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Evidence on the Effects of an Audit Quality Bonus

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 Evidence on the Effects of an Audit Quality Bonus

Herman van Brenk*

https://orcid.org/0000-0002-1658-6937
Nyenrode Business University
[email protected]

Barbara Majoor
Nyenrode Business University
[email protected]

*Corresponding author

February 2022

Forthcoming at European Accounting Review

Accepted by William Messier

Date of first submission: 26 August 2019
Date of final acceptance: 7 February 2022
 Evidence on the Effects of an Audit Quality Bonus

ABSTRACT: Audit quality rewards might create incentives for auditors to enhance their
performance. We examine whether the effects of an audit quality bonus are contingent on
appetitive motivation and engagement pressure. Appetitive motivation is a personality trait of
goal pursuits that consists of drive, reward responsiveness, and fun seeking. Engagement
pressure is the conflict between meeting time budgets and complying with auditing standards.
Relying on cognitive evaluation theory, we expect that an audit quality bonus increases audit
quality for auditors with lower appetitive motivation and decreases audit quality for auditors with
higher appetitive motivation when engagement pressure is low. When engagement pressure is
high, the effects of an audit quality bonus are difficult to predict. In an experiment with 420
auditors, we manipulate an audit quality bonus and the level of engagement pressure and
measure appetitive motivation. The results are consistent with our expectations in the setting of
low engagement pressure, but only for drive. In the setting of high engagement pressure, we find
no effects for an audit quality bonus. When considering audit quality rewards, it is important to
acknowledge the typical audit environment of conflicting pressures and the level of drive that
both can constrain these rewards’ effectiveness.

Keywords: audit quality rewards; personality; cost-quality conflict; incentive compensation;

motivation.
1. Introduction

Audit regulators and audit firm managers look for incentives that motivate auditing

professionals to improve the quality of their work. For example, the Public Company Accounting

Oversight Board (PCAOB, 2015) asserts that an audit firm’s compensation plan is an important

signal of its commitment to audit quality. Traditionally, the predominant practice has been to

apply penalties for audit failures. However, rewarding auditors for high audit quality is

increasingly being perceived as a good way to induce auditors to focus on audit quality. Since

2015, the Big 4 audit firms (Deloitte, EY, KPMG, PwC) have started to offer audit quality

rewards by providing bonuses to professionals based on their achievement of audit quality goals.

In the context of our study, we define an audit quality bonus as a financial reward to extrinsically

motivate auditors to achieve a high level of audit quality.

Although audit firms have recently started to reward auditors for high audit quality, little

is known about the effectiveness of providing such rewards. Incentives that are contingent on

performance have the potential to improve performance, as they are a signal of trust and

acknowledgement of people’s competence (Christ et al., 2012; Deci et al., 2001; Eisenberger et

al., 1999; Gagné & Deci, 2005). However, prior research indicates that the effects of financial

rewards on performance are influenced by factors surrounding the environment (e.g., pressure)

and the person (e.g., motivation) (Bonner & Sprinkle, 2002; DeZoort & Lord, 1997; Libby &

Luft, 1993). This is consistent with research in psychology showing that it is important to

examine the interaction between situational and personal factors because a person’s behavior is

jointly determined by the person and the situation (Cable & Judge, 1994; Corr, 2009; Corr &

Poropat, 2016; Judge & Cable, 1997; Judge & Zapata, 2015; Kihlstrom, 2013). The purpose of

our study is therefore to examine to what extent the effects of an audit quality bonus are

1
contingent on the level of pressure in the audit engagement (an environmental moderator) and

the auditor’s appetitive motivation (a personal moderator). Based on Carver and White (1994),

we define appetitive motivation as an individual difference in how people pursue and attain their

goals, such that a higher level of appetitive motivation represents a higher innate tendency to

engage in goal pursuits.

The ultimate goal of an audit quality bonus is to motivate auditors to achieve a high level

of audit quality. However, such financial rewards are likely to control and undermine the

intrinsic motivations of auditors because these rewards might be perceived as extrinsic incentives

that undermine feelings of autonomy and self-determination (Deci, 1971, 1972; Deci et al., 2017;

Deci & Ryan, 2008; Eisenberger & Cameron, 1996; Gagné & Deci, 2005; Ryan & Deci, 2000).

