COMMUNICATION IN MULICULTURAL AUDIT TEAMS AND ITS IMPACT
ON AUDIT QUALITY
Master Thesis
MSc Business Administration: Management Accounting & Control Faculty of Economics and Business
University of Groningen
January 17, 2021
Denise Beuleke S4231937
ABSTRACT
As a result of the ongoing internationalization of the audit industry, audit teams are increasingly composed of auditors with different cultural backgrounds. Based on this development, this study examines the effects of cultural diversity on communication in audit teams and identifies what consequences auditors perceive for audit quality. The study draws on a qualitative research approach in which semi-structured interviews were conducted with German and international auditors working together in audit teams located in Germany. The resulting findings confirm different communication styles of the auditors and show that communication in multicultural audit teams generally gets more extensive as auditors need to adapt to the different communication styles, resulting in more time needed for the audit. Moreover, miscommunications and conflicts can arise when the auditors do not communicate openly or do not feel comfortable to express their opinion, judge or apply professional skepticism. In the long run, however, the auditors develop an understanding of the differences which allows them to profit from the different perspectives of their international colleagues. Therefore, communication in multicultural teams is found to have both positive and negative effects on audit quality. The findings provide important guidance for large accounting firms, as cultural diversity within firms, and thus within audit teams, is likely to continue to increase in the future.
TABLE OF CONTENT
ABSTRACT ... II TABLE OF CONTENT ... III LIST OF TABLES AND FIGURES... IV
1. INTRODUCTION ... 1
2. THEORETICAL FRAMEWORK ... 4
2.1 Individualism versus collectivism ... 5
2.2 Assertiveness ... 7 3. RESEARCH METHODOLOGY ... 9 3.1 Data collection ... 9 3.2 Data analysis ... 10 3.3 Research setting ... 11 4. RESULTS ... 13
5. CONCLUSION AND DISCUSSION ... 21
REFERENCES ... 23
LIST OF TABLES AND FIGURES
Table 1: General information about the interviewees ……….………10
1. INTRODUCTION
Due to increasing internationalization and globalized markets, the audit industry is facing new challenges to ensure consistently high audit quality (Barrett, Cooper, & Jamal, 2005; Detzen & Loehlein, 2018). On the one hand, international accounting organizations (generally and hereafter referred to as the Big Four audit firms1) have member firms all over the world which allows them to offer worldwide coverage of assurance services to their clients including multinational firms (Barret et al., 2005; Bik, 2010). On the other hand, as hires get increasingly international, a multinational environment already exists within the member firms of the Big Four (Nolder & Riley, 2014). Accordingly, audit teams often consist of auditors from different cultures and countries. However, how cultural diversity influences the communication in audit teams and consequently the audit quality, has not yet been investigated. Auditing follows a collective approach in which each member of the audit team possesses unique knowledge about the “quality of people, processes, and business plans” (Knechel, 2000, p. 706) that must ultimately be linked and merged together in order to obtain a consistent audit report (Rudolph & Welker, 1998). Hence, it is essential for auditors to communicate with the audit teams in which they operate (Rudolph & Welker, 1998). In multicultural audit teams, employees need to communicate across language and cultural boundaries that can greatly interfere with the communication process and increase the risk of process losses in terms of audit quality (Butler & Zander, 2008; Nelson & Tan, 2005). More specifically, differing styles of communication, direct versus indirect2, can create barriers between the team members as Western cultures struggle to interpret the indirect communication of the Eastern cultures (Brett, Behfar, & Kern, 2006). Direct communication, in contrast, can damage in-group relationships when it violates another culture’s communication norms (Brett et al., 2006). As a consequence, misunderstandings can arise that may influence the perception of the colleagues’ competence, hinder the use of their expertise and knowledge (Brett et al., 2006) and lower “the degree with which individual efforts coalesce into a well-informed audit opinion” (Rudolph & Welker, 1998, p. 1). Once miscommunication and resulting conflicts have occurred, time extensive communication is needed to resolve these conflicts (Bobek, Daugherty, & Radtke, 2012). The resulting time pressure has a negative effect on audit quality (Pierce & Sweeney, 2004). In addition, the degree to which auditors openly communicate knowledge and openly express their opinion can be dependent on the cultural background of the individual (Sim, 2009; Sunderland & Trompeter, 2017). This is especially relevant in an audit setting as the core concepts of auditing - decision-making, judgement and skepticism - are based on open communication (Bik, 2010; Sunderland & Trompeter, 2017) and if individual audit team
1 The Big Four are the world’s four largest audit firms – Deloitte, PricewaterhouseCoopers, KPMG and Ernst & Young – and
account for around 70 percent of the global auditing revenue. In 2019 their combined revenues exceeded 150 million U.S. dollars with a workforce of over 1 million people (Statista, 2020).
