International Journal of Auditing doi:10.1111/j.1099-1123.2012.00456.

x
Int. J. Audit. ••: ••–•• (2012)

The Effects of Time Budget Pressure

and Intentionality on Audit
Supervisors’ Response to Audit
Staff False Sign-off ija_456 1..16

Troy A. Hyatt1 and Mark H. Taylor2

1
Boise State University
2
Case Western Reserve University

Based on theory from the psychology literature and results

from prior false sign-off research, we develop hypotheses and
then conduct an experiment to assess the reporting intentions
of audit supervisors who discover that a staff member under
their supervision has committed false sign-off. The experiment
manipulated the level of time budget pressure on the audit
engagement and the staff member’s intentionality. Results
indicate that audit supervisors are more likely to report the
false sign-off when (1) the audit staff member was working
under conditions of low time budget pressure versus high time
budget pressure and (2) the staff member committed the false
sign-off intentionally versus unintentionally as a result of
confusion over what was expected. The paper concludes with a
discussion of its limitations, suggestions for future research, as
well as implications for practice.

Key words: false sign-off, audit quality, time budget pressure,

intentionality

SUMMARY sign-off when (1) the audit staff member commits

False sign-off is the act of indicating in the work
papers that an audit step has been completed when
in fact it has not been. The purpose of this study
is to examine the reporting intentions of audit
supervisors who discover that a staff member
under their supervision has committed false
sign-off. Our results indicate that audit supervisors
are more likely to report a detected instance of false
the false sign-off under conditions of low time
budget pressure versus high time budget pressure,
and (2) the audit staff member commits the false
sign-off intentionally versus unintentionally. Our
results also indicate that a fairly large percentage of
practicing auditors have detected actual instances
of intentional and unintentional false sign-off
committed by staff auditors under their
supervision.

Correspondence to: Troy A. Hyatt, Department of Accountancy, INTRODUCTION

College of Business & Economics, Boise State University, 1910
University Drive, Boise, ID 83725-1610, USA. Email: One focus of the auditing literature that has
troyhyatt@boisestate.edu received attention for well over 30 years addresses