This undermining effect is consistent with cognitive evaluation theory (Deci, 1971, 1972; Gagné

& Deci, 2005; Kunz & Pfaff, 2002; Ryan & Deci, 2000), indicating that extrinsic incentives

decrease the motivation of intrinsically motivated people. Therefore, we consider an audit quality

bonus an extrinsic incentive that has the potential to increase audit quality for auditors with

lower appetitive motivation (facilitative effect) but to decrease audit quality for auditors with

higher appetitive motivation (undermining effect). In other words, audit quality bonuses might be

effective for auditors with a lower tendency to engage in goal pursuits and ineffective for

auditors with a higher tendency to engage in goal pursuits.

Auditors perform their engagements in a complex environment in which they face cost-

quality conflicts. On the one hand, auditors face time budget pressure to control audit costs,

whereas on the other hand, auditors face pressure from the regulator to comply with auditing

standards (compliance pressure). These two conflicting pressures often go hand-in-hand in an

audit engagement, as the need for more work tends to naturally increase time budget pressure.

2
Auditors acknowledge this cost-quality conflict in practice because they “described significant

pressure from their firms and the PCAOB to complete PCAOB-compliant audits, they also

indicated that they experience a great deal of pressure from their clients to minimize audit costs”

(Johnson et al., 2019, p. 1567). This cost-quality conflict provides pressures that have the

potential to undermine auditors’ autonomy (Westermann et al., 2019). Therefore, we examine the

interaction between an audit quality bonus and appetitive motivation in the context of audit

engagements with different levels of this cost-quality conflict. Accordingly, we expect the

facilitative and undermining effects of an audit quality bonus to be effective in a setting of low

engagement pressure where the cost-quality conflict is low (low time budget pressure and low

compliance pressure). In a setting of high engagement pressure where the cost-quality conflict is

high (high time budget pressure and high compliance pressure), the facilitative and undermining

effects of an audit quality bonus are less clear because of the joint influences of extrinsic

incentives and conflicting pressures.

In a 2 x 2 x 2 experimental design, we manipulated an audit quality bonus and the level

of engagement pressure and measured the participants’ appetitive motivation. First, we

manipulated a bonus for achieving high audit quality as “present” versus “absent.” Second, we

manipulated engagement pressure as “low” versus “high” to represent varying levels of cost-

quality conflicts in audit engagements in which auditors are involved. Third, we measured three

types of appetitive motivation (i.e., drive, reward responsiveness, and fun seeking) by using the

instrument of Carver and White (1994).

In the experiment, participants were provided with an audit finding regarding an

inventory obsolescence allowance. Based on this finding, participants were asked to identify

which of five additional audit procedures they would conduct. We consider this audit task a

3
quality-type task that we define as tasks that “tend to require a higher degree of complexity and

engagement of more skill, which commands a greater deal of personal investment” (Cerasoli et

al., 2014, p. 3). We coded each procedure as 1 if it is selected by the participant and 0 if not. An

expert panel of four experienced auditors scored each procedure’s effectiveness as a test likely to

improve audit quality. We compute an overall audit quality score by multiplying the five

indicator variables regarding the additional audit procedures by the expert panel’s effectiveness

score for each test. The sample consists of 420 auditors from the Netherlands, ranging in

experience level from audit staff to audit manager.

The results of our study show that the effectiveness of an audit quality bonus is limited.

We find that an audit quality bonus increases audit quality for auditors with lower drive but

decreases audit quality for auditors with higher drive in a setting of low engagement pressure.

We find no significant effects of an audit quality bonus for the other two types of appetitive

motivation (i.e., reward responsiveness and fun seeking). In a setting of high engagement

pressure, we find no significant effects of an audit quality bonus across all three types of

appetitive motivation. In additional analyses, we find that the facilitative effects apply to audit

managers and the undermining effects apply to audit staff, and that the effects of an audit quality

bonus are weaker for Big 4 participants than for non-Big 4 participants. Further research is

needed to better understand the effects of audit quality rewards for auditors with varying levels

of experience and the long-term effects of these rewards.

