| Using a field experiment, this study examines the effects of some contextual factors on auditors' planning decisions in an audit conflict regarding time constraint for completion of audit imposed by client which could undermine independence. These factors comprise client's financial condition, management advisory services (MAS), reputation of the audit firm and size of fees. In addition, this study also examines the effect of Chinese and Western culture on this relationship. The dependent variable, audit planning decisions, is measured in terms of the likelihood that the auditor accedes to the time constraint and the planned extent of audit evidence. Subjects were ninety-five auditors from two firms each in the U.S. (Western culture) and Hong Kong (Chinese culture). Their cultural values which are based on the seminal work of Hofstede (1991) were validated along the dimensions of individualism, power distance, Confucian dynamism, masculinity and uncertainty avoidance. The auditors were asked to indicate their audit planning decisions in response to various combinations of the contextual factors each manipulated at two levels. The data was analysed using the analysis-of-variance (ANOVA) technique.; Results suggested that size of fees significantly affected auditors' decision to accede to client's time constraint. Moreover, MAS affected both planning decisions, and its effect on the planned extent of audit evidence was more significant for Chinese than Western auditors. Surprisingly, client's financial condition and reputation of the audit firm were insignificant factors. Overall, Chinese auditors were more likely to accede and plan for a lower extent of evidence than Western auditors. All cultural dimensions examined were significant but masculinity mitigated the effects of the other dimensions in the reversing direction.; In evaluating auditors' judgment quality across the two cultures, a low level of consensus on the planned extent of evidence was found among the U.S. subjects which could adversely affect audit quality. Furthermore, while evidence on impairment of auditors' programming independence (related to audit planning) was mixed, there was potential jeopardy of investigative independence (related to execution of audit plan) as a result of such time constraint. The implications and limitations of this study and directions for future research are also discussed. |
