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The British Accounting Review 47 (2015) 395e408
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The British Accounting Review

journal homepage: www.elsevier.com/locate/bar
Auditors' identification with their clients: Effects on audit

quality
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Jan Svanberg 1, Peter Ohman*
Mid Sweden University, Department of Business, Economics and Law, Centre for Research on Economic Relations, SE-851 70 Sundsvall,
Sweden
a r t i c l e i n f o a b s t r a c t
Article history: Although client familiarity is desirable from the auditor's perspective, identifying with
Received 1 November 2013 clients threatens auditor objectivity. This study examines the extent to which non-Big 4
Received in revised form 9 June 2014 auditors identify with clients, the effect of auditoreclient identification on auditors' client
Accepted 1 August 2014
acquiescence to client-preferred treatment, and, finally, whether the harmful effects of
Available online 4 September 2014
auditoreclient identification can be extended to a broader set of reduced audit quality acts.
The responses of 141 practicing auditors at non-Big 4 firms in Sweden support our theo-
Keywords:
retical predictions. We find that auditors tend to identify with their clients, and that an
Auditor objectivity
Client identification
auditor who identifies relatively more with a client is more likely to acquiesce to client-
Professional identification preferred treatment and to commit reduced audit quality acts. While previous research
Auditors' client acquiescence has considered only Big 4 firms, the current findings suggest that the problems with
Reduced audit quality acts auditor identification with clients also hold for non-Big 4 auditors.
Non-Big 4 auditors © 2014 Elsevier Ltd. All rights reserved.
Sweden
1. Introduction
Investors perceive a lower quality of accounting information when the audited company's management exerts influence
on auditors (Dhaliwal, Gleason, Heitzman, & Melendrez, 2008; Lambert, Leuz, & Verrecchia, 2007). At the same time, value-
added audit services e i.e., clienteservice activities resulting from an audit that are not directly related to verifying the
financial statements, such as providing information and advice beyond core audit services e are found to be most abundant
when the auditor has a strong relationship with the client (Herda & Lavelle, 2013). In addition, clients prefer a relational
approach from their auditors (Fontaine & Pilote, 2011, 2012), but client desire to have a committed and relationally oriented
€
auditor appears difficult to reconcile with the need for auditor objectivity (Ohman, Ha€ckner, & So
€ rbom, 2012). The present
study addresses this problematic issue by examining the impact of auditoreclient identification on auditor objectivity and
audit quality by applying social identity theory to the auditoreclient relationship.
Bamber and Iyer (2002, 2007) suggested that auditors identify with their clients and that this identification reduces
auditor objectivity in such a way that an identifying auditor tends to acquiescence to the client's preferred accounting po-
sition. We extend this research by examining a broader set of behaviours. In particular, we examine whether the effects of
auditoreclient identification extend to reduced audit quality (RAQ) acts. The RAQ acts considered here constitute unethical
time-saving acts having no immediate relationship to client preferences, and previous research has found that RAQ acts are
* Corresponding author. Tel.: þ46 (0)60 148677, þ46 (0)730367948 (mobile); fax: þ46 (0)60 148783.
€
E-mail addresses: Jan.Svanberg@miun.se (J. Svanberg), Peter.Ohman@miun.se (P. Ohman).
1
Tel.: þ46 (0)729019569 (mobile); fax: þ46 (0)60 148783.
http://dx.doi.org/10.1016/j.bar.2014.08.003
0890-8389/© 2014 Elsevier Ltd. All rights reserved.
396 €
J. Svanberg, P. Ohman / The British Accounting Review 47 (2015) 395e408
caused primarily by time budget pressure (TBP) (e.g., Coram, Ng, & Woodliff, 2003; Otley & Pierce, 1996a; Pierce & Sweeney,
2004; Willett & Page, 1996). However, Cianci and Bierstaker (2009) argued that the underlying mechanism of the relationship
between TBP and RAQ acts is cognitive bias caused by TBP. Affected by this bias, auditors believe that they can take such time-
saving shortcuts as superficially reviewing client documents or false signoff without increasing audit risk. Auditors who
identify with their clients are likely to suffer from a similar biasing of their judgment. Consequently, auditoreclient identi-
fication is a likely cause of RAQ acts.
We also examine a model of auditoreclient identification developed by Bamber and Iyer (2007) and essentially based on
social identity theory (Tajfel & Turner, 1985; Turner, Hogg, Oakes, Reicher, & Wetherell, 1987). We extend the study of Bamber
and Iyer (2007) by testing whether auditors who do not work for Big 4 firms (i.e., non-Big 4 auditors) identify with their
clients. We also provide further evidence of the extent to which professional identity may counteract any negative effects of
auditoreclient identification on audit quality, and consider whether auditor rotation is a useful way to reduce the negative
impact of client identification.
The present research on auditoreclient identification is important for at least two reasons. First, while previous studies
examine the effects of such identification on auditor objectivity (Bamber & Iyer, 2002, 2007; Stefaniak, Houston, & Cornell,
2012), there is no evidence that auditors' client identification is a problem for non-Big 4 auditors. Previous research appears to
assume that auditors' identification with their clients is a problem that exists only when audit clients are large, making
research on non-Big 4 auditors less relevant.
We examine the merits of such an assumption since there are reasons to suspect that non-Big 4 auditors also identify with
their clients. The organizational cultures of non-Big 4 firms are suggested to be relatively less competitive (Anderson-Gough,
Grey, & Robson, 2001; Otley & Pierce, 1996b), providing the potential for stronger relationships with clients than in Big 4 firms
with their higher employee turnover rates (Herbohn, 2004). If the employee turnover is lower in non-Big 4 firms, auditors
have more opportunities to develop close client relationships and this may impair auditor objectivity. Second, studies of the
effect of client identification on RAQ acts connect the research on auditor objectivity with previous studies of TBP and audit
quality, developing a more comprehensive view of the causes of quality problems in auditing. Since research indicates that
non-Big 4 firms conduct lower-quality audits than do Big 4 firms (e.g., Francis, 2004; Sundgren, 2009), there are reasons to
believe that the threat to objectivity from RAQ acts may be serious in non-Big 4 firms.
The remainder of the paper is structured as follows: In the next section we review the literature and present the hy-
potheses. We then outline the research method and sample selection. This is followed by the findings, and the discussion and
conclusions end the paper.
2. Literature review and hypothesis development
2.1. Auditoreclient identification and auditors' client acquiescence
Previous research has focused mostly on financial incentives (e.g., Dhaliwal et al., 2008; Hackenbrack & Nelson, 1996;
Haynes, Jenkins, & Nutt, 1998; Hollingsworth & Li, 2012; Kadous, Kennedy, & Peecher, 2003; Mayhew, Schatzberg, &
Sevcik, 2001; Salterio, 1996), paying little attention to the bonds caused by social forces such as cognitive-based per-
sonal relationships with clients. Social identity theory offers a theoretical framework for examining non-financial
dependence, claiming that individuals' social identity is the result of a self-categorization process. Individuals group
themselves with others and internalize traits that they perceive as typical of the group (van Knippenberg, van
Knippenberg, De Cremer, & Hogg, 2004). When people develop a social identity, they classify themselves according to
occupation, organization, family, nationality, or age, and it is possible to have many such identities simultaneously
(Markus & Wurf, 1987). Accounting firm alumni (Iyer, Bamber, & Barefield, 1997) and auditors (Bamber & Iyer, 2002,
2007) are examples of social identities.
Social identities govern how people think and act, increasing the likelihood of a person internalizing a group's norms and
values (Lembke & Wilson, 1998). Defining the self in collective terms leads to experience of collective interest as self-interest
(Ashforth & Mael, 1989; De Cremer & Van Vugt, 1999; Dutton, Dukerich, & Harquail, 1994; Hogg & Terry, 2000; van
Knippenberg, 2000). Therefore, an auditor identifying with a client is inclined to act in the interest of that client. Confirm-
ing these findings, Bamber and Iyer (2007) found that auditors identifying with their clients tend to acquiesce to the client's
preferred treatment, and Stefaniak et al. (2012) found further evidence of this effect. This suggests that these auditors attain a
client-inspired perception of the client's internal control and accounting (Mael & Ashforth, 1992; Wan-Huggins, Riordan, &