ISSN 1090-6738
© 2012 Blackwell Publishing Ltd
2 T. A. Hyatt and M. H. Taylor
actions taken by auditors that threaten audit
quality. These actions are often referred to as either
reduced audit quality acts (e.g., Coram
et al., 2008) or audit quality threatening behaviors
(e.g., Sweeney, Arnold & Pierce, 2010). Examples
include accepting weak client explanations;
rejecting awkward looking items from a sample;
superficially reviewing client documents; testing
some, but not all items in a sample; and signing off
on audit steps without actually performing the
required work or noting the omission of the work
(Coram et al., 2008). The latter behavior, usually
referred to as either false sign-off or premature
sign-off, has been investigated in numerous
studies across multiple countries. Whether through
survey or experiment, most false sign-off research
conducted to date has been focused on trying
to understand why the behavior occurs from the
perspective of the auditors who commit the false
sign-off. In contrast, Kaplan (1995) investigated the
organizational response to the discovery of false
sign-off based on the belief that one reason the
behavior may occur is that it is not sufficiently
discouraged when it is discovered. Specifically,
Kaplan (1995) found, using an experiment, that
audit supervisors who discover a staff member’s
false sign-off would not necessarily report
the behavior as required by firm policy. The
supervisors were less likely to report the discovery
of false sign-off if the staff member had a good
work history in the firm or if the audit step falsely
signed-off was deemed to be ex-post unnecessary.
The purpose of this study is to examine
additional factors that may affect audit supervisors’
response to the discovery of false sign-off by a staff
member. Theory from the psychology literature on
retributive justice suggests that audit supervisors
will be more likely to report a detected instance of
false sign-off if the staff member was experiencing
low (vs. high) time budget pressure or if the staff
member committed the false sign-off intentionally
(vs. unintentionally). Unlike previous survey
research that did not find these relationships
to hold (Hyatt & Prawitt, 2011), we test these
expectations in a controlled experimental setting.
In our experiment, auditors read one of four
versions of a hypothetical audit case. All versions
of the case explained that while they (as the audit
supervisor) were reviewing the work of a staff
auditor under their supervision, they determined
that the staff member engaged in false sign-off.
In the time budget pressure conditions, the
case explained either that the budget was set
© 2012 Blackwell Publishing Ltd
considerably tighter than in previous years and
would have been very difficult to meet or that the
budget was similar to prior years and should have
been relatively easy to meet. In the intentionality
conditions, the case explained either that the staff
auditor intentionally committed the false sign-off
or that it occurred unintentionally due to confusion
over what was expected. Although time budget
pressure has been an area of focus in prior
false sign-off research, intentionality has not
been. Intentionality will likely impact supervisors’
reactions to the discovery of false sign-off because
intentional false sign-off is an ethical issue, whereas
unintentional false sign-off is more a matter of staff
members needing additional training.
After reading the case, participants were asked
to indicate how likely they would be to report
the false sign-off in the staff auditor’s written
evaluation. Participants also were asked to
report how many times in their careers they
had ever detected intentional and unintentional
false sign-off committed by a staff member under
their supervision. A significant percentage of our
participants reported that they had personally
detected intentional false sign-off, and a much
larger percentage of our participants reported
that they had personally detected unintentional
false sign-off. Thus, false sign-off appears to be a
continuing problem in public accounting. Further,
as predicted, the results of the experiment indicate
that audit supervisors were more likely to report a
detected instance of false sign-off by a staff member
who was experiencing low (vs. high) time budget
pressure or who intentionally (vs. unintentionally)
committed the false sign-off.
The remainder of the paper is organized as
follows. The next section reviews relevant research
and theory and develops our hypotheses. The third
section describes the research methodology, while
the fourth section presents the results. The final
section provides a discussion of the results, a
conclusion, and suggestions for future research.
BACKGROUND AND HYPOTHESES
False sign-off
False sign-off is the act of indicating in the
work papers (i.e., ‘signing-off’) that an audit step
was completed without actually performing the
required work or noting the omission of the work
(Coram et al., 2008). False sign-off has been a topic
of interest in the literature for over 30 years and
Int. J. Audit. ••: ••–•• (2012)
The Effects of Time Budget Pressure and Intentionality on Audit Supervisors’ Response to Audit Staff False Sign-off
has been investigated in the US (e.g., Rhode, 1978;
Shapeero, Koh & Killough, 2003), the United
Kingdom (e.g., Willett & Page, 1996), France (e.g.,
Herrbach, 2001), Australia (Coram, Ng & Woodliff,
2004), and Ireland (e.g., Otley & Pierce, 1996; Pierce
& Sweeney, 2006). Thus, the issue of false sign-off
spans international borders and continues to be of
significance to the auditing profession.
Rhode’s (1978) seminal study surveyed
members of the AICPA regarding false sign-off.
Approximately 60 percent of his respondents
admitted to committing false sign-off during their
career, and the reasons given for the behavior, in
order of descending frequency, were (1) time
budget pressure, (2) the auditor committing
the false sign-off considered the audit step
unnecessary, (3) the audit step was not understood,
(4) the client had imposed deadline pressure, and
(5) the auditor experienced laziness or boredom
with tedious work assignments. Studies since
Rhode (1978) have further investigated the
incidence and antecedents of false sign-off (e.g.,
Alderman & Deitrick, 1982; Buchman & Tracy,
1982; Margheim & Pany, 1986; Kelley & Margheim,
1987, 1990; Raghunathan, 1991; Margheim &
Kelley, 1992; Kaplan, 1995; Otley & Pierce, 1995,
1996; Malone & Roberts, 1996; Willett & Page, 1996;
Reckers, Wheeler & Wong-on-Wing, 1997; Kelley,
Margheim & Pattison, 1999; Herrbach, 2001; Coram
et al., 2003, 2004, 2008; Donnelly, Quirin & O’Bryan,
2003; Shapeero et al., 2003; Sweeney & Pierce, 2004;
Pierce & Sweeney, 2004, 2005, 2006; Sweeney
et al., 2010; Hyatt & Prawitt, 2011). Although the
percentage of auditors admitting to false sign-off
fluctuates from study to study, little question
remains that individuals falsely sign off on a fairly
regular basis. Based on a review of the literature,
and consistent with Rhode’s (1978) results, three of
the primary reasons audit staff cite for engaging
in false sign-off (and which are examined in this
study) are as follows: (1) time budget pressure,
(2) the audit step falsely signed-off is considered
unnecessary, and (3) confusion about or
misunderstanding of what the audit step requires,
generally due to a lack of training and/or
insufficient experience.
Nearly all prior studies examining false sign-off
have focused on factors that influence auditors to
commit false sign-off. Yet, studying factors that
influence supervisors’ (i.e., audit seniors, managers
and partners) response to detected instances of
false sign-off is also an important focus for research
and practice for the following reasons. First,
© 2012 Blackwell Publishing Ltd
3
supervising auditors have the opportunity to deter
false sign-off. They can mentor their subordinates
about the necessity of completing each and every
audit step and explain both the reasons for doing
so and the consequences of not doing so. Second,
supervising auditors are in the best position
to detect false sign-off. Notwithstanding the
limitations of the audit review and supervisory
process, as audit supervisors review and evaluate
the work of supervisees, they do have the
opportunity to detect potential false sign-off and
follow-up to determine whether false sign-off has
actually occurred.1 Third, supervising auditors
have the opportunity to report false sign-off so that
whatever formal disciplinary norms have been
established at their respective CPA (certified public
accountant) firms may be set in motion.
Considering these issues prompted Kaplan
(1995) to investigate factors that may influence
supervisors’ reporting intentions when they discover
that a staff member under their supervision has
falsely signed off an audit step. He experimentally
manipulated (1) the necessity of the audit
step falsely signed-off (necessary vs. ex-post
unnecessary), which as explained above is one of
the three main reasons that false sign-off occurs,
and (2) the work history of the audit staff member
(good vs. poor). His results showed that audit
supervisors’ reporting intentions were significantly
greater when the audit step falsely signed-off was
considered to be necessary or when the audit staff
member had a poor work history. He also found
that supervisors who had more performance
evaluation experience were more likely to report
the false sign-off.
The purpose of our study is to experimentally
investigate the effect on supervisors’ reporting
intentions of the other two primary reasons that
auditors cite for committing false sign-off: (1)
time budget pressure and (2) confusion about or
misunderstanding of what the audit step requires.
Theory and hypotheses
The issues we investigate in this paper relate
to a large body of psychological research that
has studied the theory of retributive justice
(e.g., Miller & Vidmar, 1981; Feather, 1999; Vidmar,
2002; Darley & Pittman, 2003; Fragale et al., 2009).
Retributive justice theory explores observers’
reactions to a wrongdoer’s behavior. Specifically,
this research seeks to understand to what extent the
observer assigns responsibility to the wrongdoer
Int. J. Audit. ••: ••–•• (2012)
4 T. A. Hyatt and M. H. Taylor
and what punishment the observer believes
should be meted out in response. Factors that have
been found to influence observers’ reactions
include whether the wrongdoing was committed
intentionally or unintentionally and whether any
mitigating circumstances existed at the time
of the wrongdoing. Prior research supports
the prediction that observers’ reactions are more
severe for intentional wrongdoing and are
modified in light of any mitigating circumstances.
Retributive justice theory aligns well with the
primary goal of this study: to investigate variables
that influence how observers (i.e., supervising
auditors) respond to the transgressions committed
by others (i.e., staff auditors falsely signing off audit
steps). Research that explicitly draws on retributive
justice theory as well as research that reports
results consistent with the theory is found in
a number of settings, including motor vehicle
collisions (Feather & Deverson, 2000), nursing
(Wood & Mitchell, 1981; Tyler & Feldman, 2007),
auditing (Crant & Bateman, 1993), whistle-blowing
(Gundlach, Martinko & Douglas, 2008), and tax
compliance (Fragale et al., 2009). In the following
subsections we review these and other relevant
studies to develop our hypotheses.
Time budget pressure
