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Time Pressure Research in
Auditing: INTRODUCTION My objective with this essay is to highlight the contributions that time pressure research in auditing has made, and has the potential to make, to audit practice. There is little question that time pressure is a prevalent stimulus in the auditing work environment. Professionals in all areas of auditing are confronted with time constraints that can produce high stress levels, impacting attitudes, intentions, and behavior. Perhaps as a result of the prevalence and potential consequences of time pressure in auditing, researchers have examined the problem extensively, although certainly not completely. Extensive work over the past two decades provides researchers and practitioners with a useful body of information to stimulate thought and action. Specifically, this essay is designed to emphasize that the academic literature provides some specific leads for firms and individuals considering ways to manage the positive and negative effects of time pressure in audit practice. In the tradition of previous expositions, I will focus on a critical few questions that highlight some of the primary contributions of the research literature to date:
In consideration of these questions, I want to acknowledge that this discussion of time pressure highlights my perceptions of the most important and prevalent issues identified by researchers in the area. A thorough consideration of time pressure certainly warrants a more careful analysis of the breadth and depth of work in accounting and other domains. To assist in this effort, DeZoort and Lord (1997) provide a summary that highlights the diverse findings of the time pressure literature in accounting. THE DIMENSIONS OF TIME PRESSURE IN PRACTICE Time pressure is a generic term that represents alternative, distinguishable forms of pressure. The audit literature reflects two primary dimensions of time pressure in practice: time budget pressure and time deadline pressure. While these dimensions are certainly related and often overlapping, they are not identical. Time budget pressure is a relatively chronic, pervasive form of pressure that arises from limitations on the resources allocable to perform tasks. Resources are limited for a variety of reasons, including profitability concerns, personnel limitations and fee constraints. There is little question that time budgets are important for planning and controlling audit engagements. However, the empirical literature suggests that, for both internal and external auditors, time budgets are tightening and increasingly interfering with efforts to ensure audit quality. The literature also makes it clear that increased competition in the audit market is the primary culprit because it increases the pressure to maximize efficiency and control costs. Time deadlines, on the other hand, are acute pressures characterized by the existence of specific targets for task completion. In auditing, deadline pressures may come from within the accounting firm, from the client, or from third parties such as regulators. Although some deadlines may be foreseeable, many are unforeseen and create additional stress for the professional. The unanticipated nature of deadlines can make them harder to manage than budgets, which can be anticipated and dealt with in a strategic manner. ALTERNATIVE PERSPECTIVES ON THE TIME PRESSURE PROBLEM IN AUDITING The anecdotal and empirical literature in accounting, consistently reports that time budgets and time deadlines are among the things professionals like least in their work. Evidence suggests that the demands of time pressure can diminish positive attitudes, intentions, and behavior related to audit work. This perspective reflects the predominately negative orientation found in the time pressure literature. That is, researchers to date have emphasized the deleterious effects of time constraints in audit practice in general and specifically on audit quality. These negative effects include, for example, premature sign-off on procedures, underreporting time, feelings of failure, burnout, job dissatisfaction, and undesired turnover. Fortunately, accounting researchers (in audit and tax) are starting to emphasize the potential for positive time pressure effects. Among the benefits attributable to both forms of time pressure and demonstrated in the literature are increased focus on the task and task-relevant information, decreased attention to irrelevant information, increased motivation to improve work efficiency, and increased job satisfaction. What, then, are the predominant findings in time pressure research? In the psychology literature, it is generally thought that “under time pressure, subjects tend to work more quickly, but performance accuracy declines” (Salas et al. 1996, 33). In accounting, the findings tend to suggest an inverted-U relationship where judgments improve as time pressure increases from no or low levels to moderate levels, and then worsen as the pressure increases to excessive levels. In auditing, the collective literature clearly reflects the need for auditors to audit effectively in as efficient a manner as possible. A majority of the time pressure research in auditing has focused on evaluating effects attributable to time pressure, indicating predominate concern with audit effectiveness. In this area, a large portion of the work indicates time pressure can promote premature sign-offs and underreporting behavior. A number of other studies indicate that time pressure can increase auditors’ tendencies to accept weak forms of evidence during the audit and to neglect needed research on accounting standards. Alternatively, the literature also provides evidence that time pressure can enhance auditors’ abilities to identify deviations and misstatements, and make risk assessments. However, the literature increasingly reflects interest in evaluating how time pressure can affect decision-making processes, emphasizing potential enhanced efficiency. For example, the extant literature indicates that deadlines can reduce auditors’ focus on irrelevant task information and decrease the amount of complex processing when assessing risk of material misstatement. The tax literature also provides some interesting findings in this area, providing new interactive links between time pressure, cognitive processing, and professional expertise (see, for example, Spilker and Prawitt 1997). Such work highlights the importance of remembering that time pressure should not only be considered in isolation or as if in a vacuum. Instead, it is critical to note that practitioners work in dynamic environments that are characterized by numerous interactive pressures (e.g., accountability and time budget pressure) that can impact them in both subtle and dramatic ways. WHAT CAN WE LEARN FROM RESEARCH IN OTHER DISCIPLINES? What Can We Learn From Research in Other Disciplines? While this examination of time pressure effects focuses on the auditing literature, it is always