Griffeth, 1998). These studies examined auditors in Big 4 firms who typically have large clients with whom auditors may be
likely to identify.
The important differences between Big 4 and non-Big 4 firms provide the motivation for the present study. Big 4 firms
need to protect their reputation (Sundgren, 2009) and are therefore suggested to be less likely to compromise their inde-
pendence than are their smaller competitors. Moreover, audit firm size is used as a proxy for audit quality (e.g., DeAngelo,
1981), and larger audit firms have better training programs, develop standardized audit methods and have better audit
programs (Blokdijk, Drieenhuizen, Simunic, & Stein, 2006). Larger audit firms usually deal with larger clients from a variety of
industries, which enhances their auditors' skills (O'Keefe & Westort, 1992). All in all, these arguments suggest that Big 4 firms
conduct higher-quality audits than do non-Big 4 firms, and empirical evidence supports this contention (Becker, DeFond,
Jiambalvo, & Subramanyam, 1998; Chen, Lin, & Zhou, 2005; Zhou & Elder, 2008).
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J. Svanberg, P. Ohman / The British Accounting Review 47 (2015) 395e408 397
The difference in market position between Big 4 and non-Big 4 firms is manifested by the discussion of inappropriate
market dominance that has occurred in Europe and elsewhere. The House of Lords in Great Britain issued a call for evidence
regarding the consequences of the Big 4 market concentration (House of Lords, 2010). Their concern was the extent to which
adverse effects on audit quality could result from lack of competition. The European Commission has expressed similar
concerns (European Commission, 2010). However, there is no empirical support for such a concern. Instead, Francis, Michas,
and Seavey (2013) found that the Big 4 market share has a positive impact on audit quality as long as the market is evenly split
between the Big 4 firms. This seems to further support the contention that audit firms with weak market positions have
relatively more problems achieving high audit quality.
In non-Big 4 firms, the culture is less competitive, the auditors tend to feel more job satisfaction and like their working
conditions better than in Big 4 firms (Patten, 1995). Individuals who place more emphasis on prestige and less on
workelife balance are more likely to fit in at Big 4 firms (Bagley, Dalton, & Ortegren, 2012). This situation provides good
opportunities in non-Big 4 firms for long relationships with clients, a factor that in itself is fertile soil for strong client
relationships and may contribute to auditors' development of client identification and impaired objectivity. Furthermore,
previous evidence indicates that clients’ bargaining power is an important factor affecting auditors’ reporting decisions
(Lai, 2013). Because non-Big 4 firms are smaller than the Big 4 firms, clients are more likely to exert influence on the non-
Big 4 firms, and non-Big 4 auditors are less able to withstand client pressure than are Big 4 auditors (Boone, Khurana, &
Raman, 2010; Lai, 2013).
Previous research on financial dependence has measured client importance as the proportion of client non-audit
service fees, audit fees, or total fees to the total audit office revenue (Hollingsworth & Li, 2012), which means that
small clients may be important for small audit firms. Consequently, the fact that non-Big 4 firms have smaller average
clients does not necessarily mean that the clients are perceived as less important to the auditor. For these reasons, we
expected to find that auditors in non-Big 4 firms identify with their clients to an extent comparable to that previously
found for Big 4 auditors, and that the non-Big 4 auditors would be likely to acquiesce to client-preferred accounting
positions. We state the hypothesis as follows:
H1 Non-Big 4 auditors' acquiescence to client-preferred treatment increases with increasing client identification.
2.2. Auditoreclient identification and reduced audit quality acts
Several auditor behaviours identified as RAQ acts have been examined in previous research, including accepting weak
client explanations (Coram et al., 2003; Pierce & Sweeney, 2004; Willett & Page, 1996), superficially reviewing client doc-
uments (Dalton & Kelley, 1997; Kelley & Margheim, 1987; Pierce & Sweeney, 2004), and inadequately investigating ac-
counting principles (McNair, 1991; Otley & Pierce, 1996a). Moreover, research has found that auditors in some cases reject
awkward-looking items from a sample (Coram et al., 2003; Willett & Page, 1996), inappropriately rely on the client's inter-
nal control (Pierce & Sweeney, 2004), fail to pursue questionable items (McNair, 1991), and sign off prematurely (Alderman &
Deitrick, 1982).
These RAQ acts are closely related to TBP in audit firms and this pressure is the most commonly observed cause of
these behaviours. RAQ acts have been so closely associated with TBP that they may be interpreted simply as ways for
auditors to save time in order to attain time budgets, but Cianci and Bierstaker (2009) offered an alternative way of
looking at the phenomenon. They demonstrated that TBP causes auditors to suffer from biased judgment, which in
turn causes RAQ acts to become more frequent. This judgment bias, i.e., efficiency-mediated estimation, means that
auditors discount negative information, emphasize positive information about the client's accounting as more rele-
vant, and make favourable assessments of the client's internal control as demands for efficiency increase. This in turn
means that auditors can perform RAQ acts to save time in the belief that these acts do not involve an audit risk
increase.
Cianci and Bierstaker (2009) explained auditors' biased judgment with reference to motivated reasoning theory (Kunda,
1990, 1999). This theory claims that individuals with directional goals conduct biased searches for and overestimate the
importance of evidence supporting their preferred conclusion (Ditto, Scepansky, Munro, Apanovitch, & Lockhart, 1998;
Lundgren & Prislin, 1998). Consistent with motivated reasoning theory, accounting research has provided evidence that
auditors make judgments in favour of client-preferred alternatives in response to efficiency concerns (Bierstaker, Bedard, &
Biggs, 1999; Glover, Prawitt, Wilks, & McDaniel, 2005; Haynes et al., 1998) and other evidence suggests that auditors can have
the goals of being efficient and supporting client-preferred positions (DeZoort & Lord, 1997; Johnstone, Bedard, & Biggs,
2002). Of particular importance in this respect is the similarity of these effects to the inclination of auditors to take a col-
lective's (group or organization) interest to heart (Hogg, 2003; Sedikides & Brewer, 2001; Turner et al., 1987), which is likely to
appear when the auditor identifies with clients.
In total, these observations suggest that auditors who identify with their clients are more likely to commit RAQ acts than
are other auditors. Similarly, Deetz (1995) found that professionals who identify with a client are more likely to under-report
time. We state the following hypothesis:
H2 The frequency of RAQ acts increases with increasing audit client identification.
398 €
2.3. Antecedents of auditoreclient identification
Three antecedents of auditoreclient identification were examined by Bamber and Iyer (2007), who found that the effects
of auditor tenure, client importance, and client image, respectively, on auditor acquiescence were mediated by auditoreclient
identification. Supporting a large body of social psychological research, Dutton et al. (1994) argued that the longer a person
remains with an organization, the more salient the organizational membership becomes for self-categorization. Bamber and
Iyer (2007) confirmed that the length of time that an auditor has worked on the audit engagement (i.e., auditor tenure) is
positively related to auditoreclient identification.
Furthermore, auditors will tend to identify more with clients that they deem important. Such clients are often the largest
clients of an audit firm (Chung & Kallapur, 2003), and auditors invest more time and effort in important clients, though small
clients may be important for non-Big 4 firms due to the relative size of the audited company. Auditors are sometimes
recruited by their clients (Dart & Chandler, 2013), a situation that causes auditors to value clients as potential employers as
well. Social identity theory and evidence from Bamber and Iyer (2007) suggest that the positive effect on auditors' self-image
provided by association with important clients in combination with the amounts of time that auditors allocate to such clients
stimulate audit client identification.
Finally, social identity theory suggests that people identify with groups that have an appealing image, increasing indi-
vidual self-esteem and image (Haslam, 2001; Tajfel & Turner, 1985). For these reasons, we expect to confirm Bamber and Iyer's
(2007) results and find that auditors identify more with clients having a positive image in the eyes of the general public,
auditors, or both. Accordingly, we state three hypotheses as follows:
H3 Auditors' client identification increases with increasing auditor tenure.

