Effects of audit characteristics on audit independence, audit quality and audit effectiveness through moderators of stakeholder pressure and professional responsibility: a comparative study of CPAs and tax auditors in Thailand.

• Author: Intakhan, Phaithun

1. INTRODUCTION

   For the professions as the importance for doing businesses in domestic and global environments, auditors that is one of them distinctively play significant roles in helping stakeholders and others who explore, assess, and investigate the advantages and benefits of firms' financial information in all activities by auditing any business transaction through the implementation of accounting and auditing standards, and other related regulations, rules, and laws. Their behaviors, competencies, capabilities, duties, functions, and responsibilities have been effectively interested for academic researchers and practitioners. The auditors explicitly help improve improving the qualities of reported earnings and financial statements. Their roles have been investigated in several perspectives, such as role stress that is linked to job satisfaction, job outcomes, and job performance (Almer and Kaplan, 2002; Burney and Wideney, 2007; Fisher, 2001). They need to present critical factors of profession conduct and the cornerstone of the audit profession and an essential ingredient of users' confidence in financial statements. Then, auditors' professional practices through audit experience, ethical orientation, professional commitment, ethical reasoning, and audit professionalism have outstandingly influenced their audit independence and have potentially impacted their audit quality, efficiency, effectiveness, performance, success, sustainability, and survival in the competitive markets and environments.

   To definitely achieve audit outcomes, audit characteristics are main drivers of determining audit independence, audit quality and audit effectiveness under stakeholder pressure. They consist of five dimensions, namely, audit experience, ethical orientation, professional commitment, ethical reasoning, and audit professionalism. Accordingly, the audit characteristics are auditors' unique knowledge, competencies and capabilities that occur from job practices in auditing professions. They enhance their abilities to process information, make metal comparisons of alternative solutions, and initiate subsequent actions (Chung and Monroe, 2000). They explicitly have an effect on decision making efficiency and effectiveness through a good memory of information necessary and an accurate judgment of audit tasks. Similarly, auditors need to explicitly provide their competencies and capabilities within their duties, functions and practices. Thus, audit characteristics have outstandingly influenced their independence, quality and effectiveness. Higher audit characteristics are likely to have positive associations with greater audit outcomes through audit independence, audit quality, audit effectiveness, and audit success.

   In the light of the auditing aspect, auditors definitely present their knowledge, judgments, competencies, and capabilities through reporting valuable audit activities and practices as audit effectiveness for achieving stakeholders' acceptance, creditability and reliability. In this study, stakeholder pressure and professional responsibility are proposed to play important explanations of moderating the relationships among audit experience, ethical orientation, professional commitment, ethical reasoning, audit professionalism, audit independence, audit quality, and audit effectiveness. They are stakeholders' expectations, requirements and needs that force firms or individual professionals to act, do and practice appropriate actions and behaviors following their issues in order to succeed, sustain and survive in the competitive markets and environments. Then, both stakeholder pressure and professional responsibility are likely to become moderators of the research relationships in this study. Hence, this study attempts to assess the impacts of audit experience and ethical orientation on professional commitment, ethical reasoning and audit professionalism that lead to audit independence, audit quality and audit effectiveness via moderators of stakeholder pressure and professional responsibility. To generalize the results of this study, certified public accountants (CPAs) and tax auditors (TAs) in Thailand, herein, are chosen as samples of the study.

   To efficiently prove the research relationships, this study aims at examining the effects of audit experience and ethical orientation on professional commitment, ethical reasoning and audit professionalism and the impacts of professional commitment, ethical reasoning and audit professionalism on audit quality through a mediating influence of audit independence and moderating determinants of stakeholder pressure and professional responsibility of certified public accountants (CPA) and tax auditors (TAs) in Thailand. Here, the key research questions in the current study are: (1) how audit experience and ethical orientation have an effect on professional commitment, ethical reasoning and audit professionalism, (2) how professional commitment, ethical reasoning and audit professionalism have an impact on audit independence and audit quality, (3) how audit independence has an influence on audit quality, (4) how audit quality has a relationship with audit effectiveness, (5) is stakeholder pressure a moderator of the professional commitment-audit independence relationships, the ethical reasoning-audit independence relationships, and the audit professionalism-audit independence relationships, (6) is professional responsibility a moderator the audit independence-audit quality relationships, and (7) is audit independence a mediator of the professional commitment-audit quality relationships, the ethical reasoning-audit quality relationships, and the audit professionalism-audit quality relationships.