appropriate to remember that we should not confine our curiosity and learning to the audit domain alone. In fact, the auditing literature reflects the depth and breadth of time pressure research in other domains. For example, the tax literature provides some insights into the potential for positive time pressure effects on information processing. Outside of accounting, the psychology, sociology, and organizational behavior literatures offer extensive bodies of information related to time pressure effects that can supplement the auditing literature and provide a basis for future research. For example, a look at the research from alternative domains provides important insights into potential coping strategies that could improve audit research and practice. Specifically, the psychology literature provides insights into alternative strategies that individuals can employ to deal with time pressures, including acceleration (speeding up efforts to assimilate information), strategy shifting (changing the processing strategy used), and filtration (restricting information processing). Edland and Svenson (1993, 37–38) suggest that individuals under increasingly severe time pressure may first try to increase their processing speed. As time pressure increases, increasing speed becomes less feasible and individuals begin to filter the information they process. Next, as the deadline or budgetary boundary becomes more imminent, individuals will start to change the processing strategy used. For example, Asare et al. (1998) report that auditors under time budget pressure in the investigation of a material, unexpected fluctuation altered their testing strategies by reducing the number of tests examining a particular cause while maintaining the number of causes tested. Finally, if the pressure becomes intolerable, individuals may start to avoid the problem altogether. WHAT CAN FIRMS AND PROFESSIONALS DO TO MANAGE THE TIME PRESSURE PROBLEMS? So the question remains: “What are the implications for practice?” The variety of findings in auditing and other domains provides a number of potentially useful ideas for firms and professionals to consider. From an organizational perspective, accounting firms should do more than just recognize that time pressures are a “part of business.” Rather, firms should explicitly consider ways to manage time pressures. For example, firms should reevaluate and consider improvement strategies in their training and support systems for professionals who are most susceptible (e.g., new staff auditors) to negative time pressure effects. This reevaluation should take into account the research findings that knowledge and experience affect individuals’ abilities to adapt and use modes of adaptation. The research literature also highlights the importance of acknowledging that time pressure effects can differ based on individual characteristics (e.g., personality, moral development), social and environmental (situational) context, and hierarchical position in the firm. With this in mind, a “one size fits all” approach to managing the time pressure issue is almost certainly inappropriate. Finally, firms should emphasize that time pressure is not just a “necessary” part of auditing, but also a potentially beneficial part of an auditor’s professional development. The academic literature also suggests that firms need to consider that group (team) performance is qualitatively different from individual performance. Specifically, when it comes to time pressure effects, audit research suggests that firms should be careful to consider that audit teamwork is not simply an additive function of the knowledge, skills, and attitudes of the individual professionals. In this light, emphasis should be placed on interactive variables (e.g., peer pressure, obedience pressure, organizational commitment, professional commitment) and communication among professionals in high-pressure situations. Finally, firms should recognize the potential for changes in the accounting industry’s composition to alter the nature and extent of time pressure in practice. Increasing competition in contracting audit markets can exacerbate the deleterious effects of time pressure. In this light, particular attention should be given to the link between pressure and professional ethics. Audit firms should continue to place a strong emphasis on ethical awareness training to prepare their professionals for the dynamic pressures they encounter in practice. In particular, firms can use research findings (e.g., Schultz et al. 1993) that suggest ethical behavior is a function of individuals’ perceptions of personal cost, professional duty, and the seriousness of the matter. Firms also should consider ways to de-emphasize the ability to meet or beat budget as a major criterion in both formal and informal performance review and promote alternative performance measures to realign auditors’ work motivation. From the individual auditor’s perspective, the academic literature confirms that time budgets and time deadlines are prevalent contextual factors that can affect the quality of the audit and the quality of the auditor’s work experience. On a deeper level, the audit literature also highlights the types of tasks likely to be influenced by time restrictions, as well as the variety of coping strategies available. Specifically, the literature in auditing and other domains suggests that the dysfunctional effects of time pressure, even in extreme applications, can be managed if professionals learn to use effective coping techniques (e.g., controlled acceleration, effective filtration/screening of task-irrelevant information), appraise and reappraise tasks and strategies for completing tasks, and identify possible contingencies and project management techniques. Professionals are also well served to recognize that time pressure in its alternate forms should not only be viewed in negative terms. Instead, professionals should recognize the potential upside of the pressure on their performance and careers. Abilities to adapt and remain flexible in the face of pervasive and often severe time constraints are often rewarded in today’s profession. Ultimately, the time pressure literature to date provides a number of important findings that audit practitioners and researchers can take forward in their work. However, for each question addressed, new questions arise that hold great promise for additional learning in the area. Interestingly, and as a final thought, it is here that a paradox arises. While the time pressure literature in accounting reveals a great deal of information for practitioners, it is that same time pressure that inhibits the effective flow of information from the research world to practice (see Bell and Wright 1995, for an expanded discussion of the obstacles to effective collaboration between practice and academia). REFERENCES Asare, S.,
G. Trompeter, and A. Wright. 1998. The effect of accountability
and time budget pressure on auditors’ hypothesis testing
strategy. Working paper, Boston College. |