H4 Auditors' client identification increases with increasing client importance.
H5 Auditors' client identification increases with more positive client image.
This study also examines whether client identification mediates the effects of auditor tenure, client importance, and client
image on auditor acquiescence to client-preferred treatment, although the hypotheses do not state these relationships.
2.4. Professional identification, auditors' client acquiescence, and RAQ acts
Research on the organizationaleprofessional conflict experienced by auditors has claimed that professional commitment
or professional identity is separated from and precedes other commitments for this strongly professional group (Aranya &
€
Ferris, 1984; Aranya, Pollock, & Amernic, 1981; Carrington, Johansson, Johed, & Ohman, 2013; Shafer, Park, & Liao, 2002;
Shafer & Wang, 2010). According to the social identity argument, auditors who identify with their profession tend to
internalize the values and norms of the profession, their behaviour being highly governed by these values and norms.
If it is correct to hypothesize that the propensity to acquiescence to the client's preferred accounting position increases
with increasing client identification, the opposite should hold for professional identification. This reasoning is supported by
Jenkins and Lowe (1999), who argue that auditors could be either advocates for their clients, supporting strong client
identification, or public watchdogs, supporting strong professional identification. For the same reasons that auditors tend to
acquiesce less to the client-preferred treatment when they have a stronger professional identity (Bamber & Iyer, 2007), we
expect auditors with a stronger professional identity to be less likely to commit various RAQ acts. Auditors who are less
independent should have a higher tendency to neglect the audit rigor compromised by RAQ acts. Accordingly, we hypothesize
that:
H6 Auditors' acquiescence to client-preferred treatment decreases with increasing professional identity.