The level of time budget pressure auditors
experience has been investigated in numerous
studies. For example, Pierce and Sweeney (2004)
surveyed second- and third-year staff and
senior auditors in Ireland. Thirty-six percent of
respondents indicated that time budgets are either
‘very tight, practically unattainable’ or ‘impossible
to achieve,’ 47 percent believed that budgets
are ‘attainable with considerable effort,’ and 17
percent felt that budgets are either ‘attainable with
reasonable effort’ or ‘very easy to attain.’ In another
study, Kelley et al. (1999) asked staff and seniors in
the US about the amount of time budget pressure
they had experienced over the preceding year.
Participants reported experiencing, on average,
somewhere between a moderate and large extent of
time budget pressure.
Coram et al. (2003) asked Australian auditors
with one to five years of experience whether the
budgeted time allocated for audits was generally
adequate within their firms. Results indicate that 47
percent of participants believed that time budgets
are ‘often’ adequate, 51 percent believe they are
‘sometimes’ adequate, and 2 percent believed
© 2012 Blackwell Publishing Ltd
they are ‘never’ adequate. Willett and Page (1996)
asked audit staff in the United Kingdom on what
percentage of audits was budgeted time adequate.
Fifteen percent of respondents believed that
budgeted time was ‘not nearly enough,’ 53 percent
believed it was ‘not quite enough,’ 26 percent
believed it was ‘just right,’ and 6 percent believed it
was ‘more than enough.’ Finally, 18 percent of
audit staff in the US who responded to Kelley
and Margheim’s (1990) survey believed that
time budgets are either ‘very tight, practically
unattainable’ or ‘impossible to achieve,’ 45 percent
believed that budgets are ‘attainable with
considerable effort,’ and 37 percent believed that
budgets are either ‘attainable with reasonable
effort’ or ‘very easy to attain.’
To summarize, although auditors often
encounter tight time budgets, it is clear that the
level of time budget pressure they experience
varies along a continuum that ranges from low to
very high. Further, auditors have very little control
over the level of time budget pressure experienced
on any given engagement. As such, time budget
pressure is, using the language of the prior research
described below, a mitigating circumstance.
As noted above, the retributive justice literature
finds that mitigating circumstances influence
the sanctions observers propose for the failures or
wrongdoings committed by others. Mitigating
circumstances are most likely to reduce sanctions
when they are perceived to be external to and
uncontrollable by the wrongdoer. For example,
Feather and Deverson (2000) investigated
participants’ reactions to a scenario that described a
motor vehicle collision. Participants (students at an
Australian university) read one of eight versions of
a scenario, all of which described a driver who lost
control of their car while driving home from a
business meeting. Half of the scenarios explained
that it had been raining heavily and the road was
slippery at the time of the accident; the other half
explained that witnesses reported that before
losing control the driver had been traveling at a
high speed. When the accident occurred due to
slippery road conditions (rather than due to the
driver speeding), participants rated the driver as
less responsible, the offense as less serious, and the
punishment as less deserved.
Wood and Mitchell (1981) asked nurse
supervisors to assess the responsibility level of, and
indicate the disciplinary actions they would take
against, a nurse under their supervision who had
not provided proper care to a patient. The authors
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The Effects of Time Budget Pressure and Intentionality on Audit Supervisors’ Response to Audit Staff False Sign-off
found that supervisors’ reactions were much less
severe when the improper care was administered
at a time when the hospital was extra busy and one
of the aides had left early due to illness. Specifically,
when the hospital was particularly hectic,
supervisors assessed lower levels of responsibility
to the nurse and proposed less punitive
disciplinary actions. In another experimental study
describing inadequate care provided by a nurse,
Tyler and Feldman (2007) also found that when
mitigating circumstances beyond the control of the
nurse were present (the emergency room was
extremely busy and the general situation was
chaotic versus the emergency room was relatively
quiet and things were under control), study
participants assigned lower responsibility to the
nurse and recommended less severe punishments
and reprimands.
Crant and Bateman (1993) studied whether audit
supervisors would assign lower levels of blame to
poor performers who failed due to mitigating
circumstances that were beyond their control. In an
experimental setting, auditors from a Big 6 firm read
a scenario that described a staff auditor who
significantly exceeded the budget when completing
the inventory portion of the audit. Results showed
that when the reason for failure was due to factors
beyond the staff auditor’s control (i.e., the auditee
had a new and unreliable computer system,
significant turnover among inventory management
personnel, and uncooperative employees), subjects
not only assigned less blame to the staff auditor,
but they also indicated more favorable impressions
(i.e., admiration, respect, and esteem) of the staff
auditor and allocated higher awards to the staff
auditor.
As explained above, auditors often encounter
time budget pressure, and this pressure sometimes
leads auditors to falsely sign off audit steps. Time
budget pressure is an institutional factor in the
profession over which auditors have little control.
As such, it is a mitigating circumstance that may
influence audit supervisors’ reactions to false
sign-off when it is committed by staff auditors
under conditions of high time budget pressure.
Audit supervisors understand that some audits
have very tight time budgets and consequently
they recognize the pressures that come with a
tight budget. Having previously worked as an
audit staff member, the supervisor can empathize
with the pressures experienced by staff members.
Thus, the supervisor may be more lenient toward a
staff member who falsely signs off under pressure
© 2012 Blackwell Publishing Ltd
5
of a tight time budget in order to meet the budget.2
On the other hand, if the staff member was not
under significant time budget pressure, the
supervisor may have much less empathy for a staff
member who falsely signs off an audit step.
This expectation is consistent with the retributive
justice literature. However, the findings from a
survey of current and former practicing auditors
add some tension to this analysis. Hyatt and
Prawitt (2011) asked respondents if they had ever
detected false sign-off committed by an auditor
under their supervision. For those auditors who
had detected false sign-off, they were asked to
indicate the action(s) they had taken and, if they
reported the behavior, their firm’s ultimate
response. Hyatt and Prawitt (2011) found that time
budget pressure did not appear to influence
whether audit supervisors reported detected
instances of false sign-off.3 Given that Hyatt and
Prawitt’s (2011) survey research did not support
the theory from the retributive justice literature, we
use an experiment that provides tighter control of
the variables to more definitively test the theory.
Accordingly, we test the following hypothesis:
H1: Audit supervisors’ likelihood of formally
reporting a staff member’s false sign-off behavior
will be greater when the false sign-off occurs
under conditions of low time budget pressure
versus high time budget pressure.
Intentionality
Most research that investigates false sign-off
has focused on instances where it is committed
intentionally. However, some research has
explicitly acknowledged that not all false sign-off
is committed intentionally (Kaplan, 1995; Pierce &
Sweeney, 2006), and a few papers have actually
studied both intentional and unintentional false
sign-off (Sweeney & Pierce, 2004; Pierce &
Sweeney, 2005; Hyatt & Prawitt, 2011). Sweeney
and Pierce (2004) explain that unintentional false
sign-off4 occurs either due to a lack of training or
as a result of insufficient experience (i.e., auditors
being given increased responsibilities before they
are ready).
As explained above, one of the main reasons
auditors give for committing false sign-off is
misunderstanding or confusion about what the
audit step requires, which occurs due to a lack
of training and/or insufficient experience.
Therefore, when auditors explain that sometimes
Int. J. Audit. ••: ••–•• (2012)
6 T. A. Hyatt and M. H. Taylor
they commit false sign-off due to confusion
or misunderstanding, what they are actually
saying is that they are committing unintentional
false sign-off since it occurs as a result of
misunderstanding rather than as a result of an
intentional act.
Malle and Knobe (1997) explain that committing
an act intentionally requires five elements: desire
for an outcome, beliefs about an action that leads
to that outcome, intention to perform the action,
capability to perform the action, and awareness of
fulfilling the intention while performing the action.
In other words, an action taken by a person is
intentional if the person desires to perform an
action and then actually does so (Fragale et al.,
2009). According to Darley and Pittman (2003),
research on the psychology of retributive justice
has found that the primary determinant of
observers’ punishment recommendations is the
observer’s perception of the wrongdoer’s level
of intentionality (see Darley & Pittman, 2003
and Miller & Vidmar, 1981 for reviews of this
literature).
For example, Gundlach et al. (2008) investigated
observers’ perception of the offender’s level of
intentionality on the decision to report observed
wrongdoing in a whistle-blowing context. Results
of their experiment supported the hypothesis of
a positive relationship between perceptions
about intentionality and whistle-blowing decisions.
Specifically, the stronger were participants’ beliefs
that the wrongdoing was committed intentionally,
the more likely the participants were to blow the
whistle.
Fragale et al. (2009) studied whether the severity
of observers’ recommended punishments for
wrongdoers was influenced by their perception of
the wrongdoer’s level of intentionality. In two
independent experiments, participants read one of
two scenarios that described an individual who was
accused by the Internal Revenue Service (IRS) of
underpaying personal income taxes. Included in
the scenarios was an explanation that with the
increasing complexity of federal tax laws, it is not
always clear when incorrect tax returns are due
to simple mistakes resulting from confusion over
new tax laws or when they are due to deliberate
efforts to underpay taxes. Results showed that
participants’ recommended punishments were
harsher the more they believed that the wrongdoer
intentionally underpaid.
As explained above, auditors who commit false
sign-off have varying levels of intentionality.
© 2012 Blackwell Publishing Ltd
Unintentional false sign-off occurs when an auditor
signs off an audit step under the mistaken belief
that the work has been completed when in fact
it has not. This mistaken belief results from a
misunderstanding about audit step requirements
due to a lack of training or insufficient experience