2 Direct communication is typically to the point and there is no additional information or interpretation needed to understand
members do not feel comfortable exchanging information and communicating with the group this can harm the quality of an audit (Bédard, Biggs, & Maroney, 1998). Nevertheless, cultural diversity can also positively influence audit quality if team members communicate effectively. This is because effective communication not only enables the audit to be conducted seamlessly, but also enables the team to benefit from the different perspectives of the various cultures (Bik, 2010).
In 2013, the Public Company Accounting Oversight Board (PCAOB, 2013) claimed that audit team attributes can influence audit quality and are directly responsible for variations in quality. An empirical study by Cameran, Ditillo, & Pettinicchio (2017) documents the first response to that claim by examining the impact of diversity in terms of the different sub-teams (juniors, seniors, managers, and partners) of an audit team and their proportions on audit quality. Therby, they do not account for cultural differences as in their research setting, „cross-cultural differences are almost non-existent“ (Cameran et al., 2017, p. 2). However, previous studies (for an overview, see Nolder & Riley, 2014) have acknowledged that differences in national culture are indeed an important factor which can lead to difficulties in multicultural audit teams. This study tries to fill the gap by expanding the literature and researching the communication in culturally diverse audit teams within semi-structured interviews. Therefore, the following research question is to be introduced:
How and why do cultural differences among team members influence communication in audit teams and what are its perceived implications for audit quality?
This study contributes to the audit literature in several ways. Most research in the audit literature to date has focused on the national level, examining cultural differences among auditors working in different countries, mostly in the context of multinational group audits (e.g. Barett et al., 2005; Sim, 2010; Sunderland & Trompeter, 2017). Thereby, Sunderland & Trompeter (2017) have identified, among other things, communication with component auditors as one of the specific problems faced in multinational group audits. In particular, they are concerned about the cultural differences between the auditor's home country and the component countries involved and suggest that further research should be conducted on the impact of these differences on communication. By focusing on the audit team at single geographical level, this study, in contrast to previous studies, analyzes the communication of international auditors working in the same country and office which allows to assess how the communication is being influenced in multicultural teams. Moreover, there is little evidence as to how cultural diversity explains differences in auditor behavior. The study by Bik (2010) offers initial insights into this topic and finds that the behavior of auditors, especially the exchange of knowledge and involvement of audit partners, is indeed influenced by cultural differences. In this study a contribution will be made by focusing on one aspect of auditor behavior in-depth, the communication between auditors.
setting is affected by them. In that way, it contributes to an increasing awareness of the different cultural perceptions in such a setting. This can strengthen the cultural intelligence among the team members and finally lead to higher performance (Maznevski, 1994). Hence, by making management aware of the communication challenges of working in multicultural audit teams, it would be able to adapt its management decisions and choose a strategy that is appropriate in such multicultural situations (Brett et al., 2006).
2. THEORETICAL FRAMEWORK
Chapter two will provide an overview of the existing literature on the topic of the introduced research question and discuss relevant terminology.
Audit quality represents the core product of auditing (Barret et al., 2005) and can be defined, amongst other definitions, as “the market-assessed joint probability that a given auditor will both a) discover a breach in the client’s accounting system, and b) report the breach.” (DeAngelo, 1981, p. 186). The Big Four audit firms, therefore, aim to provide seamless practices worldwide in order to maintain a uniform level of audit quality. However, with the ongoing globalization, auditors have to increasingly communicate with colleagues from different cultures which can endanger the seamless execution (Cooper, Brown, Greenwood, & Hinings, 1998). According to Hofstede (2015, p. 5), culture can be defined as “[...] a system of shared values, rules, norms and institutions, most of them unconscious and unwritten, socially transmitted, regulating the social life of groups”. It can thus be concluded that the system “culture” plays an important role in the performance of audit teams and regulates their successful communication. How culture is expressed is often associated with different languages, but in fact culture also influences the less obvious behavioral aspects such as unspoken communication, and the attitude towards relationships and groups (Hofstede, 2015).
implies a desire for structure and accordingly determines the accuracy of an audit (Hughes, Sander, Higgs, & Cullinan, 2009), but does not explain differences in communication.
2.1 Individualism versus collectivism
The dimension of individualism versus collectivism measures the degree to which individuals relate to society (Nolder & Riley, 2014). In a culture high on collectivism, individuals define themselves over in-group memberships in which shared values, norms, goals, and relationships are highly valued (Earley & Gibson, 1998). In a culture high on individualism, on the other hand, individuals define themselves over autonomy, personal liberty, and put self- over group-interests (Earley & Gibson, 1998). Hence, individualists tend to have a lower preference for teamwork (Sosik & Jung, 2002) and show less cooperative behavior than collectivistic group members (Cox, Lobel, & McLeod, 1991; Nolder & Riley, 2014). Moreover, the communication in individualistic cultures, such as Germany, is known to be direct and honest (Hofstede Insights, n.d. -b). In less individualistic cultures where harmony is highly valued, however, directness can come across offensive and violate norms as individuals in these cultures are used to a more indirect communication (Brett et al., 2006).