H7 The frequency of RAQ acts decreases with increasing professional identity.
3. Method
3.1. Context
Swedish auditing regulations have a long tradition of being governed by laws, and the current laws state that auditors
€
should act not only on behalf of shareholders but also on behalf of society in general (Ohman & Wallerstedt, 2012). In recent
decades, the number of certified auditors in Sweden has remained relatively stable at around 4000, of whom 55% are
authorized and 45% approved auditors (Carrington et al., 2013). Revisorsna €mnden (the Supervisory Board of Public Ac-
countants) is the authority that issues authorizations and approvals and supervises authorized auditors, approved auditors,
and accounting firms. Until 2007, only professionals carrying the CA designation were allowed to be members of the national
professional institute (FAR), which represents Sweden in organizations such as the International Federation of Accountants
(IFAC). Today, other accounting specialists are also allowed to be FAR members (Carrington et al., 2013).
As indicated above, the formal competence differs between two categories of certified auditors in Sweden. Authorized
auditors must meet higher formal education requirements and stricter requirements when qualifying as senior accountants
€
than must approved auditors (Fo €rordning om revisorer, 1995:665, x 3e6). To be an approved auditor, one needs an education
comparable to a bachelor's degree (i.e., three years of university study), three years of practical training under supervision,
and to pass an examination adapted to the education and practical training required for this particular category of auditors. To
become an authorized auditor, one must possess a bachelor's or a master's degree (requiring three or four years of university
study). In addition to the three years of practical training required of an approved auditor, another two years of practical
experience is required to become an authorized auditor. Auditors in this category must pass an examination of professional
competence based on the qualifications needed. In general, both approved and authorized auditors who have passed a
€
written examination may audit limited companies (Ohman & Wallerstedt, 2012). However, it has been decided that there will
be only one category of certified auditors e authorized auditors e in Sweden. All prospective certified auditors therefore need
eight years of theoretical and practical training, and must pass the same examination before being certified.
Unlike in many other countries, it is the general meeting of shareholders that elects the company's auditors in Sweden. In
accordance with the EU's Eighth Company Law Directive, listed companies in Sweden must establish audit committees.
However, this is not the case for limited companies not listed on the stock exchange. In these companies, which represent the
vast majority of Swedish companies, management may be heavily involved in the selection process that precedes the
€
appointment of auditors by the general meeting of shareholders (Ohman et al., 2012).
Although the nature of the audit differs in some respects between Sweden and some other countries, there are important
similarities between Swedish auditors and auditors elsewhere. For example, Sweden has adopted IFAC's International
Standards on Auditing (ISA). Moreover, the organization and employment structure of the Big 4 firms are comparable, and
these firms dominate in Sweden as they do elsewhere. In 2011, the audit firms in Sweden had total revenues of SEK 16 million
(equal to EUR 1.7 million). The Big 4 firms accounted for around 66% of total revenues, while the non-Big 4 firms accounted for
the remaining 34% (Carrington et al., 2013).
Although the Big 4 firms have higher market shares than do the non-Big 4 firms, the small proportion of listed companies
explains why most audit firms in Sweden specialize in owner-managed businesses (only around 300 of the approximately
350,000 limited companies in Sweden are listed). Although it is arguably easier to audit small firms, the modest audit fees
paid by these firms limit the time spent on each audit. Stakeholders' pressure on auditors may also be fairly limited when
auditing small companies, and the same holds for the risk of auditor litigation (Carrington et al., 2013).
A potential difference between Big 4 and non-Big 4 firms is that the small-firm auditors may feel somewhat distant from
the audit profession. For example, Sweden's professional audit association (FAR) has traditionally been dominated by auditors
€
representing the big audit firms (Ohman & Wallerstedt, 2012). Moreover, Big 4 auditors exclusively represent the audit
profession on Revisorsna €mnden (the Swedish Supervisory Board of Public Accountants).
3.2. Sample and data collection
To investigate client identification in a natural environment, we developed a questionnaire to collect empirical data for the
study, modelled after that used by Bamber and Iyer (2007) and in previous time pressure and audit quality research (Otley &
Pierce, 1996a). As frequencies of RAQ acts and TBP are to be measured, an anonymous questionnaire is a method of data
collection that allows respondents to reveal sensitive information about their behaviour without fear of consequences. Using
a register of Revisorsn€amnden, we selected a random sample of 600 Swedish auditors employed in non-Big 4 firms, and e-
mailed them the instrument using the survey software. Before administration, the questionnaire was pilot-tested using two
authorized auditors. Based on the pilot test results, the questionnaire was revised to ensure that the respondents correctly
interpreted the items, and to ensure proper translation from English to Swedish.
The self-administered questionnaire was distributed by e-mail in May 2011. Participation in the study was voluntary and
respondents were assured that the information would be used solely for scientific purposes. We also informed respondents
that the collection of responses through the e-mail survey software ensured anonymity, as the survey software did not enable
the researchers to track respondent identity. This information was provided to attenuate the social desirability response bias
that otherwise may occur in behavioural ethics research (Randall & Fernandes, 1991). According to the pilot study, the
questionnaires took about fifteen minutes to complete. Of the 600 e-mailings, 141 complete responses were obtained, rep-
resenting a 23.5% response rate. This response rate was achieved after four reminders generated by the e-mail survey soft-
ware over three weeks.
The possibility of bias in the data was dealt with in the following way. Non-respondents' answers were taken to be
represented by late respondents' answers, and any difference between late and early respondents was treated as a measure of
non-response bias. An ANOVA was computed to ensure that late respondents did not answer the questions differently from
early respondents. Late respondents were defined as the last 30 respondents to submit their questionnaires, that is, after
several reminders, while early respondents were the first 30 respondents. Results for late respondents, as surrogates for non-
respondents (Armstrong & Overton, 1977), were statistically indistinguishable from those for early respondents, which
demonstrates that there is some assurance against non-response bias in the sample.
3.3. Measures
The measures were adapted from scales validated in previous research, and participants responded using five-point Likert-
type scales. The Appendix presents the measures used in the present study.
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We adapted the measure of client identification and professional identification from the organizational identification scale
(Mael & Ashforth, 1992; Wan-Huggins et al., 1998) and rephrased the five-item scale to a professional orientation so that it
could measure client identification as well as professional identification. As demonstrated in Table 1, we constructed the
client identification measure in accordance with Bamber and Iyer (2007).
To determine whether client identification and professional identification are distinct constructs, we performed a
principal-component factor analysis of the items in the constructs. The factor analysis presented in Table 1 revealed that the
items loaded on two factors representing the client identification scale and the professional identification scale, respectively.
The professional identification scale consisted of five items but the client identification scale initially had one item that had
cross loadings above 0.3 with the two factors. Accordingly, the two-factor structure described in Table 1 as the solution after
the item “I am very interested in what others think about this client” has been excluded. The two-factor solution accounted for
54.9% of the variance. These results suggest that the measures assess two different constructs. The internal reliability
(Cronbach alpha) of the client identification scale was 0.77 and the corresponding value for the professional identification
scale was 0.79.
A three-item version of the organizational image scale was used (Iyer et al., 1997; Mael & Ashforth, 1992) as a measure of
client image. The internal reliability of the client image scale was low, and when we found that the highest Cronbach alpha
score we could obtain was 0.451, which we considered too low, we excluded this construct from further analysis. Conse-
quently, we were unable to test H5. Client importance was measured using one item previously used by Bamber and Iyer
(2007), and tenure was measured using one item. In the latter case, the respondents were asked to think about their
largest client and indicate the length of time the auditor had been employed by that client. The specific question was “How
many years have you audited this client?”
Auditor experience was measured as the number of years the respondent has been an auditor. The specific question was
“How many years have you worked as an auditor?” Moreover, respondents were asked whether they were juniors/seniors or
whether they occupied a manager or partner position in their audit firm. The variable “position” indicates whether the
auditors are juniors/seniors or managers/partners.
The questionnaire also contained a short case adapted from earlier research on auditors' behaviour in an audit conflict
situation (Bamber & Iyer, 2007; Knapp, 1985). Responding to this case provides a measure of auditor objectivity. Respondents
were asked to assume that the case involved their largest client. The case describes a situation in which the auditor's
conclusion is that unrecorded liabilities are material but the client's management strongly disagrees. Respondents were asked
about the likelihood that they would accept the client-preferred treatment and not require that the liabilities be recorded in
the financial statements. Respondents were to indicate their response on a probability scale ranging from 0 (“very low
likelihood”) to 100 (“very high likelihood”), a higher score representing a higher likelihood of the auditor acquiescing to the
client's demand and not maintaining an objective judgment. Several studies have successfully used this recall method to elicit
responses from auditors (Bamber & Iyer, 2007; Gibbins, McCracken, & Salterio, 2005; Gibbins & Newton, 1994). The likelihood
of accepting the client-preferred treatment is the variable “auditor acquiescence”.
As a control variable, we measured the size of the office in which the auditor is employed using the item “How many
auditors work at your office?” Measuring office size is a way of controlling for the possibility that managers and partners who
work in small offices tend to devote more time to audit field work because they have less audit staff to manage, while
managers and partners in larger offices tend to supervise an audit team and devote relatively less time to audit field work. We
caution that the amount of field work may cause variation in RAQ acts as well as variation in client identification, so this
control variable is a way of ensuring that a relationship between client identification and RAQ acts is not simply a matter of
different levels of exposure to audit field work. Another control variable was the size of the auditors' largest client measured
as the annual turnover (million SEK). The natural logarithm of this value was used in the correlations and regressions as the
control for client size.
For control reasons, TBP was included in the questionnaire. TBP was measured in accordance with Otley and Pierce (1996a)
using a three-item scale. The instrument has a demonstrated level of construct validity (Otley & Pierce, 1996a) and its internal
reliability has previously been confirmed in several studies. Pierce and Sweeney (2004) reported a Cronbach alpha of 0.66,
Table 1
Results of principal components factor analysis.
Items Factor loadings

Client identification
When someone praises this client, it feels like a personal compliment. 0.777
When I talk about this client, I usually say “we” rather than “they”. 0.687
This client's successes are my successes. 0.846
When someone criticizes this client, it feels like a personal insult. 0.755
Professional identification
When someone criticizes my profession, it feels like a personal insult. 0.644
When I talk about my profession, I usually say “we” rather than “they”. 0.670
I am very interested in what others think about my profession. 0.697
My profession's successes are my successes. 0.835
When someone praises my profession, it feels like a personal compliment. 0.849
€
Table 2
Descriptive statistics.
Variables Frequency Mean SD Median Min Max