(Sweeney & Pierce, 2004). On the other hand,
intentional false sign-off occurs when an auditor
signs off an audit step specifically knowing that the
work has not been completed. We expect audit
supervisors to react differently when they discover
intentional versus unintentional false sign-off;
specifically, audit supervisors will be more likely
to formally report the detection of intentional
false sign-off since it is only through reporting the
false sign-off that the auditor who committed the
wrongdoing can ever be sanctioned.
This expectation is consistent with the retributive
justice literature. Further, Sweeney and Pierce
(2004), who conducted semi-structured interviews
with 25 audit seniors from four of the (then) Big Five
firms, found results consistent with this expectation.
Based on their interviews, they found that audit
seniors would be reluctant to report detected
instances of unintentional false sign-off committed
by a staff auditor under their supervision. In
contrast, Hyatt and Prawitt (2011) found from their
survey of current and former practicing auditors
that intentionality did not appear to influence
whether audit supervisors reported detected false
sign-off.5 Given the conflicting results of previous
survey and interview-based research, we use an
experiment to more definitively test the effect
of intentionality on audit supervisors’ reporting
intentions, consistent with the theory from the
retributive justice literature. Thus, we test the
following hypothesis:
H2: Audit supervisors’ likelihood of formally
reporting a staff member’s false sign-off behavior
will be greater when the staff member who
engages in the false sign-off does so intentionally
versus unintentionally.
METHOD
Participants and case distribution
The results reported below are based on usable
responses from 55 audit supervisors. We
distributed an audit case to audit seniors and
managers at ten offices of a large national CPA firm
in three Midwestern states in 1996. An audit partner
from the firm served as our contact person. The
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The Effects of Time Budget Pressure and Intentionality on Audit Supervisors’ Response to Audit Staff False Sign-off
partner identified the participating offices and
provided us with a person at each office to serve as
an office coordinator. We sent a package to each
coordinator containing the agreed-upon number of
cases to be distributed. Each package included
equal numbers of the four versions of the case
(described below). The coordinators distributed the
cases to audit seniors and managers in their offices.
To preserve anonymity, participants returned the
cases directly to the researchers in the reply
envelopes provided. We received completed cases
from 58 auditors (a response rate of 64 percent).
Three participants failed one of two manipulation
check questions (described below).
Experimental design
Two factors, time budget pressure (low vs.
high) and intentionality of the audit staff member
who falsely signed off an audit step (intentional
vs. unintentional), were manipulated in a 2 ¥ 2
between-subjects design. Case materials were
adapted from Kaplan’s (1995) case and included
information that remained constant across all
cases, including an overview of the company (A-1
Appliances), its production cycle, and its financial
statements for the current and prior year. This
information was included in the case materials
primarily to provide background and context
for the research participants. Participants were
asked to assume that they were the supervising
auditor for this audit client. The case also included
information about Laura Smith, the supervising
auditor’s assistant (the staff member) for this
engagement. In all cases, Laura is described as
having a good reputation in the office for being
competent and hard working. In addition, the
case explains that while reviewing her work in
the inventory area, the supervisor determines
that Laura falsely signed off an audit step. The
case further explains that the supervisor,
while reconsidering the audit program, ex-post
determined that the audit step was unnecessary by
stating that ‘in considering this matter you reassess
the importance of this audit step. You conclude that
the audit step is unnecessary, because several other
procedures in the program adequately test the
area.’ Kaplan (1995) used similar wording when
manipulating step necessity in his experiment.
Conditions describing a staff auditor with a
good work history and an audit step that was
determined ex-post to be unnecessary were chosen
because Kaplan (1995) found greater variability
© 2012 Blackwell Publishing Ltd
7
among his subjects’ responses under these
conditions. Further, based on Kaplan’s (1995)
results, integrating these conditions into our
case materials creates a situation where audit
supervisors may be less likely to report a detected
instance of false sign-off.
After reading the information about A-1
Appliances and Laura’s work on the audit,
participants were asked to provide several appraisal
judgments for Laura and to indicate their belief
regarding how frequently audit staff members
actually engage in false sign-off of audit steps.
Participants were then asked to answer two
manipulation check questions and to indicate
whether they had personally determined that audit
staff under their supervision had ever committed
false sign-off intentionally or unintentionally and,
if so, how many times it had occurred. Finally,
participants provided a variety of biographical data.
Independent variables
As previously stated, two independent variables
were manipulated between subjects: time
budget pressure and staff auditor intentionality.
An additional variable, the participants’ staff
evaluation experience, was obtained directly from
the participants and was used as a covariate in our
analyses.6
Time budget pressure
We manipulated time budget pressure at two
levels. In the high time budget pressure scenario,
the case read, in part, ‘This year, due to increasing
fee pressures, THE BUDGET WAS SET
CONSIDERABLY TIGHTER than in previous
years. Consequently, you believed that it would be
VERY DIFFICULT (in fact, nearly impossible) to
meet the inventory budget.’ Alternatively, in the
low time budget pressure scenario, the case read, in
part, ‘In the past, other staff have not had much
trouble meeting the inventory budget. This year the
budget was similar to previous years, and you
believed that it would be FAIRLY EASY to meet.’
All versions of the case stated that Laura completed
the audit work within the budgeted amount of
time, but also stated that she would have gone over
budget if she had not falsely signed off.
Staff auditor intentionality
We manipulated staff auditor intentionality at two
levels. In the intentional false sign-off scenario,
Int. J. Audit. ••: ••–•• (2012)
8 T. A. Hyatt and M. H. Taylor
the case read, in part, ‘When you discussed the
matter with Laura, she said she INTENTIONALLY
SKIPPED the step because she felt it was important
to not go over budget and she thought the step was
unnecessary.’7 Alternatively, in the unintentional
false sign-off scenario, the case read, in part, ‘When
you discussed the matter with Laura, she indicated
that she found the audit step requirements
unclear and that she was uncertain how much
work needed to be done. You conclude that Laura’s
false sign-off of the audit step was probably an
UNINTENTIONAL MISTAKE. However, you also
believe there should have been enough doubt in
Laura’s mind about the proper interpretation of the
audit step that she should have asked you about it
up front.’8
Evaluation experience
Participating auditors were asked the question,
‘How many times have you evaluated the
performance of a staff auditor?’ This question
was asked so it could be included as a covariate
since Kaplan (1995) found that staff evaluation
experience affected supervisors’ reporting
intentions. This question was part of the
biographical data completed by participants at the
end of the case.
Dependent variable
In practice, immediate supervisors typically
evaluate their subordinates’ performance at the end
of each audit engagement. This written evaluation,
among other things, provides the supervisor with
a formal method to report acts committed by the
subordinate that reduce audit quality, including
false sign-off. The participating firm’s formal policy
requires its auditors to report the discovery of
false sign-off. Accordingly, after reading the case
materials, participants were asked the following
question: ‘Given Laura’s performance as described
in this case, how likely is it that your written
evaluation of Laura would include the fact that
she did not perform an audit step that she signed
off?’ Participants answered the question using
a seven-point response scale (1 = Extremely
UNLIKELY to include in written evaluation;
7 = Extremely LIKELY to include in written
evaluation).
Manipulation checks
We included one manipulation check for
each manipulated independent variable. After
© 2012 Blackwell Publishing Ltd
responding to the dependent variable question, but
prior to providing biographical data, the case stated
the following: ‘Case Scenario Information: Please
respond to the following without looking back at
the case description.’ The first manipulation
check stated, ‘The inventory time budget on the
engagement this year was:’ and subjects
chose between ‘VERY DIFFICULT TO MEET’
and ‘FAIRLY EASY TO MEET.’ The second
manipulation check stated, ‘Laura falsely signed off
on the audit procedure:’ and subjects chose between
‘INTENTIONALLY’ and ‘UNINTENTIONALLY.’
Of the 58 auditors who completed and returned one
of the cases, three failed one of the two manipulation
checks. As noted, results reported in this study are
based on the 55 cases with correctly answered
manipulation check questions.
RESULTS
Descriptive statistics
Descriptive statistics of the participating auditors
are provided in Table 1. Panel A presents two
measures of the auditors’ experience. On average,
participants had nearly 58 months of audit
experience (std. dev. = 28.4) and had evaluated the
performance of an audit staff member 40 times (std.
dev. = 41.7). Panel B of Table 1 presents information
about the participants’ personal experience in
discovering actual instances of false sign-off
by a staff member. Given the high level of
variability in our participants’ experience level,
Panel B presents the statistics in four categories
based on participants’ years of experience (<3
years, 3–5 years, >5 years, and all participants). Not
surprisingly, Panel B shows that the percentage of
participants who had detected false sign-off
generally increases as experience increases. For
example, zero percent of individuals with less than
three years of experience had detected intentional
false sign-off, whereas 33% of individuals with
more than five years of experience had detected
intentional false sign-off. For all participants, Panel
B shows that 11 auditors (20% of participants)
indicated that they had discovered intentional false
sign-off by an audit staff member under their
supervision. Further analysis of the data reveals
that for these 11 auditors, the mean number of
intentional false sign-offs encountered is 3.5 (std.
dev. = 2.8). Panel B also shows that 50 auditors (91%
of participants) reported that they had discovered
unintentional false sign-off by an audit staff member
Int. J. Audit. ••: ••–•• (2012)
The Effects of Time Budget Pressure and Intentionality on Audit Supervisors’ Response to Audit Staff False Sign-off 9