Within the audit context, these attributes can influence various aspects that determine the quality of an audit. For example, the decision-making process in audit teams may be prolonged when international auditors work together. This is because individualists want to satisfy their needs immediately (Sosik & Jung, 2002), value a strict time keeping and quick decision-making (Hurn, 2007), whereas collectivists prefer to discuss things in more detail in order to reach a group consensus before making important decisions (Hughes et al., 2009; Hurn, 2007). However, excessive discussions or, in other words, an increased need for communication between auditors is time consuming and time is an important cost factor in auditing as resulting time pressure can lead to a cost-quality conflict (Pierce & Sweeney, 2004). Due to this conflict, auditors sometimes engage in dysfunctional behavior that can threaten the audit quality (Pierce & Sweeney, 2004). Accordingly, it becomes clear that time-consuming communication can increase the risk of audit quality threatening behavior. Nevertheless, extensive communication can also have a positive impact on audit quality, as it gives auditors more time to evaluate, understand, and resolve engagement-related issues (Bobek et al., 2012; Vera-Muñoz, Ho, & Chow, 2006).
sharing (Bik, 2010). As a result, individualists are likely to participate more strongly in multicultural situations and with a greater share of speaking engagements compared to collectivists (Oetzel, 1998). This might lead to a rather one-sided communication in which collectivists leave the communication to their individualistic colleagues. In addition, also the ability to demonstrate professional skepticism is dependent on effective communication (Detzen & Loehlein, 2018) and varies with the cultural background of individuals (Sunderland & Trumpeter, 2017). It is expected that the independence and direct communication of individualists will be reflected in a higher likelihood to formulate skepticism (i.e. asking probing questions) (Hughes et al., 2009; Sunderland & Trumpeter, 2017). In collectivistic cultures, in contrast, this may be seen as non-conforming, as individuals are concerned about respecting authority and are therefore less likely to express skepticism (Bik, 2010; Yamamura, Frakes, Sanders, & Ahn, 1996). However, since a sufficient level of professional skepticism is of great importance to the audit quality (Sunderland & Trumpeter, 2017), it is highly relevant to further investigate the communication effectiveness in a multicultural audit team setting.
Besides indirect and direct communication, also communication openness3 can be connected to the cultural dimension of individualism and collectivism. In collectivist cultures, openness is often limited to the group, characterized by trusting relationships among members (Bik, 2010). Additionally, also the missing knowledge about different communication styles can result in a less open communication (Puck, Rygl, & Kittler, 2007). This is because adapting to different communication styles and circumstances is a lengthy process, especially as team members “[...] are likely to adopt a wait-and-see attitude [...]” (Puck et al., 2007, p. 227). However, open communication in an audit team is essential because it enables successful integration of all team members, which increases decision quality and strengthens consensus and acceptance in the team (Puck et al., 2007). Accordingly, misunderstandings and resulting errors are minimized (Puck et al., 2007) and the auditors are able to combine their individual efforts to determine the end product, the audit opinion (Rudolph & Welker, 1998). Hence, it can be assumed that open communication supports the communication effectiveness and enhances the team performance which is a determinant of audit quality (Cameran et al., 2017). A less open environment, in contrast, may have a discouraging effect on the individual auditor’s propensity to share information with the group (Bédard et al., 1998). In multicultural teams, it is therefore particularly important to invest time in open communication in order to overcome cultural differences (Bik, 2010).
To conclude, the differences between individualism and collectivism, hence, can lead to different communication processes in multicultural teams compared to homogenous groups (Oetzel, 1998) and have the potential to disrupt the “seamless” execution of audits (Barret et al., 2005). Especially in the initial meeting phase, differing communication styles can create misunderstandings and poor group processes within the group (Oetzel, 1998). However, in their study, Watson, Kumar, and Michealsen (1993) showed that over time team members learn to adapt, and multicultural teams can ultimately have
3Communication openness describes the ability to speak freely and question the views of other team members without
the same high process quality as their homogeneous counterparts. Nonetheless, the Big Four audit firms need to be aware of the cultural barriers to the communication of knowledge and take initiatives to help create an open knowledge-sharing environment (Vera-Muñoz et al., 2006).