Male 100
Female 41
Authorized auditor (CPA) 67
Approved auditor (AA) 74
Junior/senior 39
Manager/partner 102
Age (years) 46.94 9.86 45 27 65
Experience (years) 16.99 9.67 17 2 35
Auditor tenure (years) 10.26 3.67 8 0.5 21
Office size (number of auditors) 8.24 5.68 8 3 80
Client importance 2.50 1.01 2 1 5
Client size (turnover MSEK) 128.02 142.81 85.00 4.00 900.00
TBP (1e5) 1.97 0.71 2.00 1.00 4.33
TBP (junior/senior) 1.90 0.54 2.00 1.33 3.33
TBP (manager/partner) 2.00 0.76 2.00 1.00 4.33
Sig. differencea 0.474
Client identification (1e5) 2.73 0.69 2.80 1.00 4.40
Client identification (junior/senior) 2.73 0.68 2.80 1.00 4.00
Client identification (manager/partner) 2.72 0.70 2.80 1.00 4.40
Professional identification (1e5) 3.31 0.66 3.40 1.00 5.00
Professional identification (junior/senior) 3.39 0.58 3.40 2.00 4.60
Professional identification (manager/partner) 3.27 0.69 3.40 1.00 5.00
Auditor acquiescence (0e100) 57.76 32.96 60 0 100
Auditor acquiescence (junior/senior) 60.00 31.27 70 0 100
Auditor acquiescence (manager/partner) 56.91 33.71 60 0 100
RAQ acts (1e5) 1.83 0.42 1.83 1.17 2.50
RAQ acts (junior/senior) 1.86 0.34 2.00 1.17 2.50
RAQ acts (manager/partner) 1.82 0.46 1.83 1.17 3.00
Separate RAQ acts (1e5)b
Accepted weak client explanations 2.02 0.65 2 1 3
Superficial reviews of client documents 2.24 0.83 2 1 4
Failed to research an accounting principle 1.69 0.60 2 1 3
Reduced work below a reasonable level 1.71 0.64 2 1 3
Signed off prematurely 1.62 0.61 2 1 3
a
Two-tailed t-test. Variables: “Age” is the age of the auditor in years. “Experience” is the number of years the auditor has worked as an auditor. “Auditor
tenure” is the length of time the auditor has audited his or her largest client. “Office size” is the number of colleague auditors working in the same office as
the auditor. “Client importance” measures the perceived importance of the client for the auditor's firm. “Client size” is the logarithm of the annual turnover
(MSEK) of the client. “TBP” is the perceived time budget pressure. “Client identification” measures the extent to which an auditor identifies with a client.
“Professional identification” is the extent to which the auditor identifies with the audit profession. “Auditor acquiescence” measures the extent to which an
auditor acquiesces to the client-preferred treatment. “RAQ acts” is the average value of five reduced audit quality acts. A variable name followed by junior/
senior or manager/partner means that the score is reported separately for the group's junior/senior and manager/partner.
b
The frequency scores for the five RAQ acts that together make up the RAQ acts score are reported separately.
and in the present study we find a Cronbach alpha of 0.73 for TBP. The five-item measure of RAQ acts was adapted from Otley
and Pierce (1996a) and has been used in several previous TBP studies. The Cronbach alpha for this measure was previously
reported to be 0.82 (Pierce & Sweeney, 2004), and in the present study the Cronbach alpha for the measure was found to be
0.69.
4. Results
4.1. Descriptive statistics
Demographic information about the respondents is summarized in Table 2. Most respondents are men. Just under half of
the respondents possess the highest certification available in Sweden (i.e., authorized auditor, CPA) and the rest of them have
the lower certification (i.e., approved auditor, AA).2 Table 2 also shows that most respondents are either managers or partners.
On average, the respondents are 47 years old, have been auditors for 17 years, and have worked for their largest client for an
average of 10 years. Several variable scores are reported separately for the groups “junior/senior” and “manager/partner”. As
can be seen, the average scores on the central variables (i.e., client identification, professional identification, auditor
2
No significant differences between authorized and approved auditors were found, and we therefore excluded this variable from further analysis.
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Table 3
Pearson productemoment correlations.
Variables RAQ acts Client ID Prof ID TBP Auditor tenure Client imp. Age Gender Exp. Office size Client size Pos.
Auditor acq. 0.316** 0.294** 0.063 0.156 0.275** 0.377** 0.015 0.061 0.027 0.087 0.002 0.042
RAQ acts 0.317* 0.143 0.090 0.193* 0.125 0.047 0.050 0.055 0.168 0.037 0.049
Client ID 0.186* 0.039 0.263** 0.102 0.037 0.032 0.038 0.037 0.008 0.005
Prof. ID 0.146 0.111 0.121 0.031 0.062 0.052 0.075 0.014 0.079
TBP 0.044 0.031 0.061 0.010 0.060 0.045 0.191* 0.064
Auditor tenure 0.202* 0.501** 0.133 0.495** 0.269** 0.014 0.457**
Client imp. 0.003 0.044 0.006 0.022 0.090 0.006
Age 0.241** 0.675** 0.410** 0.077 0.606**
Gender 0.222** 0.024 0.128 0.160
Exp. 0.220* 0.001 0.728**
Office size 0.037* 0.197*
Client size 0.142
*p < 0.05, **p < 0.01; two-tailed tests. In cases in which one variable is dichotomous and one is ordinal, the correlations are point-biserial correlation
coefficients; in cases in which two variables are dichotomous, the phi coefficients are presented. Variables: “Auditor acq.” measures the extent to
which an auditor acquiesces to the client-preferred treatment. “RAQ acts” is the average value of five reduced audit quality acts. “Client ID” is a
variable describing the extent to which an auditor identifies with a client. “Professional ID” is the extent to which the auditor identifies with the audit
profession. “TBP” is the perceived time budget pressure. “Auditor tenure” is the length of time the auditor has audited his or her largest client. “Client
imp.” is the perceived importance of the client to the auditor's firm. “Age” is the age of the auditor in years. “Gender” is 0 for women and 1 for men.
“Exp.” is the number of years the auditor has worked as an auditor. “Office size” is the number of colleague auditors working in the same office as the
auditor. “Client size” is the logarithm of the annual turnover (MSEK) of the client. “Pos.” is a dichotomous variable that is 0 if the auditor is junior or
senior and 1 if the auditor is manager or partner (junior/senior or manager/partner is the auditor’s own classification).
acquiescence, and RAQ acts) do not differ significantly between the two groups of auditors. The frequency scores for the five
RAQ acts that together constitute the RAQ acts score are reported separately.
Examining the relationship between client identification and RAQ acts, we initially cautioned that a sample consisting
mostly of managers and partners would be less suitable because the highest levels of TBP as well as RAQ acts tend to be
observed among juniors and seniors (Kelley, Margheim, & Pattison, 1999; Svanberg & Ohman, € 2013). We therefore
ensured that the data would be suitable for this analysis in three ways. First, by choosing non-Big 4 auditors, we sample
auditors who work in relatively small offices in which there is less division of labour. The “managers” and “partners” in
the present sample are largely employed in relatively small firms e the average office size is eight persons e in which the
tasks of managers have more in common with those of senior auditors in Big 4 firms than with those of the managers or
partners of such firms.
Second, we compare the levels of TBP and RAQ acts in the present study with those found in previous studies using
comparable measurement instruments. Table 2 shows that TBP (mean ¼ 1.97) is significantly (p < 0.05) below the scale
midpoint, indicating that auditors in this sample find time budgets relatively attainable. RAQ acts are also below the scale
midpoint. The average RAQ acts value (mean ¼ 1.83) refers to the frequency labelled “rarely”, which is between the midpoint
(“sometimes”) and the endpoint (“never”).3 This indicates that the sampled auditors report committing RAQ acts, despite the
fact that most describe themselves as managers or partners. In comparison, Otley and Pierce (1996a), based on the same RAQ
acts scales as are used here, reported RAQ act frequencies suggesting a total average value of only marginally “above two” for
junior auditors. The present sample appears suitable in that the sampled auditors are actively engaged in audit practices in
which RAQ acts are apparently committed. This interpretation is further supported by Otley and Pierce (1996b), who found
average scores for RAQ acts of “close to two” for four of the RAQ acts considered in the present study. That study also used a
