The impact of auditor attributions for failure on observer perceptions of auditor power and trust

Confidence in auditors provides a cornerstone of confidence in corporate financial reporting. Yet, a series of audit failures in which financial statements were reissued to correct significant errors occurred in recent years. Typically, the auditors provided public statements that could be described as self-serving explanations. These statements proposed that the audit failures were caused by factors that were external to the auditors and were uncontrollable by the auditors. Attribution theory proposes that these self-serving statements are made in an effort to protect public image following a failure (Weiner, 1972, 1985, 2000). However, Lee and Tiedens (2001) suggested that self-serving statements by a high-status individual might actually impair public image. If Lee and Tiedens are correct, self-serving statements by auditors could damage the public perception of auditors and the auditing profession and undermine confidence in corporate financial reporting. To address the issue, this study examined the relationship between self-serving statements by the auditors and public impressions of the auditors.; The purpose of the study was to investigate the relationship between auditor attributions and professional investment advisors' perceptions of the auditor. The study consisted of two parts. First, the study examined investment advisors' attributions regarding the cause of an audit failure described in a scenario. The Revised Causal Dimension Scale (Duncan, McAuley, & Russell, 1989) measured investment advisors' attributions that explained the cause of the audit failure.; The second part of the study examined the relationship between auditor attributions following the restatement of financial statements and investment advisors' perceptions of the auditor. Perceptions of the auditor were defined in terms of power and trust of the auditor. Items adapted from Doney and Cannon (1997) measured trust. Items adapted from the Rahim Leader Power Inventory (Rahim, 1988) and the Interpersonal Power Inventory (Raven, Schwarzwald, & Koslowsky, 1998) measured power.; Findings indicated that investment advisors did attribute the audit failure to causes that were internal and controllable by the auditors. Also, self-serving statements by the auditor did significantly reduce trust but did not reduce perceptions of power.