2.2 Assertiveness
Although, based on the literature, possible influences of assertiveness on the communication in multicultural audit teams can be expected, a rank order analysis conducted by Bik (2010) did not support these findings. However, this analysis was aimed at auditors’ professional behavior and as Bik (2010, p. 150) notes “assertiveness is essentially about expression and communication styles, rather than about actions”. Nonetheless, the present study is trying to explore the communication in audit teams and thus focusing exactly on what assertiveness is about.
3. RESEARCH METHODOLOGY
To be able to provide an answer to the research question “How and why do cultural differences among
team members influence communication in audit teams and what are its perceived implications for audit quality?”, a qualitative research approach is chosen. Qualitative research is the appropriate type of
research to address the “How” and “Why” in the research question and to explore processes and real-world phenomena (Pratt, 2009). In addition, it allows to gain new insights into a field that has not yet been extensively researched (Edmondson & McManus, 2007), such as the communication in multicultural audit teams. A form of qualitative research is the use of interviews. Interviews allow the respondents to provide their opinion, motivation and experiences as well as explanations and justifications for their actions (Tracy, 2013). This increases external validity of the findings. However, relying on actual experiences comes also with the major issue of reliability. In other words, there is a possibility that the interviewed auditors target their answer to secure their reputation and refuse to report on errors.
3.1 Data collection
Within this qualitative research, eight semi-structured interviews, spread over the second half of October 2020, were conducted. The data collection through semi-structured interviews is selected because of three primary considerations. Firstly, it allows more space for information to be sought and answers to be clarified rather than limiting respondents' answers (Gugiu & Rodríguez-Campos, 2007). Secondly, the diverse backgrounds and responsibilities of the sample group preclude the use of a standardized interview schedule (Barriball & While, 1994). Thirdly, the pre-set questions ensure that the interview stays within the topic of the study (Gugiu & Rodríguez-Campos, 2007).
reasonable. As confidentiality and anonymity are guaranteed to all participants and to the Big Four audit firm in general, no names are mentioned in this thesis that would allow for traceability.
The following table provides an overview of the interviewee’s level, organizational tenure and cultural background:
INTERVIEWEE LEVEL ORGANIZATIONAL
TENURE (in years)
CULTURAL BACKGROUND 1 Senior 5 years (thereof 3 in Germany) Thailand 2 Senior 7 years (thereof 2 in Germany) Brazil 3 Junior 3 years (thereof 1 in Germany) Romania
4 Junior 2 years Germany
5 Senior 3 years Germany
6 Senior 5 years China
7 Senior 1 year Germany
8 Senior 4 years Germany
Table 1: General information about the interviewees
The questions of the semi-structured interviews are structured as follows: the first questions are rather general questions to get to know the interviewees and build rapport, the subsequent questions aim to find out about the experiences the interviewees made with the communication in their teams and how they see communication being influenced by a cultural diversity within the teams. Finally, questions that aim to find out if the interviewees perceive the communication in multicultural teams to have an influence on audit quality. All questions are designed to encourage open, unbiased answers, and only in cases where the respondent specifically asked for them were some random examples from the literature provided. The interview guide that was used in the semi-structured interviews can be found in Appendix I. It includes both the German and English versions of the interview questions, as respondents were able to choose the language, they felt most comfortable with. It turned out that this was German in all cases. Therefore, a later translation of the quoted statements was necessary. The 30 to 45 minutes long interviews were conducted one on one over Skype and recorded to facilitate a later analysis.
3.2 Data analysis
linked to the research question. This allowed the researcher to categorize and compare the findings from the eight interviews. The resulting categories tie in with the concepts discussed in the theory section, as these were the basis for the interview guide.
3.3 Research setting
A Big Four audit firm with its German member firm serves as the research site. Germany is chosen as it is one of the major countries in international accounting (Bik, 2010). Moreover, it is characterized by a highly individualistic culture in which individuals focus on self-actualization and are known for their direct and assertive communication. They value the truth, even if it may be hurtful for their counterpart (Al-Alawi & Alkhodari, 2016). According to Lincoln, Kerbo, & Enhagen (1995) combining employees from a German individualistic culture with others from a contrasting, more collectivistic culture led to inner-group tensions. Therefore, the international interviewees are selected from rather collectivistic cultures, as illustrated below:
Figure 1: Scores of the interviewees’ cultures on individualism dimension (based on Hofstede Insights, n.d. -a, n.d. -b)
Figure 2: Scores of the interviewees’ cultures on assertiveness dimension (based on Bibu & Brancu, 2008; GLOBE 2020, n.d. -a, n.d. -b, n.d. -c, n.d. -d)4
Moreover, the Big Four audit firms operate worldwide and promote an inclusive culture (Edgley, Sharma, & Anderson-Gough, 2016). The culture of the organization can also play an important role in terms of communication openness. In particular, the unspoken standards and common values, beliefs and day-to-day practices within an audit firm that are communicated by the higher to the lower tier auditors may encourage or hinder open knowledge sharing (Vera-Muñoz et al., 2006). An inclusive culture is expected to positively influence such an open communication of knowledge. Therefore, it is considered highly appropriate to conduct the research within a German Big Four audit firm. Especially since communication is expected to “play[...] a dominant role on the cultural diverse team performance”, as a study by Bouncken (2004, p. 250) on entrepreneurial teams in Germany showed.