five-point Likert scale with a score of two indicating “rarely”.
Third, despite the fact that the average level of RAQ acts in the sample indicates that the auditors are sufficiently involved
in audit field work, we dealt with the possibility that the level of RAQ acts may vary between different managers and partners
because of varying involvement in field work. The control variable “office size” was employed to ensure that a relationship
between client identification and RAQ acts would not be observed because of the varying involvement in audit field work
associated with varying office size.
Table 2 shows that the average client identification is 2.73, significantly below the scale midpoint (p < 0.001). The standard
deviation (0.69) indicates considerable variation in client identification between auditors. The average professional identi-
fication is 3.31, significantly above the scale midpoint (p < 0.001), and the variation between auditors (standard deviation
0.66) is comparable to the variation in client identification. These values can be compared with those obtained by Bamber and
Iyer (2007), who found both values to be above the scale midpoint and reported identification levels approximately 0.4 units
higher than in the present study. Thus, client identification seems lower among these non-Big 4 Swedish auditors than in the
Big 5 U.S. sample that Bamber and Iyer (2007) used, and the same holds for professional identification. At the same time, we
find that the variation in the client identification level is higher in our sample of non-Big 4 auditors than in the Big 5 firm
sample examined by Bamber and Iyer (2007).
3
The RAQ acts measure was reverse coded.
€
Table 4
Multiple regression of the effect of client identification on auditors' client acquiescence and RAQ acts.
Dependent variable Predicted sign Model 1 Model 2 Model 3 Model 4 Model 5
Client identification Auditor acquiescence Auditor acquiescence RAQ acts RAQ acts
Coeff. Sig. Coeff. Sig. Coeff. Sig. Coeff. Sig. Coeff. Sig.
Variable
Client identification þ 1.182 0.003 0.137 0.023
Professional identification 0.188 0.064 0.183 0.675 0.380 0.371 0.031 0.639 0.007 0.910
TBP þ 0.063 0.523 1.097 0.009 1.072 0.008 0.073 0.234 0.066 0.235
Auditor tenure þ 0.210 0.004 0.952 0.002 0.696 0.022 0.086 0.063 0.057 0.220
Client importance þ 0.037 0.610 1.227 0.000 1.180 0.000 0.019 0.0673 0.013 0.767
Position 0.141 0.525 1.152 0.212 1.280 0.150 0.027 0.843 0.011 0.937
Experience 0.006 0.564 0.111 0.046 e0.0103 0.023 0.009 0.176 0.009 0.208
Office size þ/ 0.062 0.205 0.220 0.275 e0.0296 0.131 0.062 0.048 0.071 0.023
Client size þ 0.013 0.835 0.638 0.013 0.0651 0.009 0.020 0.601 0.022 0.556
R2 0.146 0.357 0.414 0.121 0.167
Adj. R2 0.080 0.304 0.359 0.050 0.090
F 2.215 6.745 7.525 1.692 2.161
Sig. 0.032 0.000 0.000 0.110 0.031
Sig. F for change between 0.003
models 3 and 2
Sig. F for change between 0.023
models 5 and 4
Significance values refer to two-tailed tests. Variables: “Client identification” is a variable describing the extent to which an auditor identifies with a client.
“Auditor acquiescence” measures the extent to which an auditor acquiesces to the client-preferred treatment. “RAQ acts” is the average value of five reduced
audit quality acts. “Professional identification” is the extent to which the auditor identifies with the audit profession. “TBP” is the perceived time budget
pressure. “Auditor tenure” is the length of time that the auditor has audited his or her largest client. “Client importance” is the perceived importance of the
client to the auditor's firm. “Position” is a dichotomous variable that is 0 if the auditor is junior or senior and 1 if the auditor is manager or partner.
“Experience” is the number of years the auditor has worked as an auditor. “Office size” is the number of colleague auditors working in the same office as the
auditor. Client size is the logarithm of the annual turnover (MSEK) of the client.
4.2. Hypothesis test results
Table 3 presents Pearson productemoment correlation coefficients for the variables. As expected, the correlations reveal
potentially significant relationships between several variables. The correlations between auditor acquiescence scores and
RAQ acts, client identification, auditor tenure, and client importance, respectively, are significant at p ¼ 0.01 or less. The
correlations between RAQ acts and client identification and auditor tenure, respectively, are significant at p ¼ 0.05 or less.
However, there is no significant relationship between RAQ acts and TBP, suggesting that time pressure does not affect audit
quality in this sample of auditors. We note that the present study is not concerned with the relationship between TBP and RAQ
acts; instead, our focus is the relationship between client identification and RAQ acts, and we use TBP as a control variable
because previous studies have found that a substantial part of the variation in RAQ acts can be explained by TBP (e.g., Coram
et al., 2003; Pierce & Sweeney, 2004).
As expected, the correlation between age and experience is high. Because these two variables provide similar information,
we excluded age from the multiple regression models to avoid multicollinearity. We decided not to include the variable
gender in the multiple regressions because the correlations did not indicate that gender would be related to the central
variables of the study. This finding is supported by previous research similar to the present study (Bamber & Iyer, 2007; Otley
& Pierce, 1996a, 1996b).
Table 4 presents data from the multiple regressions. Collinearity statistics were generated to verify whether the relatively
high correlations between auditor tenure and experience indicate multicollinearity in the regression model. However,
regarding collinearity statistics, tolerance values were all below 1 and VIF values were all between 1.0 and 1.8, suggesting no
multicollinearity.
The structural equation model developed by Bamber and Iyer (2007) demonstrated that the effects of auditor tenure and
client importance on client acquiescence were mediated by client identification.4 We tested this possibility using hierarchical
multiple regression and by assessing the incremental contribution of client identification. Using the same variables as did
Bamber and Iyer (2007) e except for a different definition of auditor experience e we examined the possible relationships
between client identification and auditor acquiescence, and the extent to which client identification mediates the effect of
auditor tenure and client importance on auditor acquiescence. The dependent variable is client identification in model 1,
auditor acquiescence in models 2 and 3, and RAQ acts in models 4 and 5.
4
If it can be assumed that client identification is caused by auditor tenure or client importance and if it can be assumed that auditor acquiescence is
caused by auditor tenure, client importance, and client identification, then client identification may act as a mediator between the precedent variables (i.e.,
auditor tenure and client importance) and the outcome variable (i.e., auditor acquiescence). If this is the case, the effect of the precedent variables (i.e.,
auditor tenure and client importance) is mediated by client identification. The test of mediation is the statistical confirmation of causal modelling. We used
a test of mediation described by Baron and Kenny (1986).
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The multiple regression analysis presented in model 1 in Table 4 confirms a positive relationship between auditor tenure
and client identification (p < 0.01), supporting H3. This relationship, together with the observed decrease in significance
levels and in coefficient size between models 2 and 3, indicates that client identification partially mediates the effect of
auditor tenure on auditor acquiescence (cf. Baron & Kenny, 1986). The regression in model 1 does not indicate any re-
lationships between client identification and client importance, suggesting no support for H4. The control for client size
suggests that auditors acquiesce more to the preferences of larger than smaller clients, but that auditors do not identify more
with larger clients.
The significant positive regression coefficient for client identification (p < 0.01) in model 3 indicates a positive relationship