Overall, our findings have implications for auditing practice. Consistent with suggestions

from members of audit committees, regulators, and academics (e.g., CAQ, 2016; PCAOB, 2015;

Peecher et al., 2013), our study shows that offering an audit quality bonus has the potential to

enhance audit quality. However, the analyses show that this facilitative effect applies only to

4
auditors with lower drive in the condition of low engagement pressure. This is an important

finding because auditing tasks are primarily qualified as quality-type tasks, and auditing

engagements are likely to be conducted under high time budget and compliance pressures,

indicating that the impact of an audit quality bonus is limited, at least in the context of our study.

Thus, when considering the implementation or continuation of audit quality rewards, it is

important to acknowledge the typical audit environment in terms of cost-quality conflicts and the

auditors’ level of drive, both of which can constrain the effectiveness of these rewards.

We make a number of contributions to the literature. First, we provide evidence on the

effects of rewarding auditors for achieving high audit quality. As such, we address suggestions

that these rewards might positively affect auditors’ motivation to improve audit quality (e.g.,

CAQ, 2016; PCAOB, 2015; Peecher et al., 2013). This study is relevant and timely because audit

firms use these audit quality rewards nowadays (Bouwens et al., 2019), so research is needed to

examine how they influence the behavior of professionals in auditing settings. Second, we

address several calls for research on the joint effects of financial rewards and individual

differences on performance (e.g., Byron & Khazanchi, 2012; Gerhart & Fang, 2015; Rynes et al.,

2005; Stone et al., 2010). That is, we extend the literature on auditor incentives by showing that

the effects of financial rewards on audit quality are contingent on individual differences in

personality. This interplay is supported by research in psychology, which shows that interactions

between personal and situational factors determine people’s behavior (Bonner & Sprinkle, 2002;

Cable & Judge, 1994; Cronbach, 1975;Judge & Cable, 1997; Judge & Zapata, 2015; Kihlstrom,

2013; Shah et al., 1998). Third, we address the criticism raised in the literature that support for

the undermining effects of financial rewards on motivation is lacking in workplace settings

(Gerhart & Fang, 2015; Kunz & Pfaff, 2002; Rynes et al., 2005). That is, we provide evidence

5
from cognitive evaluation theory in an auditing setting and extend this theory by focusing on

different levels of engagement pressure in the form of a conflict between meeting time budgets

and complying with auditing standards. Fourth, we extend the literature on engagement pressure

that has a unidimensional focus on time budget pressure or client pressure to do less work (e.g.,

Coram et al., 2004; Kelley & Margheim, 1990; Svanberg & Öhman, 2013). By combining time

budget pressure and compliance pressure, we use a two-dimensional construct of engagement

pressure that reflects the real audit environment.

2. Theory and Hypotheses

2.1 The Facilitative and Undermining Effects of an Audit Quality Bonus

Several examples of Big 4 audit firms show that they have started to use audit quality

rewards in their auditing professionals’ compensation plans. These rewards are based on

individual performance on audit engagements and provide additional compensation for the

auditors. For example, the non-partner professionals of PwC (2015) who work on audits

“participate in a performance bonus plan that is based, in part, on the achievement of quality

goals and objectives” (p. 4). These audit quality rewards address calls from academics and

regulators to employ rewards that promote audit quality, arguing that rewards for good audit

quality might be incrementally more useful than penalties for bad audit quality in motivating

auditors to improve their performance (AFM, 2015; Andreoni et al., 2003; PCAOB, 2015;

Peecher et al., 2013).

The general assumption is that individuals will behave based on the incentives they

receive (Bonner et al., 2000; Cerasoli et al., 2014; Pink, 2010; Stone et al., 2010). Prior research

indicates that rewards are generally perceived as a signal of trust that increases the likelihood of

cooperation (Christ et al., 2012; Fehr & Falk, 2002; Fehr & Rockenbach, 2003; Houser et al.,

6
2008). Furthermore, rewards are used to acknowledge people’s competence (Eisenberger et al.,