Table 1: Descriptive statistics of participating auditors (n = 55)

Panel A: Experience measures
Mean
(Standard deviation)
Months of audit experience 57.9
(28.4)
Number of audit staff members evaluated 40.0
(41.7)
Panel B: Discovery of false sign-off
Participants’ years Number who have detected Number who have detected Number who have not
of experience intentional false sign-off unintentional false sign-off detected any false sign-off
(%) (%) (%)
<3 0 8 4
(n = 12) (0%) (67%) (33%)
3–5 6 28 0
(n = 28) (21%) (100%) (0%)
>5 5 14 1
(n = 15) (33%) (93%) (7%)
All participants 11 50 5
(n = 55) (20%) (91%) (9%)

under their supervision. Further data analysis
reveals that for these 50 auditors, the mean number
of unintentional false sign-offs discovered is 9.4
(std. dev. = 9.5).9 Finally, Panel B shows that five
participants had not detected any type of false
sign-off.10
Comparing our results on the discovery of false
sign-off to previous research, we note that Kaplan
(1995) reports that 33 percent of the audit
supervisors in his study had discovered false
sign-off committed by a staff member under
their supervision. However, he did not ask his
participants to distinguish between intentional and
unintentional false sign-off (although his intent was
to learn about participating auditors’ experience
with discovering intentional false sign-off) and he
states that some of his participants may have been
responding to instances of unintentional false
sign-off. Also, Hyatt and Prawitt (2011) asked
auditors with an average of nearly 13 years of
experience if they had ever discovered intentional
false sign-off. Approximately 25 percent of
respondents indicated that they had detected
intentional false sign-off committed by an auditor
under their supervision.
intentions as the dependent variable, time budget
pressure and staff auditor intent as dichotomous
independent variables, and participants’ staff
evaluation experience as a continuous covariate.
The ANCOVA results are presented in Panel A of
Table 2; descriptive results are presented in Panel B
of Table 2. The descriptive results include the mean,
standard deviation, and number of participants in
each experimental condition.
Time-budget pressure and false sign-off
Our first hypothesis predicts that audit supervisors
will be more likely to report a staff member’s
false sign-off when the staff member falsely signs off
under conditions of low time budget pressure
versus high time budget pressure. Panel A of
Table 2 shows that the budget pressure variable
is significant (p = 0.006, one-tailed). The bottom row
of Panel B of Table 2 shows that participants were
more likely to report the staff member’s false sign-
off under conditions of low time budget pressure
(mean = 5.79, std. dev. = 1.54) as opposed to high
time budget pressure (mean = 4.54, std. dev. = 1.75).
Thus, these results are consistent with H1.

