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THEORETICAL FRAMEWORK AND HYPOTHESES
The theoretical framework starts with a presentation of the theories chosen for the study, namely the conformity pressure, the professional commitment and the locus of control. This sections also includes the hypothesis that we will test in this study.
CONFORMITY PRESSURE
Social pressures, an overview
According to Milgram (1974 in Nasution & Östermark 2012), a person adapts his behavior due to social influences pressures. These social pressures comprise obedience pressures and conformity pressures. Overall, social influence is, as noted by Abram, Wetherell, Cochrane, Hogg & Turner (1990), the inclusion of self in the category of those attempting to exert influence. That is, when others are defined as members of a particular social category, this yields rejection or attraction to others as group members and independent of their personal characteristics, and hence this determines how far their approval and attraction to oneself are valued. Consequently, when group membership is eminent, only an in-group is argued to be effective in applying such pressure. Therefore, it could be concluded that self-categorization is equally an important basis for normative influence. To put it in Abram’s et al. (1990: 117): “self-categorization can be a crucial determining factor in social influence, and that the extent of informational and normative influence may depend very largely upon whether the source of influence is regarded as a member of a person’s own category”. This is closely related to the purpose of this study, since we are examining a specific group; auditors.
Conformity pressures
One form of the social pressures is the conformity pressures. It refers to behavior influenced by examples set by peers or equals, not by arbitrary orders from superiors (Lord & DeZoort, 2001). Conformity pressure affects individuals who tend to alter their attitudes or behavior in an effort to be consistent with perceived group norms (DeZoort & Lord, 1997). Festinger (1954 in Nasution & Östermark, 2012) have developed a theory of social comparison process to illustrate this phenomenon. According to this theory, conformity pressure stems from one’s inclination to be considered as a group member. To achieve that, individual would follow the rampant attitude within the group. Curiously, under conformity pressure, one will accept the others’ beliefs or opinions even if he has no motivation to agree with them per se (Deutsch & Gerard, 1955). In another word, “individuals will publicly accept the majority view while privately retaining their initial view, motivated by a desire not to appear deviant or to risk possible negative sanctions from the majority, such as ostracism or ridicule” (Bond & Smith, 1996: 113). Santee and Maslach (1982) also illustrated that unanimous agreement among peers induces higher level of conformity. Early studies have provided evidence that individuals tend to abandon their own judgement and follow the consensus agreement when the information they have was interpreted differently by all other member of the group with complete disregard for errors contained in such unanimous judgement. Using a visual discrimination task involving lines of different lengths, Asch (1956) found that the majority of subjects had the propensity to the clearly mistaken views of their in assessing line length. Moreover, Asch’s studies accentuated that individuals, even if they chose to conform to the others’ views, are often burdened with making decisions to which they privately discontent. This was acutely summarized by Brehm and Kassin (1990 in Lord & Dezoort, 2001: 218) when they stated that: “task was relatively simple and they could see with their own eyes that their own answers were correct. Still, they often went along with the incorrect majority”. Unlike what one can assume, this impact does not only come to play within colossal, powerful groups. But, as stated by Deutsch and Gerard (1955: 635), “when a group situation is created, even when the group situation is as trivial and artificial as it was in our groups, the normative social influences are grossly increased, producing considerably more errors in individual judgment”.
However, some studies have suggested that conformity pressures, as well other social pressures, vary depending on one’s culture. Bond and Smith (1996) used the results of three surveys to assess a country’s individualism-collectivism, and they deduced that collectivist countries tended to show higher levels of conformity than individualist countries. That is, people from collectivist cultures are more often than not to concede to the majority, factoring in the higher value placed on harmony in person-to-group relations. This supports the justification put forward by Nasution and Östermark (2012) 15 regarding the contradiction between the results of their study and those of Lord and Dezoort (2001). As mentioned earlier, Lord and DeZoort (2001) attempted to test the impact of conformity pressure on auditors’ judgement based on the experiments conducted by Asch (1956), yet they failed to find any support of their hypothesis that conformity pressures affect auditors’ judgement. Nasution and Östermark (2012) ascribed such results to the cultural dimension which was not accounted for in Lord and DeZoort’s study. Accordingly, Nasution and Östermark (2012) concluded that in a society with high individualism and low power distance, the impact of conformity pressures are being amplified and more apparent. Thus, the cultural element will be considered in this study as well. For the best of our knowledge, this study is the first one to explain such pressures in the Swedish context, which makes it of significant giving the unique attributes of the Swedish culture.