1999; Gagné & Deci, 2005). Thus, linking auditors’ compensation to their performance on audit

quality, as proposed by the PCAOB (2015), provides auditors with an incentive to enhance the

quality of their work. However, prior research on the effects of financial rewards on performance

provides mixed results indicating positive, negative, and no effects (Bonner et al., 2000; Byron &

Khazanchi, 2012; Deci et al., 2001; Farrell et al., 2017; Gerhart & Fang, 2015; Hoopes et al.,

2018; Stone et al., 2010). These mixed results suggest that motivational mechanisms play a role

in performance. Depending on their levels and types of motivation, people might respond

differently to financial rewards in their performance (Ryan & Deci, 2000). Based on differences

in their personality traits and preferences people perceive the same rewards differently (Byron &

Khazanchi, 2012; Cable & Judge, 1994; DeZoort & Lord, 1997; Hogan et al., 1998; Judge &

Cable, 1997; Kihlstrom, 2013; Schneider, 1987; Shah et al., 1998). Therefore, we examine

whether the effects of an audit quality bonus are contingent on the motivations of individual

auditors.

Stimulating auditors to achieve high audit quality relates to the well-known distinction

between intrinsic (or autonomous) and extrinsic (or controlled) motivation. People are

intrinsically motivated when they perform tasks that are inherently interesting or enjoyable and

satisfy their innate need for autonomy and self-determination, whereas people are extrinsically

motivated when they perform tasks that lead to external rewards (Cerasoli et al., 2014; Deci,

1971, 1972; Ryan & Deci, 2000). Thus, intrinsic motivation originates from within a person

(autonomous), while extrinsic motivation originates from outside a person (controlled).

However, as Deci and Ryan (2000) show, extrinsic motivation can be internalized to different

degrees, indicating that there are varying levels of both extrinsic and intrinsic motivation within

7
the same person. Appetitive motivation is an innate tendency to pursue and attain goals (Carver

& White, 1994), which can be intrinsically and/or extrinsically motivated. Based on higher

versus lower levels of this appetitive motivation, we expect different effects of an audit quality

bonus because of differences in the motivation to approach the goal of high audit quality.

Appetitive motivation is part of the broader literature about approach and avoidance

motivation (Braver et al., 2014; Covington & Müeller, 2001). Approach motivation is the

energization of behavior by positive stimuli, and avoidance motivation is the energization of

behavior by negative stimuli (Elliot, 2006). Hence, audit quality rewards are an example of

approach motivation, and audit quality penalties are an example of avoidance motivation. Prior

research shows that these types of motivation are associated with intrinsic motivation (Cury et

al., 2006; Elliot & Church, 1997; Elliot & Harackiewicz, 1996; Skaalvik, 2002; Smith et al.,

2002), indicating that performance goals and motivational orientations can either enhance or

undermine intrinsic motivation. Further, Abuhamdeh and Csikszentmihalyi (2009) find a positive

and significant correlation between appetitive motivation and intrinsic motivation orientation.

This finding is consistent with research in neuroscience (see Di Domenico & Ryan, 2017),

showing that human intrinsic motivation is based in an appetitive system in the brain that

energizes exploratory activities in a spontaneous and unconditioned way. We use cognitive

evaluation theory in this study to examine whether different levels of this type of appetitive

motivation provide different responses to an audit quality bonus.

Cognitive evaluation theory posits that when financial rewards are used to incentivize an

interesting task, people shift their perception from “intrinsically motivated” to “motivated by

money” (extrinsic motivation) for that task, also known as the “overjustification effect” or

“crowding out effect” (Deci, 1971, 1972; Deci et al., 2017; Eisenberger & Cameron, 1996; Ryan

8
& Deci, 2000). This shift in motivation is especially important for audit tasks because intrinsic

motivation is a better predictor of performance in quality-type tasks rather than quantity-type

tasks (Cerasoli et al., 2014; Jenkins et al., 1998). A recent study in auditing provides evidence of

such a shift in motivation by showing that auditors are more focused on the enjoyment of

performing a task than on the extrinsic incentives for completing a task when their intrinsic

motivation is made salient (Zhou, 2020). We apply these insights to appetitive motivation

because the role of motivation is important in the context of audit quality rewards for audit tasks

that are primarily complex and require professional judgment (i.e., quality-type tasks).

