The Effects of Time Budget Pressure and Risk of Error on Auditor Performance

This paper examines the effects of time budget pressure, risk associated with the task, and audit test on three reduced audit quality (RAQ) behaviors. Specifically, the study evaluated RAQ acts using three situations, including the perceived likelihood of rejecting awkward items from a sample (Situation A), accepting doubtful audit evidence (Situation B), and failing to test all items in the sample (Situation C). A 2×2×2 between-subjects design used 103 audit seniors to evaluate the impact of the independent variables on the potential for RAQ acts. The results show that time budget pressure had the largest impact on the propensity to commit RAQ (higher likelihood in the presence of time budget pressure), and that time budget pressure interacted with risk of the audit task in determining the propensity to commit RAQ. Under conditions of high level of time budget pressure, a lower risk of error for the audit task was associated with an increased likelihood of RAQ. The results were found to differ depending on the specific RAQ.