4. RESULTS
Due to the increased cultural diversity within the German Big Four offices, auditors work in multicultural teams with colleagues from different cultural backgrounds. Therefore, exploring if there are differences in the communication in culturally diverse audit teams can reveal important insights that are highly relevant for the audit literature. This section presents the main findings and discusses them in light of the reviewed literature.
Building on the dimension of individualism versus collectivism (Hofstede, 2015), the study finds that all international auditors notice the direct communication of the German auditors. For example, Interviewee 3 notes that the way colleagues communicate and formulate things varies from culture to culture:
“When coming to Germany, I noticed Germans rather tend to keep to themselves and sometimes they would not sugarcoat something or have the tendency to skip the “How are you?” in conversations.”
(Interviewee 3)
The Romanian junior auditor (Interviewee 3) claims that Germans tend to say things rather directly without “sugarcoating” their message. She adds that she perceives that Germans quickly get to the heart of a conversation and do not attach much importance to small talk. Auditors from collectivistic cultures, in contrast, apply a more indirect communication style, as a German auditor noted:
“When I look at my Asian colleagues who believe hierarchy is important, they communicate less direct. They hesitate to ask questions or speak up. This also jeopardizes audit efficiency by increasing the likelihood that work will have to be redone. In the end the whole team suffers if the communication and exchange does not work.” (Interviewee 4)
According to Interviewee 4, the indirect communication of Asian auditors can result in serious problems harming the audit quality. This is because not asking for help could lead to misunderstanding and the risk that a task was done incorrectly and thus has to be worked on again which costs time and makes the audit as a whole less efficient. Moreover, the auditor acknowledges that insufficient communication of one team member has an impact on the whole audit team (Rudolph & Welker, 1998). A reason for engaging less in communication could be the fear of looking bad, as described by a Chinese senior auditor:
Interviewee 1 from Thailand, a collectivistic and less assertive culture, offers an explanation for that behavior:
“[...] Thailand has a lot to do with respect and “face-saving”. If someone says something wrong, you do not correct it directly, but ask if maybe he just misunderstood something. One does not say, “You are wrong”.” (Interviewee 1)
He describes that it is simply not considered nice to give someone feedback in public, as this could damage that person's reputation. Through indirect communication or, as mentioned in the above quotation, indirect feedback, the reputation of the criticized auditor can be maintained. The thereby explained concept of face-saving is a typical characteristic for a culture low on assertiveness (Bik, 2010). Individuals from such cultures use a rather non-confrontational communication and as Interviewee 1 notes, it is “[...] culturally difficult [for him] to challenge others.”.
In multicultural audit teams, where the auditor from Thailand encounters individuals from an assertive and/or individualistic culture, such as Germany, it is therefore to be expected that a too direct and assertive communication of feedback can lead to demotivation and destroy the team dynamics. A representative comment from another auditor is illustrated below:
“In the beginning I felt that all my actions and work were questioned so eventually I wasn’t really motivated anymore to bring in new ideas myself. I didn’t like to work with that particular manager because of that and was glad when I was staffed on a new engagement with other colleagues.”
(Interviewee 2)
Interviewee 2 claims that the assertive communication of his German colleague can be detrimental to the relationship and leads to less motivation to engage in interaction. The perception could possibly be explained through the collective background of the Brazilian auditor, where respect is highly valued (Brett et al., 2006). However, according to GLOBE (n.d. -a). and unlike Thailand, Brazil is a rather assertive country. Thereupon, it is surprising that Interviewee 2 does not stand up for his opinion and seem to give in easily.