   This study is outlined as follows. Relevant literatures of audit experience, ethical orientation, professional commitment, ethical reasoning, audit professionalism, audit independence, audit quality, audit effectiveness, stakeholder pressure, and professional responsibility are reviewed, addressed and criticized, and significant research hypotheses developments are also presented. Next, the research methods used to test the hypotheses are discussed including sample selection and data collection procedure, variables and methods. Also, the results of the study derived from 207 certified public accountants (CPA) and 265 tax auditors (TA) in Thailand are indicated and their reasonable discussions with existing literature supports are showed. Lastly, the study concludes by discussing implications for theory, institution, and profession, identifying limitations of the study, and providing suggestions and directions for future research.

2. LITERATURE REVIEWS OF AUDIT CHARACTERISTICS, AUDIT INDEPENDENCE, AUDIT QUALITY, AND AUDIT EFFECTIVENESS, AND HYPOTHESES DEVELOPMENTS

   Here, audit characteristics are main determinants of audit independence, audit quality and audit effectiveness of certified public accountants (CPAs) and tax auditors (TAs) in Thailand. They include audit experience, ethical orientation, professional commitment, ethical reasoning, and audit professionalism. Also, stakeholder pressure and professional responsibility are moderators of the aforementioned relationships. Audit experience and ethical orientation are proposed to have a direct effect on professional commitment, ethical reasoning and audit professionalism. For achieving an audit outcome as audit quality, professional commitment, ethical reasoning and audit professionalism explicitly tend to have a direct influence on audit quality and an indirect impact on audit quality via audit independence as a mediator. Stakeholder pressure is likely to moderate the relationships among professional commitment, ethical reasoning, audit professionalism, and audit independence. Similarly, professional responsibility seems to moderate the relationships between audit independence and audit quality. Likewise, audit quality likely has an association with audit effectiveness. To outstandingly investigate these relationships, the conceptual, linkage, and research model presents the relationships among audit experience, ethical reasoning, professional commitment, ethical reasoning, audit professionalism, audit independence, audit quality, audit effectiveness, stakeholder pressure, and professional responsibility, as shown in Figure 1.

   2.1 Audit Experience

   Audit experience is a key driver of determining professional commitment, ethical reasoning and audit professionalism. It refers to an auditor' unique knowledge, competencies and capabilities that occur from job practices in auditing profession. It enhances the auditor's abilities to process information, make metal comparisons of alternative solutions, and initiate subsequent actions (Chung and Monroe, 2000). It explicitly has an effect on decision making efficiency and effectiveness through a good memory of information necessary and an accurate judgment of audit tasks. Also, audit experience has an influence on hypotheses generation, especially industry experience. Industry experience potentially encourages auditors to receive job efficiency and effectiveness via developing the knowledge bases of the unique risks and audit approaches for a particular industry (Wright and Wright, 1997). It helps them identify clients' operational errors and search for their misstated accounts.

   Likewise, auditors with great experience are likely to improve their judgments with more complete and complex classifications of risk assessments (Stone and Dilla, 1994). Audit experience definitely promotes them to build and develop the consistency and consensus of risk judgments, assessments, and evaluations in auditing practices under other conditions, situations, and circumstances. Thus, auditors with more experience tend to perform best audit practices, achieve superior audit outcomes, and gain outstanding audit success. They respond clients' needs, expectations, and requirements by being aware...