Swedish culture and conformity pressures
Swedish culture appears to be of dissonance and contradictory. That is, Sweden, among other countries, has been categorized as horizontal, individualistic society. In such societies, people prefer to view themselves as equal to others in status in addition to the focus is on expressing one’s uniqueness and establishing one’s capability to be successfully self-reliant. (Hofstede, 1980, 2017; Hofstede, 2011; Shavitt, Lalwani, Zhang & Torelli, 2006). For individualists, the propensity is to prioritize personal goals over societal interests and the autonomy from in-groups (Triandis, 2001; Hofstede, 2011). If these attributes are accurate, that might lead us to expect that Swedish auditors do not concede to conformity pressure since it is antithetical to their predisposed behavior. However, it is not that simple conclusion to reach giving the other contrary observations in the Swedish culture. In spite of the portrayal of Scandinavians of being conditioned to distinguish themselves from the others, they are governed with a pervasive modest codes. “Jantelagen” is a perfect example to that. According to this socio-cultural ideology by which Scandinavians abide, people should not assign themselves in a higher position or special status than the others. Such unwritten code was claimed to stifle Scandinavians’ individuality, forcing the people to conform to the larger collective to avoid distinction (Nelson & Shavitt, 2002; Tian & Guang, 2017). In the same vein, Daun (1991 in Tian & Guang 2017), pointed out that Swedish culture emphasizes consensus, leading Swedes to seek non-controversial conversation subjects. He also highlighted that Sweden shares several characteristics with countries conventionally considered collective ideologies. Swedes, for example, are conflict averse, conformist, and deferential to collective ideologies. Unlike individualists, collectivists are inter-dependent with their in-groups, prioritize the groups’ goals over individual ambitions, and shape their behaviors based on in-group norms (Triandis, 2001). Furthermore, Swedes have low tendency to express their distinctiveness (Eriksson, Becker & Vignoles, 2011). As an attempt to untangle this puzzling observations, Tian and Guang (2017) conducted their studies using in-depth interviews with thirteen participants. The results of their studies suggested that Swedish individualism-collectivism is distinguished between the public and private domains of social life. On one hand, in the public sphere (e.g., society at large, public institutions, and colleagues) Swedes exhibit behaviors characteristically associated with collectivist societies; these elements include: conformity (Eriksson et al., 2011). On the other hand, in the private sphere of life, Swedes prioritize individualism and autonomy. This contrary and different results and observations add to the importance of our study to explore these premises within the auditing field in the Swedish context.
In accounting, the dysfunctional auditor behavior caused by conformity pressure was examined by previous studies. For instance, Ponemon (1992) in Lord and DeZoort (2001: 219) admitted that auditors may perceive others doing the same thing or that their performance is somewhat inferior, which may result in dysfunctional outcomes. He also found that conformity pressure from peers was an antecedent to some dysfunctional behavior of auditors, such as underreporting of time (DeZoort & Lord, 1997). Nasution and Östermark (2012), replicating Lord and DeZoort (2001), have conducted a study on sample of 70 auditors from two Big Four and two non-Big Four CPA firms using a specific hypothesized scenario of asset misstatement, which will be detailed later. The results of this study indicated that conformity pressures from peers/colleagues affect auditors’ judgement. Following the abovementioned studies, we asked participants to make a judgement (sign off) on the net equipment balance for the assets in question. The larger the balance determined the higher probability of the financial statements misstated. Based on the theory of conformity pressure and cultural dimension we construct hypothesis one as follows:
H1: Under conformity pressures, auditors’ judgement will be influenced more that those under no conformity pressure.