between client identification and auditor acquiescence, providing support for H1. The significant increase in the R2 value,
supported by the F-test, between models 2 and 3 indicates that client identification contributes significantly to the
explanatory power of the model. However, H6, suggesting that auditors' acquiescence to client-preferred treatment decreases
with increasing professional identity, does not receive any support from the regressions presented in Table 4.
Regarding mediation, we note that there is a relationship between auditor tenure and auditor acquiescence indicated by
the significant and positive coefficient for auditor tenure in model 2 (p < 0.01) and that the relationship is confirmed in model
3, with the magnitude of the coefficient decreasing from 0.952 (model 2) to 0.696 (model 3) and the p-value increasing from
0.002 (model 2) to 0.022 (model 3). Finally, models 2 and 3 indicate a negative relationship between auditor experience and
auditor acquiescence (p < 0.05), this effect counteracting the impact of auditor tenure on auditor acquiescence.
H2 and H7 were tested using the multiple regression analyses presented in models 4 and 5. The hypothesized relationships
between RAQ acts and the central variables of this study are the same as we hypothesized for auditors' acquiescence to client-
preferred treatment. Therefore, we developed the analysis as a hierarchical regression to detect mediation in the same way as
in models 2 and 3.
Model 5 indicates a positive relationship between client identification and RAQ acts (p < 0.05), supporting H2. The control
variable TBP is insignificant in both models. We found no apparent relationship between TBP and RAQ acts in the present
sample, confirming the univariate test.
While we found that client identification partially mediates the effect of auditor tenure on auditor acquiescence, the
corresponding mediation of the effect of auditor tenure on RAQ acts is not confirmed by the regressions. Although the
conditions for partial mediation are not completely in place (cf. Baron & Kenny, 1986), there is some indication of mediation
because the coefficient for auditor tenure drops from 0.086 to 0.057 between models 4 and 5, and the significance level
decreases as well. The pattern observed in the regressions with auditor acquiescence as the dependent variable is thus partly
confirmed in this respect by the regression with RAQ acts as the dependent variable. Finally, no significant relationship was
found between professional identification and RAQ acts, leaving H7 unsupported.
5. Discussion and conclusions
This study extends previous literature on the effect of auditors' client identification on auditors' client acquiescence
(Bamber & Iyer, 2002, 2007). We contribute to the research on the threat to auditor objectivity posed by client identification in
two ways. First, while Bamber and Iyer (2007) used a sample of auditors employed in Big 4 firms, we examine whether their
findings can be extended to a sample of auditors in non-Big 4 firms. Second, while previous findings regarding the effects of
auditors' client identification have been limited to one behaviour, i.e., auditor acquiescence to client-preferred treatment, we
examine a broader set of unethical acts, i.e., RAQ acts, previously examined in time budget pressure (TBP) research (e.g.,
Coram et al., 2003; Coram, Glavovic, Ng, & Woodliff, 2008; Otley & Pierce, 1996a, 1996b; Pierce & Sweeney, 2004; Svanberg &
€
Ohman, 2013; Willett & Page, 1996).
We found that identification with clients varies substantially between auditors, and that client identification is lower than
professional identification on average. Partly contrary to this result, Hogg, van Knippenberg, and Rast III (2012) argued that
identification across organizational boundaries is difficult to achieve if there are intergroup identity clashes. We recognize
that an auditoreclient relationship could well involve intergroup clashes because the auditor's professional identification is
strong and being an auditor entails maintaining a certain distance from the client.
In the view of researchers such as Fontaine and Pilote (2011, 2012) and Herda and Lavelle (2013), auditors should establish
a relational approach to their clients. However, the present study provides further evidence of the impairment of auditor
objectivity that may be caused by relaxing the requirement for an arms-length auditoreclient relationship. We found that
auditors' client identification serves to impair auditor objectivity because auditors who identify relatively more with their
clients are more likely to acquiesce to the client-preferred treatment of a material accounting issue. This effect was
demonstrated using a measure of the extent that the auditor's judgment is biased. We also found that auditors who are more
experienced are less likely to acquiesce to the client's position, supporting previous findings (Bamber & Iyer, 2007).
We hypothesized that client identification was caused by auditor tenure, client importance, and client image as suggested
by Bamber and Iyer (2007), but our expectations were confirmed only in the case of auditor tenure, for which we found that
client identification partially mediates the effect of auditor tenure on auditor acquiescence. Our results on this point are
further indications that audit firm management of auditor tenure may be useful, and the relationship between auditor tenure
and auditor acquiescence suggests that auditor rotation could be beneficial because client identification likely takes time to
develop. Auditor experience provides some protection against the effects of auditor tenure, more experienced auditors being
€
less likely than their less experienced colleagues to acquiesce to client-preferred treatment, but the likelihood of identifying
with clients appears unrelated to auditor experience.
There were two reasons to expect that client identification would have an impact on RAQ acts, although previous research
has associated RAQ acts more or less exclusively with TBP. The first reason was that previous studies have found that auditors
under pressure alter their judgment in favour of client-preferred alternatives in response to efficiency concerns (Bierstaker
et al., 1999; Glover et al., 2005). The other, and more important, reason was suggested by recent developments in TBP
research. Cianci and Bierstaker (2009) found that the effect of TBP on RAQ acts is explained by cognitive bias. They argued that
TBP causes the auditor to look more favourably on the client's internal control, and that this assessment by the auditor in turn
causes the auditor to inappropriately believe that foregoing some substantive testing, in order to save time, will have less
adverse effects. We expected auditors' client identification to have the same detrimental effect on the frequency of RAQ acts,
because we expected that auditors who identified with their clients would tend to look more favourably on the client's in-
ternal control. We examined the effects of auditors' client identification on five different RAQ acts, and found evidence of the
expected relationship between auditors' client identification and RAQ acts. This finding supports the expectation that the
effects of auditors' client identification extend to areas previously regarded as related mostly to TBP.
Some previous research has examined the impact of such factors as the audit firm's leadership (Otley & Pierce, 1996a) and
€
ethical culture (Svanberg & Ohman, 2013; Sweeney, Arnold, & Pierce, 2010), but our impression is that most research argues
that TBP explains most of these detrimental effects. The present study, combined with the findings of Cianci and Bierstaker
(2009), provides evidence suggesting that the underlying psychological mechanism in situations in which TBP causes RAQ
acts is the same as in situations in which client identification causes RAQ acts. We suggest that the cognitive bias affecting
auditors who identify with their clients is similar to the bias affecting auditors who are affected by TBP. Our finding that client
identification is associated with RAQ acts suggests that research on the link between TBP and RAQ acts need to be addressed
using complex models.