Reporting intentions Intentional versus unintentional false sign-off

To test this study’s hypotheses, we used an Our second hypothesis predicts that audit
ANCOVA model with participants’ reporting supervisors will be more likely to formally report a

© 2012 Blackwell Publishing Ltd Int. J. Audit. ••: ••–•• (2012)

10 T. A. Hyatt and M. H. Taylor

Table 2: The effect of staff auditor intent, time budget pressure, and evaluation experience on audit
supervisors’ reporting intentions
Panel A: ANCOVA results
Source of variation Sum of squares df Mean square F Sig.
Evaluation experience 6.300 1 6.300 2.619 0.056
Budget pressure 16.615 1 16.615 6.907 0.006
Intentionality 18.659 1 18.659 7.757 0.004
Budget pressure ¥ intent 0.212 1 0.212 0.088 0.768
Error 120.270 50 2.405
Panel B: Descriptive results – Cell means, (standard deviations), and samples sizes
Intentionality Time budget pressure Overall
Low High
Unintentional 5.17 3.92 4.54
(1.75) (1.56) (1.74)
n = 12 n = 12 n = 24
Intentional 6.24 5.07 5.71
(1.25) (1.77) (1.60)
n = 17 n = 14 n = 31
Overall 5.79 4.54
(1.54) (1.75)
n = 29 n = 26

staff member’s false sign-off behavior when the
staff member who engages in the false sign-off does
so intentionally versus unintentionally. Panel A of
Table 2 shows that the intentionality variable
is significant (p = 0.004, one-tailed). The far
right-hand column of Panel B of Table 2 shows that
participants were more likely to report the staff
member’s false sign-off when the false sign-off was
done intentionally (mean = 5.71, std. dev. = 1.60)
rather than unintentionally (mean = 4.54, std.
dev. = 1.74). Thus, the results are consistent with
H2.
Sensitivity analyses
We perform four different sensitivity analyses to
test the robustness of the results. First, as explained
in the Method section, we included participants’
staff evaluation experience as a covariate in our
hypothesis tests as shown in Table 2. We did this
because Kaplan (1995) found that this variable
affected participants’ reporting intentions in his
study. Like Kaplan, we also find that participants’
staff evaluation experience influenced their
reporting intentions (p = 0.056, one-tailed). To
assess whether a more general measure of
experience produces the same results as a more
task-specific measure, we replaced participants’
staff evaluation experience with participants’
months of auditing experience as the covariate and
reran the model shown in Table 2. The results are
qualitatively similar.
Second, to achieve a sufficient sample size of
participants, our pool of audit supervisors includes
both audit seniors and audit managers. Although
our research instrument asked participants to
indicate their total months of auditing experience,
it failed to ask them for their rank (this oversight
occurred because when we were developing the
research instrument, our original plan had been
to only collect responses from audit seniors).
Accordingly, we use participants’ months of
experience to approximate their rank to assess
whether rank, in addition to participants’ staff
evaluation experience, also affects reporting
intentions. We first assumed that all participants
who had 60 or more months (less than 60 months)
were managers (seniors). We then included rank as
an additional dichotomous independent variable
in the model shown in Table 2. The results are
qualitatively similar, except that now staff
evaluation experience becomes insignificant; rank
is also not significant. Additionally, we used 72
months of experience as the cutoff between
managers and seniors. The results are qualitatively
similar to those shown in Table 2, and rank is not

© 2012 Blackwell Publishing Ltd Int. J. Audit. ••: ••–•• (2012)

