Friend or Foe: Is Your Audit Staff Helping or Hurting Your Firm?

By Kate Jelinek and Ronald Jelinek

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As scholars explain, deviance is voluntary behavior that violates organizational norms and threatens the success of the organization and its members. In an accounting context, this may include “blowing budgets,” “fudging expense reports,” or complaining to clients about managers and firm policies. Each of these behaviors can make audits more costly and impair client relationships, consequently undermining firm profitability. While explaining to practitioners how such negative, counterproductive behavior is impacting today’s audit firm, managers and partners repeatedly asked the authors a salient question: “If these deviant behaviors are the don’ts, what are the dos?” In response, this article offers a list of negative behaviors that should be discouraged in staffers and new hires, as well as a list of positive behaviors that should be encouraged. In addition to providing an overview of various types of accountant behaviors—internal and external, positive and negative—the authors also provide practical suggestions as to how firms can foster the positive and discourage the negative.

Understanding Auditor Behavior

Paying attention to audit staff’s behavior may not have been a top priority in the past, but it is becoming increasingly clear that staffers’ actions can have a serious impact on the success of a firm. Because staff accountants constantly interact with clients on the front lines, negative behaviors threaten to make audits costlier and leave clients dissatisfied, while positive behaviors can help make audits more efficient and keep clients happier. Firms therefore have a financial incentive to encourage positive behaviors and discourage negative behaviors. While interviewing staffers from large accounting firms, the authors were surprised to find that audit staffers understood very little about the consequences of their behavior. Although some could see how positive behaviors helped the firm, most considered certain negative behaviors innocuous. Managers and partners tended to fall into two groups: those who had given the subject only slightly more thought than their staffers, and those who had spent considerable time contemplating the issue. The latter were very aware of their staffers’ ignorance, and frustrated that they had not yet been able to codify these behaviors and incorporate them into a training program.

Exhibit 1 offers examples of both positive and negative auditor behaviors, organized by whether they are intrafirm or interfirm. Intrafirm behaviors are directed at the staffers’ own firm or coworkers. Positive intrafirm behaviors include learning the eight new risk assessment auditing standards before the firm officially incorporates them into its practice, or taking extra time to ensure junior audit team members gain a genuine understanding of the client during the planning phase of an engagement. They also include making an effort to share best practices with other members of the firm by uploading successful presentations and effective work paper documentation onto the firm’s intranet. Negative intrafirm behaviors include blaming other members of the audit team when things go wrong, wasting time on the Internet under the guise of doing audit work, and preparing workpapers without care and consideration for next year’s audit team.

Interfirm behaviors are directed at clients. Positive interfirm behaviors involve providing high-quality service in a professional and polished manner. This would include making a special effort to explain SFAS 154 in an understandable way to a client who is changing inventory-costing methods. It would also include making requests for client-prepared documentation several weeks before the beginning of the audit so as not to disrupt the client’s normal workflow. On the other hand, negative interfirm behaviors threaten the relationship between the firm and the client and include violating client protocols such as dress codes or parking rules. They also consist of disrespecting client confidentiality rules and complaining to the client about work grievances regarding vacation, overtime, or other specific audit firm policies.

What Accounting Firms Can Do

Above and beyond being able to incorporate a list of dos and don’ts into their staff training programs, partners and managers need to know what firm-level changes will foster positive behaviors and discourage negative behaviors. The following recommendations are based on a review of business-to-business research and have been empirically proven to encourage desired behaviors. These recommendations are outlined in Exhibit 2.

De-bureaucratize the firm and empower employees. Accounting firms are notorious for their strict management style and rigid culture. Some firms actually prohibit staffers from bringing their own lunch to work. At a number of firms, partners and managers make members of the audit team wait for all of the team members to finish their work before letting anyone leave for the night. Staffers frequently view customs like these as excessively harsh and bureaucratic and respond unfavorably to them.

Firms should solicit input from members regarding such practices in an effort to eliminate nonsensically rigid customs that tend to unnecessarily frustrate staffers and inhibit their ability to effectively do their jobs. Doing so will encourage more open communication and enable staffers to express themselves in a healthy manner, making negative behaviors less likely. Firms should, of course, maintain reasonable rules that have real value and purpose. If the system is too loose and without any controls, staffers can take advantage of their freedom and engage in more, rather than less, deviance.