In addition, the statement of Interviewee 1 and 2 implies that it is unusual to voice criticism or ask probing questions in collectivistic cultures, which is also perceived by German auditors, as the following quotations show:
“I notice the team spirit very much among my Asian colleagues and that they do not throw their opinions directly at each other. I think they do not want to endanger the team and the harmony in the team. They rather look for the harmony and rather refrain from giving an opinion so that the others do not feel bad.” (Interviewee 7)
The German auditors do not seem to associate such a behavior with bad intention, but rather with a characteristic of the Asian, collectivistic and less assertive, culture, where it is not common to openly communicate one’s opinion or to disagree with others (Bik, 2010). However, not getting any critical review notes makes it harder to detect misunderstandings or mistakes. More precisely, the judgements of Asian auditors could even be influenced in such a way that they coincide with the work of their team members (Nolder & Riley, 2014). Looking beyond the borders of the audit team, the Asian, collectivistic, auditors could also have difficulties to stick to their judgements under the pressure of clients (Cohen, Pant, & Sharp, 1993). Such behavior also contradicts the fact that criticism and skepticism are considered important qualities needed in the audit work (Detzen & Loehlein, 2018). Audit work is a collective effort and based on the knowledge and judgement of all members of the audit team (Vera-Muñoz et al., 2006). However, if the individual auditors do not communicate openly, this can lead to difficulties in decision-making as the following quotes implies:
“I see a big problem in communicating with Asian colleagues when it comes to addressing dissatisfaction or disagreement. By not doing it they ultimately prolong the decision-making process. On the one hand, this has a negative impact on audit efficiency, but on the other hand, it could increase audit quality because more time is spent looking for the best solution." (Interviewee 4)
Following Hughes et al. (2009), the statement shows that the Asian auditors do not express their opinion individually, but wait for a group discussion until they engage: “[...] only when we started to discuss
the problem all together, they started to bring in their view of things”. This can have an impact on the
audit outcome in terms of increased quality due to a better solution on the one hand, and decreased efficiency due to the increased time required to develop a group decision on the other hand. Interviewee 5, a senior auditor from Germany, gives an idea of other consequences that can occur due to a less open communication resulting from the collectivists’ focus on teamwork:
sometimes do not look at things as detailed as it might be necessary and as a consequence risk to oversee potential findings.“ (Interviewee 5)
The German senior auditor describes that her international colleagues from India and Japan would rather be under time pressure than ask for help. In line with Jelinek and Jelinek (2008) who found that workplace stress can lead to dysfunctional behavior, the auditor expresses concern about potentially insufficient work. Such behavior can threaten the audit quality (Bobek et al., 2012) and should therefore be avoided through openly addressing the work overload. However, the culture of the international auditors is low on assertiveness and hinders them from standing up for themselves (Bik, 2010). Moreover, it is in line with the finding of Bik (2010) that people from such cultures do not show any initiative when it comes to actively requesting help. At the same time, the behavior of the Indian auditor supports his collectivistic background as he would do anything for his team to make them look good. Whereas previous literature indicated that the German communication is explicit and easy to understand (Brett et al., 2006), the following findings show something different. An illustrative comment of a German auditor was:
“I believe that in multicultural teams communication becomes more diverse and ambiguous. I think
that when you make a statement, be it proverbs or allusions, every one of the German colleagues has a picture in their heads and knows what is meant by it. Internationals sometimes lack that kind of understanding.“ (Interviewee 7)
The German auditors have a different understanding of their way of communicating things which international auditors are missing. Interviewee 1 supports Puck et al. (2007) in saying that adapting and also understanding the different communication style takes time:
“In the beginning when I still had to get used to the German way of doing things, I had to work extra hours and most tasks took more time. The budget does not account for this and therefore it can get difficult to deliver a good quality and at the same time stay within the budget.” (Interviewee 1)
Consequently, the adaption process takes up time the auditors do not have as it is not planned for in the budget. Instead “[...] you are expected to be as fast as the German colleagues. This was really stressful
and sometimes I was working late without writing down the extra hours as I did not want to appear less skilled by taking more time.” as Interviewee 2 adds. However, under-reporting time can lead to less
“Another difference that I experience is that some of my international colleagues, especially from Asian countries, never indicated when the work was too much and obviously not feasible during normal working hours. In comparison, I know from my German colleagues that in such situations they would escalate and say that we have to redistribute the work among the team members.” (Interviewee 4)
The interviewee confirms with the previous statement in saying that her Asian colleagues would never complain about their workload. Her German colleagues, in contrast, tend to address such situation and try to find a fair solution. Thereby, they are committed to their own needs, which can be attributed to their assertive communication style (Bik, 2010). Both statements showed that ultimately the differences in communication openness can influence the number of overtime hours. Such cultural differences regarding overtime can possibly be perceived as unfair. Nonetheless, it can be anticipated that collectivistic auditors would continue to work more extra hours in order to compensate for any inefficiencies caused by other team members, since the team is their main priority (Nolder & Riley, 2014). In addition, different cultures seem to have different attitudes towards overtime in general.