The Effects of Time Budget Pressure and Intentionality on Audit Supervisors’ Response to Audit Staff False Sign-off
significant. Thus, it appears that, after controlling
for participants’ staff evaluation experience,
participants’ rank (as approximated by their months
of experience) does not affect their reporting
intentions.
Third, as explained in the Method section, we
asked participants, using a 7-point scale, how
frequently they believe audit staff members sign
off audit steps that have not been performed
(1 = occurs on almost every audit; 7 = almost never
occurs). The mean response to this question is 4.45
(std. dev. = 1.66), which suggests that respondents
believe that some form of false sign-off occurs on
a little less than half of all audits. We examine
whether participants’ response to this question
affects the study’s results and include this variable
as an additional covariate in the model shown in
Table 2. The results are qualitatively identical and
this new variable is not significant.
Finally, as reported in Table 1, several of our
participants (20%) indicated that they had detected
staffs members’ intentional false sign-off at
some point in their careers. We examine whether
participants’ actual experience in detecting false
sign-off affects the study’s results by including
participants’ reported detection of subordinate’s
intentional false sign-off as an additional
dichotomous independent variable in the model
shown in Table 2. Again, the results are
qualitatively identical and this new variable is not
significant.
Supplemental analyses
We collected and analyzed additional data to
assess other possible reactions audit supervisors
might have to discovering false sign-off. First,
we examine the participants’ likelihood of
assigning the staff member an overall performance
rating of ‘unacceptable.’ Second, we examine
the participants’ willingness to support the staff
member’s request to work with the participant on a
future audit engagement.11
To investigate the effects on the overall
performance rating, we used an ANCOVA model
with the participants’ likelihood of assigning
an overall performance rating of unacceptable
to the staff member as the dependent variable, time
budget pressure and staff auditor intentionality
as dichotomous independent variables, and
participants’ staff evaluation experience as a
continuous covariate variable. The ANCOVA results
indicate that the intentionality variable is significant
© 2012 Blackwell Publishing Ltd
11
(p = 0.000, one-tailed); however, the budget
pressure variable is not significant (p = 0.463, one-
tailed). The pattern of means suggests that the
participants would be more likely to assign an
overall performance rating of unacceptable to a staff
member when the staff member’s false sign-off was
intentional (mean = 3.4, std. dev. = 1.7) rather than
unintentional (mean = 1.8, std. dev. = 1.0). The staff
evaluation experience covariate also is significant
(p = 0.019, one-tailed); the budget pressure ¥ intent
interaction term is not significant (p = 0.227).
To examine participants’ willingness to work
with the staff member on a future engagement,
we also used an ANCOVA model with the extent
to which a participant would support the staff
member’s request to work with the participant
on a future audit engagement as the dependent
variable, time budget pressure and staff auditor
intentionality as dichotomous independent
variables, and participants’ staff evaluation
experience as a continuous covariate variable.
Consistent with the results on overall performance
ratings, the intentionality variable is significant
(p = 0.018, one-tailed), and the budget pressure
variable is not significant (p = 0.482, one-tailed).
The pattern of mean results suggests that the
participants would be less likely to support the staff
member’s request to work with the participant
in the future if the staff member’s false sign-off
was done intentionally (mean = 5.3, std. dev. = 1.0)
versus unintentionally (mean = 4.5, std. dev. = 1.8).
In this analysis, neither the evaluation experience
covariate (p = 0.123, one-tailed) nor the budget
pressure ¥ intent interaction term is significant
(p = 0.958).
As explained earlier in the paper, research on
retributive justice has found that the primary
determinant of an observer’s reaction to the
transgressions committed by others is the
observer’s perception of the wrongdoer’s level of
intentionality. Thus, it is not surprising that
intentionality is highly significant in both of our
supplemental analyses. Given that the retributive
justice literature has found that mitigating
circumstances beyond the control of the wrongdoer
also tend to influence observers’ reactions, we
expected that time budget pressure would also be a
significant variable in our supplemental analyses.
Upon further reflection, and considering our
positive results for H1 that show time budget
pressure does appear to affect audit supervisors’
reporting intentions, perhaps together these
results suggest the following: Under the condition
Int. J. Audit. ••: ••–•• (2012)
12
of high time budget pressure, although audit
supervisors are less likely to formally report an
auditor for committing false sign-off because they
can empathize with the pressures faced in public
accounting, they nonetheless do not condone the
behavior as reflected by their unwillingness to
work with that auditor in the future. Future
research can further explore this, as well as other,
possibilities.
DISCUSSION AND CONCLUSION
Previous research, conducted in several different
countries, has established that false sign-off is fairly
commonplace in practice, and a significant amount
of previous research has focused on false sign-off
and its antecedents. Research on false sign-off is
important due to the potentially negative effects
false sign-off has on audit quality. Almost all
previous research has studied false sign-off from
the perspective of the individuals engaging in the
behavior in an effort to learn about factors that
influence auditors to commit false sign-off and
the rate at which it occurs. However, like Kaplan
(1995), we examine the reporting intentions of
audit supervisors upon the discovery of false
sign-off by a staff member under their supervision.
Whereas Kaplan (1995) examined the effects
of audit step necessity and staff members’ prior
work history on audit supervisors’ reporting
intentions, we investigate the effects of time budget
pressure and staff auditor intentionality on
audit supervisors’ reporting intentions upon the
discovery of false sign-off committed by a staff
auditor. We find that the study’s participants were
more likely to report the staff member’s false
sign-off when the staff member’s false sign-off
was intentional (vs. unintentional) and under
conditions of low (vs. high) time budget pressure.
Implications for audit practice
Our results reinforce the importance of firm-level
training from at least two perspectives. First,
supervising auditors should be trained on when to
report detected instances of false sign-off, and the
contextual and psychological factors that may affect
their perceptions about when to report, so the
individual who commits the false sign-off can be
appropriately trained and/or disciplined. A proper
response will also help ensure that audit quality is
maintained and the stakeholders, the profession,
and the firm are appropriately protected.
© 2012 Blackwell Publishing Ltd
T. A. Hyatt and M. H. Taylor
Additionally, audit supervisors must be trained
to anticipate when false sign-off is most likely to
occur so they can be especially vigilant in such
circumstances. Such caution may allow them to
prevent, or at least be more likely to detect, false
sign-off committed by an auditor under their
supervision. Second, given that a significant
percentage of our participants reported detecting
actual instances of intentional false sign-off in
practice, all auditors should be trained on the
importance of not committing false sign-off, and
that training should make clear the connection
between false sign-off and audit quality. This
connection exists even when it may involve an audit
step that they personally deem to be unnecessary.
Even in such situations, consultation with other
auditors on the team needs to occur to ensure that all
are in agreement about the necessity of each step.
Prior research suggests that training may be
effective at increasing the likelihood that detected
instances of false sign-off are reported as well as at
decreasing the occurrence of false sign-off. For
example, Hyatt and Prawitt (2011) found that
when supervising auditors perceived that firm
policies related to false sign-off were relatively
clear, the supervisors were more likely to report
detected instances of false sign-off. In addition,
other research (Willett & Page, 1996; Pierce &
Sweeney, 2006; Sweeney et al., 2010) suggests that
clear firm policies, along with an ethical tone at
the top, influence whether auditors engage in false
sign-off in the first place. On the other hand, it is
naive to believe that training will completely
resolve these issues because of the cost-quality
conflict that exists in auditing firms (McNair,
1991) and the associated organizational defense
mechanisms that arise as a result of this conflict
(Sweeney & Pierce, 2006).
The 2003 International Federation of Accountants
(IFAC) report, Rebuilding Public Confidence in
Financial Reporting: An International Perspective,
discusses the importance of high audit quality
(IFAC, 2003). The report asserts that high audit
quality is achieved, at least in part, through
providing high-quality training to all members of
the firms, developing an environment at the firms
in which audit quality is a key focus and objective,
and focusing on the necessity of ethical behavior.
Given that the reporting of detected false sign-off
– as well as the act of false sign-off itself – are at
their core ethical issues, the report’s assertion that
individual and institutional integrity are crucial to
achieving audit quality is especially salient.
Int. J. Audit. ••: ••–•• (2012)
The Effects of Time Budget Pressure and Intentionality on Audit Supervisors’ Response to Audit Staff False Sign-off
Limitations and suggestions for
future research
This paper is subject to limitations. First, as
explained in the Method section, the case materials
informed the participants that the audit step
falsely signed-off was determined, ex-post, to be
unnecessary. Further, the case also informed
participants that the audit staff member who
committed the false sign-off had a good work