In addition to removing bureaucratic barriers, firms should empower staffers by both articulating to them why their work is meaningful and instilling in them a sense of confidence. For example, a lower-level staffer who is working on an accounts receivable aging schedule and seems to be discouraged by the seemingly mundane nature of the task could benefit from a manager’s explanation that the staffer is helping the audit firm gain comfort with the allowance for doubtful accounts, a client-estimated and therefore risky account. When staffers understand how their work ties into the broader mission of the firm, they will be reminded of the big picture and see how they help the firm when they do the right things. Similarly, when they feel that their partners and managers believe in them, they will have pride in what they do and commit themselves to going above and beyond to benefit the firm.

Balance the forces of intrafirm competition. Firms should be aware that highly competitive reward systems tend to encourage staffers to gossip, point fingers, and blame co-workers for work problems. Such systems appear to ratchet up jealousies and infighting, causing staffers to lash out against each other or “eat time” to create the appearance of superior individual performance. While accounting firms typically use competitive review processes, often going so far as to put staff into comparative “buckets,” they should consider adopting a slightly less competitive rating system. For example, staffers might be evaluated in part by how their audit team or teams performed. This would encourage team members to actively work together to achieve specific metrics, such as keeping staff time spent on the engagement within the specified budget. In effect, this would drive staffers to cooperate when audit work gets difficult.

Encourage role models. The “tone at the top” influences how lower-level staffers behave. Managers must both serve as good examples themselves and identify popular, high-performing staffers to serve as good examples for others. Firms will benefit from the dynamics of both peer and superior influence in an effort to shape the normative behaviors of lower-level staff. If a manager role model sets a poor example, such as by “fudging” an expense report, the firm must be ready to enact prompt punishment.

Promote a sense of justice. Research has shown that fairness in the workplace affects how employees behave. When staff accountants believe their firm has treated them fairly, they will likely respond with positive behavior; however, when staffers feel they have been treated unfairly, they will act out. For example, a disgruntled staffer may vent to clients about a perceived lack of sufficient vacation time. To rectify this problem, firms should be fair both in their distribution of rewards and punishments and be thorough in explaining how they determined this distribution and why they believe the system is just and fair. In essence, when the firm is fair from both a distributive and procedural standpoint, staffers will view the firm’s policies more favorably and respond accordingly.

De-stress staffers. Unfortunately, stress tends to ratchet up negative behavior and suppress positive behavior. Although stress will likely continue to challenge the accounting profession, there are steps firms can take to reduce staffers’ stress levels. First, firms should enlist the help of experienced staff by training them to recognize signs of stress among junior staff members. If a senior identifies an overburdened lower-level staffer, and if firm resources permit, the senior can accommodate the junior member. Helping the new staffer set up a meeting time with a hard-to-reach client or walking the staffer through a particularly difficult work paper are simple but effective ways to defuse work stress.

To further de-stress staff accountants, a firm’s human resources department should consider establishing a rating system according to clients’ workload demands and perceived stress burdens. Audit clients with the following attributes may be rated as high stress: a public company requiring SEC work (including Section 404), a large company requiring many audit hours, or a first-year client. On the contrary, a small, private client that does not require many audit hours and that the firm has serviced for years may be low stress. Armed with this system, HR will be able to better plan staff schedules to ensure that no staffer has an inordinately stressful portfolio of clients.

Audit Staff Behavior: A Key to an Accounting Firm’s Success

The examples of staff behaviors presented in Exhibit 1 and their far-reaching impact should send a strong signal to audit firms that they need to pay attention to their staffers. Firms must have a sense of what is going on both within their firms and also at the interface between auditor and client. Armed with the suggestions provided above, management can proactively work to improve firm culture and encourage firm members to engage in positive behaviors.

This article is an extension of the authors’ previous research, published as “Auditors Gone Wild: The Other Problem in Public Accounting,” Business Horizons, vol. 51(3), May/June 2008.

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