PROFESSIONAL COMMITMENT
Professional commitment is the extent to which an individual is attached to a profession (Hall, Smith & Langfield-Smith, 2005). Differently put, it refers to the strength of an individual’s identification with a profession (Otley & Pierce, 1997; Nasution & Östermark, 2012). Professional identification refers to the extent to which a professional employee experiences a sense of oneness with the profession. (Heckman, Steensma, Bigley & Hereford, 2009). Following Leicht and Fennell (2001) and Carrington, Johed and Öhman (2011), a professionally committed person accepts the rigor and enforcement of independence requirements, the ethical values and the goals of the profession (Lachman & Aranya, 1986). Individuals with high professional commitment are characterized as having a strong belief in and acceptance of the profession’s goals, a willingness to exert considerable effort on behalf of the profession, and a strong desire to maintain membership in the profession (Otley & Pierce, 1997; Lord and DeZoort, 2001). As a matter of fact, the strength of professional commitment has consequences on performance improvement, turnover intentions, and the level of satisfaction on the profession (Hall et al., 2005). Additionally, professional identity is characterized by lack of profit maximization as an objective; instead, the focus is put on the provision of high quality service to stakeholders (Broberg, Umans, Skog & Emily 2014). As described by Marshall in Brante (1988: 119): “The professional man… does not work in order to be paid, he is paid in order that he may work. Every decision he takes in the course of his career is based on his sense of what is right, not his estimate of what is profitable”. The importance of understanding professional commitment comes from four reasons provided by Lee et al. (2000). First, individual’s career resembles a meaningful focus in life. Second, due to its potential link with retention, professional commitment is of significance for human resources management. Third, professional commitment is imperative for work performance. That is, to develop expertise, one have to engage in relevant activities for long time, which in turn affects the continuity in the profession. Such places professional commitment as a precursor of exemplary work performance.
Finally, the professional commitment is important because it illustrates how people develop, make sense of, and integrate their multiple work-related commitments, including those that go beyond organizational boundaries. Professional Commitment is likely to affect aspects of accountants’ work behavior, such as rule observance attitudes, involvement in professional accounting associations (Hall et al., 2005), and propensity to mentor junior accountants (Smith & Hall, 2008).
As detailed by Hall et al. (2005), professional commitment has three dimensions: affective professional commitment (APC) (the extent to which individuals “want to stay” in the profession because they identify with the goals of the profession and want to help the profession to achieve those goals), continuance professional commitment (CPC) (is the extent to which individuals feel they “have to stay” in the profession because of the accumulated investment that they have and the lack of other alternatives), and normative professional commitment (NPC) (the extent to which individuals feel they “ought to stay” in the profession as an obligation). Hall et al. (2005) also contend that considering these three dimensions of professional commitment will provide more inclusive, in-depth understanding of auditors’ profession. Therefore, we decided to consider all these dimensions in our study, using the concept and measurement of professional commitment adapted by Smith and Hall (2008) for the accounting profession, which was adapted from the measurement developed by Meyer et al. (1993). The first study that has used these three dimensions to investigate the relationship between professional commitment and auditor judgement was conducted by Nasution and Östermark (2012). With that being said, and after we have explained the different aspects entailed in the concept of professional commitment, it could be argued that auditors with higher APC and NPC tend to sign off lower balances compared to CPC auditors. Be that as it may, we construct hypotheses two and three as follows:
H2a. Auditors with higher APC will be influenced less under conformity pressures compared to auditors with lower APC under similar conditions.
H2b. Auditors with higher CPC will be influenced less under conformity pressures compared to auditors with lower CPC under similar conditions.
H2c. Auditors with higher NPC will be influenced more under conformity pressures compared to auditors with lower NPC under similar conditions 19
LOCUS OF CONTROL
Locus of control was first proposed by Rotter (1966) as an individual-differences construct. Essential to the concept of locus of control is the assumption that the effects of reinforcement on preceding behavior depend on whether the individual perceives the reinforcement as contingent on his or her own behavior or independent of it (Singer & Singer, 1986; Spector, 1988). Rotter (1990: 489) gave a brief definition of locus of control when he said:
“Internal versus external control refers to the degree to which persons expect that a reinforcement or an outcome of their behavior is contingent on their own behavior or personal characteristics versus the degree to which persons expect that the reinforcement or outcome is a function of chance, luck, or fate, is under the control of powerful others, or is simply unpredictable.”