history in the firm prior to this incident. If the case
had described an audit step that was deemed to be
ex-post necessary or if the audit staff member’s
work history with the firm had been described as
poor, results may have differed; future research
could examine the effects of changing these
variables. However, with respect to the audit-step
necessity issue, the case describes that the staff
member falsely signed off on the audit step not
knowing that the audit supervisor would ex-post
determine that the audit step was unnecessary.
Thus, the staff member’s action is clearly
inappropriate and not within the staff member’s
purview. As explained in note 8, although it may
seem logical to think that auditors would consult
their supervisors when they deem an audit step to
be unnecessary, both Hyatt and Prawitt (2011) and
Pierce and Sweeney (2006) have found that auditors
often do not consult their supervisors in such
circumstances. In the case of intentional false
sign-off, even if the staff member considered the
step to be unnecessary, the staff member does not
have sufficient experience, much less the authority,
to make such decisions. In the case of unintentional
false sign-off, where the staff member was
uncertain about how much work needed to be
done, at a minimum the staff member should have
consulted the audit supervisor (as explained in the
case materials) before signing off the audit step.
In either case, the staff member should never
make the final call about skipping an audit step;
rather, they should always consult with the audit
supervisor about such issues.
Second, the results are limited by the use of
participating auditors from only one firm. Perhaps
the culture of the participating firm is sufficiently
different from other firms such that responses
would differ across firms. Studying cultural
differences and their potential effects on auditors’
responses to discovered instances of false sign-off
could be examined in future research.
Another potential area for future research
concerns the difference in results found in our
© 2012 Blackwell Publishing Ltd
13
study and those found in the survey conducted
by Hyatt and Prawitt (2011). In contrast to our
findings which show that time budget pressure
and intentionality influence whether supervisors
reported detected instances of false sign-off, Hyatt
and Prawitt (2011) did not find such effects.
Perhaps the difference is due to experience level.
Our subjects had on average less than five years of
experience whereas those in the Hyatt and Prawitt
(2011) study had nearly 13 years of experience.
Perhaps over time, audit supervisors develop less
tolerance for reduced audit quality acts such as
false sign-off. Alternatively, the difference in results
may be a function of the tighter control available in
the experimental setting used in this study. Future
research could address these issues.
Given the frequency of false sign-off in practice,
further experimental research is warranted. Such
research could examine additional factors that
may influence audit supervisors’ reporting
intentions upon the discovery of false sign-off,
such as the audit supervisors’ leadership style
(see Otley & Pierce, 1995), tolerance for ambiguity
(see Johnson, Kaplan & Reckers, 1998),
authoritarianism (see Feather, 1999), and locus of
control (see Shapeero et al., 2003). Another factor
that may affect supervisors’ reporting intentions is
the level of time deadline pressure experienced on
the audit. Both Sweeney and Pierce (2004) and
Kelley et al. (1999) found that time deadline
pressure (in addition to time budget pressure) is
associated with reduced audit quality acts,
including false sign-off. Also, research could be
designed to determine the effect of training on the
propensity for committing false sign-off as well as
on audit supervisors’ responses to the discovery of
false sign-off. A more thorough understanding
of false sign-off, its antecedents, and audit
supervisors’ responses to its discovery, could lead
to improved training at the firms and, ultimately,
audit quality.
ACKNOWLEDGMENTS
We are grateful to Audrey Gramling, Travis Holt,
Kevan Jensen, two anonymous reviewers, and
workshop participants at Boise State University,
Brigham Young University, and Case Western
Reserve University for their many helpful
suggestions and comments. Also, we thank Steve
Kaplan for allowing us to use and modify his case
materials. Finally, we give special thanks to Amy
Lovig for her contributions to this project.
Int. J. Audit. ••: ••–•• (2012)
14
NOTES
1. Auditors who commit intentional false sign-off
have incentives to cover up their behavior so
that it is not detected because its discovery can
lead to adverse consequences for the auditor
(Pierce & Sweeney, 2006). However, previous
research (e.g., Kaplan, 1995; Sweeney &
Pierce, 2004; Hyatt & Prawitt, 2011) as well
as the current study report that a significant
percentage of supervising auditors indicate
they have detected false sign-off, which
suggests that their subordinates’ attempts at
cover up are not always successful. Although
successful cover-up efforts prevent false
sign-off from being detected, the focus of this
study is on the subset of intentional false
sign-off where cover up is unsuccessful and
unintentional false sign-off (where cover up is
not relevant) and the supervising auditor
detects an instance of false sign-off.
2. Another reason that audit supervisors may be
more lenient is that audit supervisors are
responsible for ensuring that the time budget is
met. Therefore, a supervisor’s job performance
is threatened if a staff auditor goes over the
time budget. Thus, the audit supervisor may be
more lenient toward a staff member who falsely
signs off under pressure of a tight time budget
in order to meet the budget.
3. Note that although Hyatt and Prawitt (2011)
found that time budget pressure did not affect
whether detected instances of false sign-off
were reported, they did find that time budget
pressure influenced the severity of the
disciplinary action directed at the offender for
the subset of instances that were reported.
4. Sweeney and Pierce (2004) refer to
unintentional and intentional false sign-off
as inadvertent and deliberate false sign-off,
respectively.
5. Note that, although Hyatt and Prawitt (2011)
found that intentionality did not appear to
affect whether detected instances of false
sign-off were reported, they did find that
intentionality influenced the severity of the
disciplinary action directed at the offender for
the subset of instances that were reported.
6. Participants also were asked to report their
gender (see Sweeney et al., 2010) and to answer
questions that allowed us to assess the extent
of their Type A personality (see Kelley &
Margheim, 1990; Malone & Roberts, 1996) to
© 2012 Blackwell Publishing Ltd
T. A. Hyatt and M. H. Taylor
determine if either of these variables would
affect the respondents’ reporting intentions.
Neither variable was significant in any of this
study’s analyses; therefore, they are excluded
from the discussion and the reported analyses.
7. Since Kaplan (1995) found that supervisors are
less likely to report detected instances of false
sign-off when the audit step is determined to be
ex-post unnecessary, this wording, if anything,
has the potential of decreasing the likelihood of
finding support for our second hypothesis.
8. Although one might assume that auditors
who consider an audit step unnecessary would
simply approach their audit supervisor rather
than making such a determination on their
own and not performing the audit step without
receiving permission to do so, previous
research indicates that this does not always
happen. For example, Pierce and Sweeney
(2006) found that junior auditors often fail to
seek out the approval of their supervisors
regarding decisions to skip audit work that
they consider unnecessary. In addition, Hyatt
and Prawitt (2011) identified a specific instance
in which a staff auditor falsely signed off an
audit step because they deemed it to be
unnecessary. However, when the false sign-off
was later discovered, the supervisor reported
the behavior, and the staff auditor was formally
punished for not following office policy.
9. The few participants who reported detecting
a large number of false sign-offs (whether
intentional or unintentional), which causes
the relatively large standard deviations,
may have interpreted the definition of false
sign-off differently than other participants.
As explained more fully in the Sensitivity
analyses section, to control for this possibility
we performed two tests. First, we included
participants’ perception of false sign-off
frequency as an additional covariate in the
model shown in Table 2. Second, we included
participants’ reported detection of intentional
false sign-off as an additional dichotomous
independent variable in the model shown in
Table 2. The results from each of these tests are
qualitatively identical to those reported in the
paper and neither of the new variables is
significant.
10. As shown in Table 1 Panel B, one of the five
participants who had not detected any type
of false sign-off has more than five years of
audit experience. If we remove that participant
Int. J. Audit. ••: ••–•• (2012)
The Effects of Time Budget Pressure and Intentionality on Audit Supervisors’ Response to Audit Staff False Sign-off
from our analyses, the study’s results (which
are summarized in Table 2) are qualitatively
identical.
11. Kaplan (1995) also studied these two variables
in supplemental analyses.
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AUTHOR PROFILES
Troy A. Hyatt is an associate professor in the
Department of Accountancy at Boise State
University. He received his PhD from the
University of Arizona. His research interests
include judgment and decision making in auditing
and issues related to financial reporting. His
research has appeared in a variety of journals,
including The Accounting Review, Behavioral
Research in Accounting, and the Journal of
Accounting Education.
Mark H. Taylor is Professor of Accountancy in
the Weatherhead School of Management at Case
Western Reserve University in Cleveland, OH. He
received his PhD from the University of Arizona.
Professor Taylor’s research interests include
decision making and judgment in auditing and
accounting settings. His publications have
appeared in Contemporary Accounting Research,
Accounting, Organisations & Society, Auditing: A
Journal of Practice and Theory, Behavioral Research in
Accounting, and Accounting Horizons, among other
leading publication outlets in accounting.
Int. J. Audit. ••: ••–•• (2012)