“It is also important to communicate that you have to do something for one project because there is a big deadline pressure and then continue in the other team. Without communication, it simply doesn't work. Even more in international teams, because there may be the expectation that you have to continue and finish the task overnight.” (Interviewee 5)
The German senior auditor explains that different expectations regarding how fast to finish a task can exist in a multicultural team. She elaborates that some internationals tend to expect to stay late to finish the task as soon as possible. In the fluid team setting, which is common in the audit industry, however, auditors sometimes work on multiple engagements simultaneously and have to manage their time. Hence, according to Interviewee 5, it is particularly important to communicate why she maybe chooses to pursue one task first and another one later. By referring to the literature, it becomes clear that especially in multicultural teams it is highly important communicate openly expectations in order to avoid misunderstandings (Bik, 2010). Furthermore, Interviewee 1 acknowledges that the communication within audit teams helps to reveal different approaches regarding the interpretation of client information.
“I think one should be more considerate in communication, because everybody interprets information differently. Therefore, the exchange is very important.” (Interviewee 1)
that the Thai auditor would show less interest in knowledge sharing (Bik, 2010). That the distribution of knowledge can be beneficial not only for the individual but also for the firm as a whole, is shown in the next statement:
“I do think that if you have to think your way into another project and work together with other colleagues, especially international colleagues, it gives you a fresher view, when you return to your previous project. If you have worked on a similar topic with other colleagues, you will discuss it differently in one team than in the other and this gives you the chance to take what you have learned over into the other project.“ (Interviewee 5)
The German senior auditor perceives the different views of her international colleagues as enriching and describes that the exchange of knowledge indeed helped her to rethink her approach in an audit engagement. Thus, it can be concluded that “[...] the conduct and outcome of the audit” (Vera-Muñoz et al., 2006, p. 134) is being influenced by the exchange of knowledge and expertise. Additionally, she states that she personally learned something new through working and communicating with internationals. This is in line with the conclusion of Hurn (2007) that learning and understanding each other's culture is important to reduce misunderstandings during work. In fact, obtaining and considering new insights in work procedures and best practices, ultimately helps the audit team to increase the overall audit efficiency during the engagement, as Interviewee 8 indicates:
“I would go even further and say that it improves the overall audit process. Audits where we implement an idea from a colleague who comes from the country where the company operates have a better overall efficiency than other audit engagements.” (Interviewee 8)
That most German auditors already learned to understand the culture of their international team members, can be observed below:
“I am aware that some cultures may think more hierarchically in this respect and I know that German culture is somewhat more explicit than the Asian culture. So I try to pay attention to that, but more in the sense that I express myself even more directly. For example, when I talk to a Chinese colleague, where I know that she expresses herself more indirectly than I do. At the same time, I always make sure that my message is received the way I mean it.” (Interviewee 7)
time that no misunderstandings have occurred and controlling other auditor’s tasks costs time and time is an important cost driver of an audit project, which is thereby increased (Pierce & Sweeney, 2004). Another German auditor confirms the importance and adds that different understandings can have major consequences, such as conflicts in the group.
„If you do not communicate what you mean by this, it is not clear what exactly the expectations are. I have gotten into the habit of always saying "I understand that I am now covering the following tasks. Do you understand this in the same way, or do you see it differently?". At the end of the day, everything has to be done and if it is not well planned and communicated, it will always lead to stress and trouble afterwards.“ (Interviewee 8)
Therefore, not only communicating excessively but also doing nothing and risking miscommunication can cost time in the end. Either way, working in multicultural teams will probably take longer and require more intensive discussions, which is in line with Oetzel's (1998) findings. The lost time can further lead to “stress”, as Interviewee 8 mentioned in her statement, which is likely to harm the audit quality (Pierce & Sweeney, 2006). In addition, both statements are in contrast to the literature on the cultural dimension of individualism versus collectivism (Hofstede, 2015) as the expected self-focused behavior of the German, individualistic culture cannot be observed. Instead the German auditors care for their group members and do their best to guarantee a shared understanding. These characteristics can in fact be attributed more to a collectivistic than an individualistic culture (Hofstede, 2015). Nevertheless, auditor indicate that cultural diversity can also positively influence audit quality as knowledge is enriching when communicated openly. This is shown in an illustrative example by a German senior auditor:
“Overall, it is always a benefit for the team when you have people with different cultural backgrounds in the team, because it brings together different perspectives. If you communicate them very openly and get out of your comfort zone, that can be a great added value. You simply have to communicate much more than you might have to with people from the same cultural background. I believe that the audit quality will then always be better, because you can include many aspects that you would otherwise not have.” (Interviewee 5)
5. CONCLUSION AND DISCUSSION
This research was focused on the influences of cultural diversity on the communication in the audit industry. Eight interviews were conducted with German and international junior and senior auditors of a Big Four audit firm in Germany. These showed that cultural differences in communication as well as an influenced communication through working in multicultural teams are perceived by the interviewed auditors. More specifically, the international auditors highlighted the different communication styles and the lacking focus on deeper relationships of their German colleagues. The German auditors, on the other hand, noted a lack of open communication and feedback, which led to misunderstandings and time delays. This results in a lower efficiency, directly related to the cost-quality conflict as referred to by Pierce and Sweeney (2004). Accordingly, both sides recognized that communication is a critical success factor that can have a positive but also negative effect on audit quality (Nelson & Tan, 2005). This means that the auditors should invest time and effort in communicating in a considerate and extensive manner, thus leaving as little room as possible for doubt on what they expect from their international colleagues.
composition of the audit teams also matters in terms of the cultural diversity of the audit team members. Thereby, the study identifies another attribute that can also influence audit quality.
