Audit creativity, audit decision making, audit technique variety, audit working improvement and audit success: an empirical study of CPAs in Thailand.

• Author: Musig, Pornpun

1. INTRODUCTION

   The globalization business has been increasing the need for consistence and high quality financial reporting within the complexity of the transaction. Corporate crisis sufferers such as Enron, WorldCom, Asian economic crisis, and U.S. sub-prime in 2007 are resulted from accounting information failure which directly affect both accounting and auditing. Especially, auditing has been expected from stakeholders for the reliability and quality of financial reporting. The auditors have to analyze, synthesize and redefine materials and problems so that they can provide new things, new processes with originality and appropriateness to their work. That is the way to solve a problem of the complexity of the transaction that concerns the audit success. Thus, auditing research has been the subject of numerous review papers, which focus on several issues such as audit independence, audit knowledge, audit judgment, which are related to audit success. But, no empirical research has investigated the audit creativity so far.

   The concept of survival in the business world is to achieve performance or organization goals especially on the long term. Resource-based view of a firm (RBV) is a theory to clearly explain how a firm can sustain its business. That indicates the different resources in the firm that has established advantages for competition which leads to firm success. Similarly, at the individual level the person who has different capability will have different performance. Especially, auditors who need success in audit market. Audit success refers to client acceptance, stakeholder satisfaction, and financial user confidence. Thus, auditor who will survive and succeed in audit market should have high capability or competence. Therefore, this study attempts to seek the audit creativity that leads to audit success.

   Because the importance of reliability and quality of financial reporting affect audit successes, the audit creativity has been brought to attention as it is the first element for survival in auditing markets. Accordingly, the advantage of competence-performance approach is that the competencies help to predict performance outcomes and provide an explanation for discrepancies in performance. Thus, this study focuses on five dimensions of audit creativity, namely, independence of Judgment, self-confidence, attraction to complexity, risk-taking and aesthetic orientation. Meanwhile, the consequences of audit creativity are audit decision making, audit technique variety, audit working improvement and audit success via professional experience and change mindset as moderators. Key research questions are (1) how does audit creativity has an influence on audit success?. Specifics research questions are (1) how does professional experience moderate the relationship among audit creativity, audit decision making, audit technique variety and audit working improvement?, and (2) how does change mindset moderate the relationship among audit decision making, audit technique variety, audit working improvement and audit success?.

   The remainder of this paper is organized as follows. In Section 2, we provide the theoretical framework. In Section 3, we provide the relevant literature and develop our hypotheses. Then, we describe our research methodology in Section 4. Section 5 is the results and discussion. The contributions and the future directions research are included in Section 6 and conclusions in Section 7.

2. THEORETICAL FRAMEWORK

   This study attempts to fill this theoretical gap by seeking to identify the audit creativity dimension by integrating among three theories, namely resource-based view theory (RBV), cognitive theory and creativity theory to make this conceptual model clearly understood.

   Resource-Based View of a Firm (RBV)

   The resource-based view (RBV), which has become and integrated paradigm for strategy research, explains sources of competitive advantage, sustainability or otherwise (Barney, 1991). Differences in performance are explained in terms of types of resources and capabilities that are different. The RBV has been introduced to strategic management literatures by Penrose (1959) and Barney (1991). This theory is a theory that predict economic. And it explains how a firm's resources can predict its performances in a competitive environment that can help firm's managers to identify the firm's resources, capabilities and competencies to be used to the gain competitive advantage as the strategy is part of the firm's resources. Survival research in strategy management focuses on the resource-based view of the firm recognizes the important role of knowledge in firms that achieve a competitive advantage; proponents of the knowledge based view which argues that the resource-based perspective does not go far enough. Specifically, the RBV treats knowledge as a generic resource, rather than having special characteristics. It, therefore, does not distinguish between different types of knowledge-based capabilities. Thus, we adapt the RBV to explain this conceptual model which regarded as in person level rather than firm level. The RBV confirms that the resource is different leading to difference in performance and competitive advantage consequently difference in capabilities of person that affect difference in individual performance.

   Cognitive theory

   Social cognitive theory explains human psychosocial functioning in terms of the interaction among behavior, cognitive and other personal factors and environment events. As a construct, cognitive style has been widely studied. It is defined as an individual's "preferred" way of gathering, processing, and evaluating information relating to creativity, problem-solving and decision making. Thus, we use social cognitive theory as a framework to integrate and explain the relationship between the variables in the present study. This study challenges to understand the audit creativity which considers individual auditor factors such as independence of judgment, self-confidence, attraction to complexity, risk-taking and aesthetic orientation which lead audit success.

   Creativity theory

   Creativity theory explains in both organizational level and individual level in terms of the creative ideas. Thus, environment, knowledge and experience are facilitated to generate the creative ideas to be used for process improvements, and services or products improvements. Furthermore, the creativity is essential to innovation. Innovation is necessary to organizational or individual survival and success. Thus, we use creativity theory as a framework to integrate and explain the relationship between the variables in the present study.

3. RELEVANT LITERATURE ON AUDIT CREATIVITY, AUDIT DECISION MAKING, AUDIT TECHNIQUE VARIETY, AUDIT WORKING IMPROVEMENT, AUDIT SUCCESS, PROFESSIONAL EXPERIENCE, AND CHANGE MINDSET

   Audit creativity plays an important role in explaining the relationships. In this research, audit creativity includes independence of judgment, self-confidence, attraction to complexity, risk-taking, and aesthetic orientation. In addition, audit decision making, audit technique and audit working improvement are mediating effects of the relationships between audit creativity and audit success. Also, professional experience and change mindset play moderator roles. Therefore, the conceptual foundations, relationship, and research model are the audit creativity-audit success relationships through mediating effects, including the moderating effects and their relationship, as shown in Figure 1. Then, literature reviews of audit creativity and the relevant effects of variable are discussed, and the hypotheses development from the conceptual framework are proposed.

   Creativity is defined as the "production of novel and useful ideas" (Amabile, 1988, P.126 sign in Chang and Birkett, 2004). Accordingly, audit creativity is refers to ability of auditor to analyze, synthesize and redefine materials and problems then provide new thing, new process that are original and appropriate to their works (Lowenfeld, 1962; Chang and Birkett; 2004, Barron, 1988), which is seen as necessary to ensure continuous innovation. Besides, the difference in creativity is seen as the production of new, novel and useful ideas...