According to this theory, individuals are classified as either “internal” or “external”. To an internal individual, it is convinced that events are subject to his or her own control (Hambrick & Finkelstein, 1987). On the other hand, individuals with an external locus of control believe that results are attributable to things beyond their control and may occur independently of his own action (e.g. fate, chance, luck, or destiny) (Rotter, 1966). As it has been well-documented, locus of control is of significance in predicting human behavior. Overall, individuals who are internal are more likely to take responsibility for consequences and to rely on their own determination of what is right and wrong to guide their behavior, as they have a firm belief that they can control their destiny (Singer & Singer, 1986; Trevino, 1986 in Tsui & Gul, 1996). Conversely, external individuals are less likely to take personal responsibility for the consequences of inopportune behavior and will blame it on external forces (Trevino, 1986 in Tsui & Gul, 1996).
Similar to conformity pressure, culture has a role to play in the locus of control. As explained by Cherry (2006: 116), the linkage between internality/externality has been related to national culture often relating locus externality to the Hofstede’s famous theory of culture. Additionally, Cherry (2006:116) highlighted that the congruent trend within research suggests that individuals from collectivistic societies are more externally oriented, unlike those who are from individualistic societies. This adds value to this study giving, as mentioned before, the contradictory observation within the Swedish culture and how the Swedes seesawing between individualistic and collectivistic attributes based on the surrounding sphere.
Studies have accentuated that locus of control is a robust determinant of auditors’ behavior, especially in audit conflict situations. Additionally, it was highlighted that locus of control influences dysfunctional audit behavior (Tsui & Gul, 1996; Hyatt & Prawitt, 2001; Donnelly, Quirin, & O’Bryan, 2003; Shapeero, Chye Koh & Killough, 2003; Paino, Smith & Ismail, 2012; Nasution & Östermark, 2012; Iswari & Kusuma, 2013). Based on all that, we argue that the behavior of auditors under conformity pressure will vary based on their locus of control. That is, auditors with internal locus of control are expected not to succumb to such pressures as they tend to consider themselves personally liable for the actions taken, which makes their engagement in inappropriate behavior very unlikely. On the other hand, external auditors, since they believe that outcomes are beyond control and can be attributed to fate, luck or destiny, are expected to concede to the pressure they encounter from their peers. Differently put, it is expected that an internal locus of control is negatively related to unprofessional behavior to intentionally prematurely sign-off compared to external locus of control. Based on this, our hypothesis is constructed as follows;
H3. Auditors with an external LOC will be influenced more by conformity pressures compared to auditors with an internal LOC under similar pressures.
Table of contents :
1. Introduction
1.1. Background
1.2. Problematization
1.2.1.The social context and auditors’ judgement
1.2.2.Conformity pressures and auditors’ judgement
1.3. Research question
1.4. Purpose
1.5.Outline
2. Theoretical framework and hypotheses
2.1. Conformity pressure
2.1.1.Social pressures, an overview
2.1.2.Conformity pressures
2.1.3.Swedish culture and conformity pressures
2.2. Professional commitment
2.3. Locus of control
3. Methodology
3.1. Theoretical Methodology
3.1.1. Research approach
3.1.2. Choice of methodology
3.1.3. Choice of theory
3.2. Empirical Methodology
3.2.1. Research subjects
3.2.2. Research design and procedures
3.2.3. Operationalization
3.2.3.1.Dependent variable
3.2.3.2.Independent variables
3.2.3.3.Moderating variables
3.2.3.3.1.Professional commitment
3.2.3.3.2.Locus of control
3.2.3.4.Control variables
4. Analysis and discussion
4.1. Descriptive
4.2.Pearson correlation test and linear regression
4.3.Discussion
4.4. Summary
5. Thesis conclusion
5.1.Summary of the thesis
5.2.Theoretical contribution
5.3.Limitations
5.4.Future research
Appendix A: Instrument
References