The fact that we did not find that TBP affects RAQ acts can be reconciled with the fact that previous research has used low
ranking auditors with little experience while our sample contains experienced auditors who also have management roles in
Swedish non-Big 4 firms. Previous evidence indicates that experienced auditors are less susceptible to the negative effects of
TBP and that junior auditors perform most of the audit field work. Our sample of experienced auditors on average conducts
RAQ acts almost as frequently as previously reported for junior auditors (Otley & Pierce, 1996a, 1996b). This assures us that the
sampled auditors are suitable for the purpose of the study despite the fact that their roles differ from those of the junior
auditors examined in most previous research. Moreover, whereas previous studies of the impact of TBP on RAQ acts have
surveyed junior auditors whose time budgets are imposed upon them, the auditors examined here have more influence over
their time budgeting and for this reason perceive less TBP. These factors taken together may explain why TBP has less in-
fluence on the behaviour of the current sample of auditors.
We found some indications, though not conclusive ones, that client identification mediates the effect of auditor tenure on
RAQ acts; however, the nature of the findings presented meant we could not formally conclude that client identification
partially mediates the effect of auditor tenure on RAQ acts. However, the pattern that emerged provides some indication of
the expected mediation. The totality of the evidence, taking the regressions for auditor acquiescence and RAQ acts together,
suggests that auditor tenure is an antecedent of client identification and that the effect of auditor tenure is partially mediated
by client identification. The use of the control variable office size provides some assurance that differences in the amount of
field work between auditors do not distort the analysis of the relationship between client identification and RAQ acts.
In conclusion, we have found that the auditor objectivity problem due to client identification exists in non-Big 4 firms,
indicating that the problem is more severe than previous research suggests. When non-Big 4 auditors identify with their
clients, they are vulnerable to the negative effects on objectivity and more likely to commit RAQ acts. Since non-Big 4 auditors,
according to much previous research (e.g., Francis, 2004), produce lower-quality audits than do Big 4 auditors, it is unsur-
prising to find these negative effects of client identification. We found that increasing client identification increases not only
the auditor's tendency to acquiesce to the client-preferred treatment of a material accounting position, but that the auditor is
more likely to commit a range of RAQ acts.
Limitations of this study include the modest response rate and non-response bias, social desirability bias, and the mea-
surement of auditor acquiescence using a constructed scenario. These limitations indicate that the results should be inter-
preted cautiously. Nevertheless, since this study provides evidence that client identification has an effect on RAQ acts, future
research could continue to explore how client identification affects behaviours other than those intimately related to auditor
objectivity. Furthermore, we confirm previous findings that auditors identify with their clients but, in contrast to Bamber and
Iyer (2007) who examined Big 5 firms, we did not find that professional identification in non-Big 4 firms counteracts the
effects of client identification. A possible reason for the lower level of professional identification observed in the present study
is that non-Big 4 auditors are somewhat more distant from the audit profession than are Big 4 auditors (cf. Ohman € &
Wallerstedt, 2012). Further studies could empirically examine potential differences between Big 4 and non-Big 4 auditors
with respect to professional identification.
Appendix. Measures used in the study
Client identification (Scale: strongly disagree, disagree, neutral, agree, strongly agree)
When someone praises this client, it feels like a personal compliment.
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When I talk about this client, I usually say “we” rather than “they”.
This client's successes are my successes.
When someone criticizes this client, it feels like a personal insult.
Professional identification (Scale: strongly disagree, disagree, neutral, agree, strongly agree)
When someone criticizes my profession, it feels like a personal insult.
When I talk about my profession, I usually say “we” rather than “they”.
I am very interested in what others think about my profession.
My profession's successes are my successes.
When someone praises my profession, it feels like a personal compliment.
Client image (Scale: strongly disagree, disagree, neutral, agree, strongly agree)
This client does not have a good reputation in the business community.
The public thinks highly of this client.
This client is considered one of the best companies to work for.
Client importance (Scale: no importance, little importance, moderate importance, considerable importance, high
importance)
Please estimate the importance of this client to your firm.
TBP In general, were the time budgets for the jobs you worked on during the last year (Scale: very easy to attain, attainable
with reasonable effort, attainable with considerable effort, very tight/practically unattainable, impossible to attain?
How often do you achieve your time budgets? (Scale: nearly always, often, sometimes, rarely, never.
If you did not under-report time, how often would you attain your time budget? (Scale: nearly always, often, sometimes,
rarely,never.
RAQ acts During the last year, how often did you act in the following manner when carrying out an audit? (Scale: nearly
always, often, sometimes, rarely, never)
Accepted weak client explanations.
Made superficial reviews of client documents.
Failed to research an accounting principle.
Reduced the amount of work performed on an audit step below what you consider reasonable.
Signed off an audit-programme step without completing the work or noting the omission.
Auditors' client acquiescence Please respond to the following short audit case. We appreciate that normally you would require
more information. However, for the purpose of our study we ask that you respond (1) based on the limited information provided and
(2) assuming that the case involves your largest client referred to above.
In the current year's audit, a dispute has arisen between you and the management of your largest client over the mate-
riality of certain unrecorded liabilities discovered by you during the audit. Professional and firm guidelines do not provide a
definitive answer on the materiality of the amount involved. In your opinion, the amount is material. However, the client
management strongly disagrees. The client's CFO argues that the total amount of unrecorded liabilities is immaterial and,
therefore, it is unnecessary to make adjusting entries in the financial statements. As the auditor, how likely is it that you will
not require these liabilities to be recorded? Please indicate your response as a likelihood between 0 (very low likelihood) and
100 (very high likelihood).
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The British Accounting Review 47 (2015) 395e408

Contents lists available at ScienceDirect

The British Accounting Review

Auditors' identiﬁcation with their clients: Effects on audit

2. Literature review and hypothesis development

2.1. Auditoreclient identiﬁcation and auditors' client acquiescence

2.2. Auditoreclient identiﬁcation and reduced audit quality acts

2.3. Antecedents of auditoreclient identiﬁcation

H3 Auditors' client identiﬁcation increases with increasing auditor tenure.

2.4. Professional identiﬁcation, auditors' client acquiescence, and RAQ acts

H6 Auditors' acquiescence to client-preferred treatment decreases with increasing professional identity.

3.2. Sample and data collection

Items Factor loadings

Variables Frequency Mean SD Median Min Max

4.1. Descriptive statistics

Dependent variable Predicted sign Model 1 Model 2 Model 3 Model 4 Model 5

4.2. Hypothesis test results

5. Discussion and conclusions

Appendix. Measures used in the study

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