Overall, these findings have important implications for auditors as well as big accounting firms like the Big Four. Working in multicultural audit teams prolongs the whole audit process as communication is getting more extensive. As this can also have positive consequences for audit quality, the audit firms should account for the increased need of time and consider it in their planning. The German auditors themselves seem to have already developed a thorough understanding of how to interact with internationals. Nonetheless, immediate difficulties and discouragement on the site of the international auditors are not accounted for. The findings offered by this study can serve as a starting point for audit firms to develop trainings for international auditors to help them become familiar with the local communication style and avoid misunderstandings later on. In that way the audit efficiency and quality can be increased.
Nonetheless, there are several limitations to this study. Firstly, it could be noted that in particular the international auditors held back some answers and negative comments as they were afraid to make themselves or others look bad. Secondly, the description of culture-specific observations bears the danger of referring to stereotypes rather than to actual experiences. Thirdly, the small sample of eight interviews does not allow to generalize the findings and increases the chances that the described characteristics occur on an individual base and therefore might not apply to the culture as a whole. Moreover, the interviewees came from different offices of the Big Four audit firm and according to Francis et al. (2005) audit quality can differ across the offices of one specific audit firms which might have had an impact of on the perceived implications on audit quality. Lastly, the interviews were conducted in the middle of the COVID-19 pandemic. Therefore, at the time of the interviews the respondents worked from home and had no personal contact with their group members. This circumstance generally complicates communication within the team and might have had an impact on the results of this study.
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APPENDIX
Appendix I – Interview guide
1. What is the amount of audit engagement you are currently part of and in how many of these audit engagements do you interact with international colleagues?
In welchem Umfang sind Sie derzeit an Prüfungsaufträgen beteiligt, und bei wie vielen dieser Prüfungsaufträge arbeiten Sie mit internationalen Kollegen zusammen?
2. How would you describe your work relationship with your international/German colleagues? Why may there be differences?
Wie würden Sie Ihr Verhältnis zu Ihren internationalen/deutschen Kollegen beschreiben? Warum sind möglicherweise Unterschiede zu erkennen?
3. What role does a good relationship with your colleagues play for you (also with regard to the audit work)?
Welche Rolle spielt für Sie ein gutes Verhältnis zu Ihren Kollegen (auch im Hinblick auf die Prüfungsarbeit)?
4. How do you perceive the impact of your work in multiple changing teams on relationship building?
Wie nehmen Sie die Auswirkungen Ihrer Arbeit in mehreren wechselnden Teams auf den Aufbau von Beziehungen wahr?
5. When on an audit engagement, how do you experience the collaboration and especially the communication within your team?
Wie erleben Sie bei einem Prüfungsauftrag die Zusammenarbeit und insbesondere die Kommunikation innerhalb Ihres Teams?
6. Do you experience differences in the communication styles of your international/German colleagues? What kind of differences? Please give examples. (Direct versus indirect communication; communication openness)
Erleben Sie Unterschiede in den Kommunikationsstilen Ihrer internationalen/deutschen Kollegen?
Welche Art von Unterschieden? (Direkte versus indirekte Kommunikation;
Kommunikationsoffenheit)
7. How do these different communication styles influence the teamwork? (e.g. misunderstandings, discussions take longer)
Inwiefern beeinflussen diese unterschiedlichen Kommunikationsstile die Arbeit im Team? (z.B. Missverständnisse, Diskussionen dauern länger)
8. To what extent could the audit work be influenced by this?
Inwieweit könnte die Prüfungsarbeit davon beeinflusst werden?
9. Based on your experiences, what role does effective collaboration and communication play in audit work in general?
Welche Rolle spielt nach Ihren Erfahrungen eine effektive Zusammenarbeit und Kommunikation bei der Prüfungsarbeit im Allgemeinen?
10. Are you recognizing different working methods and procedures between your international/German colleagues? In what kind?
Erkennen Sie unterschiedliche Arbeitsmethoden und Vorgehensweisen zwischen Ihren internationalen/deutschen Kollegen? In welcher Art?
