Audit pressure: effects on audit process efficiency and audit report effectiveness in busy season of CPAs in Thailand.

• Author: Sudsomboon, Seerungrat

1. INTRODUCTION

   Nowadays, business has dramatically increased the need for consistent and high quality financial reporting within countries and across borders. Corporate crisis such as Enron, WorldCom, Asian economics crisis, U.S. sub-prime in 2007 until Europe financial crisis shows accounting information failure. This directly affects on auditing. Especially, external auditing has been expected from stakeholder for the reliability and quality of financial reporting. An external audit is widely recognized as a means of reducing information asymmetry through the monitoring of agents by independent third parties (Sudsomboon and Ussahawanitchakit, 2009). In additionally, audit performance is a significant value to investor in capital markets because investors often use audited financial statements by auditors as the basis for investment decisions. Moreover, auditors are as both insurance provider and information intermediary that provide independent verification of manager-prepared financial statement, audit performance contributes to the reliability and quality of financial reporting. Furthermore, over the last few decades, globalization has emerged worldwide and continued to have a growing impact on several aspects of society most particularly on business lead to has a lot of business transpired in the world which shown financial statement to stakeholder. In year-end, stakeholder need for consistent and high quality financial reporting for decision making usefulness. Thus, centered on the first calendar quarter, the busy season in public accounting and auditing are high demand. An unchallenged axiom in auditing is that increased pressure in critical period which affect on audit performance. Moreover, in the recent years, there have been increasing pressures in auditing environment such as stakeholder expectation, regulation change and competitive in the audit market which all of pressure affect on audit performance (Ball et a., 2000 and O'Dwyer, 2003). However, auditors or CPAs have always played a potential role in produce financial statements reliability.

   With the interest of the relationships among audit pressure, audit process efficiency, and audit report effectiveness, the objective of this study is to examine the effects of audit pressure on audit process efficiency and audit report effectiveness in busy season of CPAs in Thailand. Audit pressure has two groups as internal pressure and external pressure. Internal pressure includes accountability concern, responsibility awareness, and ethical pressure. External pressure consists of stakeholder force, regulation change, and audit competitive. Likewise, audit process efficiency consists of completeness of audit risk judgment, adequacy of mitigating control, and appropriateness of sample selected. With the current study, the research questions are: (1) how audit pressure has a positive relationship whit audit process efficiency and audit report effectiveness, (2) how audit pressure and audit process efficiency have and influence on audit report effectiveness, are (3) how different are the effects are between audit pressures as a whole and each of six dimensions on audit process efficiency and audit report effectiveness.

   The remainder of this study is organized as follows. First, literature reviews of audit pressure, audit process efficiency, and audit report effectiveness are addressed, and research hypotheses developments are also presented. Second, the research methods used to test the hypotheses are discussed. Third, the results derived from 136 CPAs in Thailand are indicated and their reasonable discussions with existing literature supports are showed. Finally, the study concludes by discussing implications for theory and practice, identifying limitations of the study, and providing suggestion and directions for future research.

2. LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT

   Audit report effectiveness is required from stakeholders especially investors in the securities markets (Palmrose, 2006). Professional auditing standard setters and academic researchers have devoted considerable attention to debate concerning the audit repot effectiveness in valued communicating and results of the audit practice (Gomez-Guillamon, 2003). Thus, audit report effectiveness as audit performance that shown in audit report which containing information usefulness to stakeholder decision making. However, the complexes of business and environment change especially limited time in busy season have influence on audit performance. Prior researches focus on the effect of audit characteristics on audit performance that explained by cognitive theory.

   Cognitive theory explains human psychosocial functioning in terms of the interaction between 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, this study used 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 pressure which consider the result of CPAs perceived the business environment change and expectation of stakeholder for financial statement that affect on audit process which lead to superior audit outcome. This study focuses on the busy season in public accounting and auditing are high demand as the first quarter of calendar. Audit pressure included two groups of variable are internal and external pressure. Internal pressure consists of accountability concern, responsibility awareness, and ethical pressure. External pressure includes stakeholder force, regulation change, and audit competitive. Therefore, this study shows the conceptual model as followed in Figure 1.

   Accountability Concern

   Recently, accountability has become an important topic in the discussion about the legitimacy of profession auditing (Loe et al., 2000). Auditors who play under accountability must show high audit performance. Accountability concern refers to internal rules and norms as well as some independent commission are mechanisms to hold reliability and creditability of financial statement which pressure on audit performance. Imply that if auditors of CPAs have high pressure of accountability concern they may also have great effective of audit process and audit performance. This leads to the following hypotheses:

   Hypothesis 1: The higher the accountability concern, more the likely that CPAs will perform greater audit report effectiveness.

   Hypothesis 7a: the higher the accountability concern, more the likely that CPAs will perform greater completeness of audit risk judgment.

   Hypothesis 7b: the higher the accountability concern, more the likely that CPAs will perform greater adequacy of mitigating control.

   Hypothesis 7c: the higher the accountability concern, more the likely that CPAs will perform greater appropriateness of sample selected.

   Responsibility Awareness

   Responsibility assumption is a doctrine in the personal growth field holding that each individual has substantial or total responsibility for the events and circumstances that befall them in their life. Responsibility awareness in audit profession refers to individual auditor aware the pressure of professional value that obligation to carry forward an assigned task to a successful conclusion. Especially, external auditors are independent third parties who give the reliability, quality of financial reporting, and usefulness for decision making of financial users (Sudsomboon and Ussahawanitchakit, 2009). With responsibility goes authority to direct and take the necessary action to ensure success of audit task. This leads to the following hypotheses:

   Hypothesis 2: The higher the responsibility awareness, more the likely that CPAs will perform greater audit report effectiveness.

   Hypothesis 8a: the higher the responsibility awareness, more the likely that CPAs will perform greater completeness of audit risk judgment

   Hypothesis 8b: the higher the responsibility awareness, more the likely that CPAs will perform greater adequacy of mitigating control.

   Hypothesis 8c: the higher the responsibility awareness, more the likely that CPAs will perform greater appropriateness of sample selected.

   Ethical Pressure

   Ethical pressure is defined as an objective stimulus constructs referring to individual characteristics or combinations of characteristics and events that impinge on the perceptual and cognitive processes of individuals (DeZoort and Lord, 1997). Thus, ethical pressure is very important factor that relate...