People experience performance-contingent rewards as extrinsic incentives that narrow

their focus, control their behavior, and undermine their motivation (Amabile, 1998; Cameron &

Pierce, 1994; Deci et al., 1999, 2017; Gagné & Deci, 2005; Pink, 2010; Ryan & Deci, 2000). 1

Thus, an audit quality bonus has the potential to shift auditors’ motivation in performing audit

tasks. Drawing on cognitive evaluation theory (Gagné & Deci, 2005; Kunz & Pfaff, 2002; Ryan

& Deci, 2000), we assert that an audit quality bonus, which is an extrinsic reward for a quality-

type task, decreases audit quality for auditors who have higher appetitive motivation

(undermining effect). In contrast, we expect an audit quality bonus to increase audit quality for

auditors who have lower appetitive motivation because these people need extrinsic incentives to

get stimulated (facilitative effect) (Corr, 2009; Gray, 1970). However, as we will discuss in

Section 2.2, we consider the role of engagement pressures because they have the potential to

undermine people’s autonomy and self-determination, providing us with the opportunity to test

and extend cognitive evaluation theory.

1
Recent archival research finds a positive association between audit personnel salaries and audit quality (Hoopes et
al., 2018). Nominal salaries are likely not to have these detrimental effects because base salary is primarily not
affected by individual performance. By using an experimental approach, we keep the effects of salaries constant
across conditions and focus on the effects of a performance-contingent audit quality bonus.

9
2.2 The Role of Pressures in an Audit Engagement

Auditors work in complex environments where they face different types of pressures. For

example, DeZoort and Lord (1997) identified pressures from accountability, justification, clients,

competition, compliance, conformity, obedience, feedback, litigation, time, and workload. These

pressures provide uncertainty and ambiguity, generating stress responses in auditors (DeZoort &

Lord, 1997; McDaniel, 1990). Further, some of these pressures might be potentially conflicting

at the engagement level where, for example, time budget pressure likely increases dysfunctional

audit behavior (controlling audit costs), and compliance pressure likely decreases dysfunctional

audit behavior (complying with auditing standards). Prior research provides evidence of such a

cost-quality conflict in auditing (Agoglia et al., 2015; Pierce & Sweeney, 2004; Svanberg &

Öhman, 2013; Sweeney & Pierce, 2006). In this setting of engagement pressure, auditors have to

balance between controlling audit costs and complying with auditing standards.

In addition to the pressures identified by DeZoort and Lord (1997), auditors nowadays

face compliance pressure (Kinney, 2005; Westermann et al., 2015). That is, independent

regulators conduct inspections of audit engagements to examine whether auditors comply with

auditing standards. These regulators’ findings reports regularly call for continuous improvements

in audit quality (FRC, 2019; IFIAR, 2020). This type of compliance pressure provides an

incentive for auditors to enhance audit quality. However, a recent interview study shows a

negative consequence of this compliance pressure in terms of undermining auditors’ autonomy

and professionalism because they are ticking the box to satisfy the regulator rather than applying

risk-based judgments (Westermann et al., 2019). Thus, the pressure to comply with auditing

standards and to enhance audit quality generates a mechanistic and extrinsically driven audit

approach that undermines the autonomy of auditors. This shift in motivation is consistent with

10
cognitive evaluation theory (Deci, 1972; Eisenberger & Cameron, 1996; Ryan & Deci, 2000).

Therefore, we differentiate between different levels of engagement pressure to examine whether

an audit quality bonus has either more or less potential to be effective.

We expect that the proposed facilitative and undermining effects of an audit quality

bonus as developed in Section 2.1 are contingent on the level of engagement pressure. When

engagement pressure is low, auditors face low time budget pressure and low compliance

pressure, providing a high level of autonomy to exert professionalism in conducting audit

engagements without being directed in goal pursuits. As such, we expect that an audit quality

bonus will facilitate the performance of auditors who have lower appetitive motivation and

undermine the performance of auditors who have higher appetitive motivation. Accordingly, we

hypothesize these effects of an audit quality bonus as follows:

H1: When engagement pressure is low, an audit quality bonus increases audit quality
for auditors who have lower appetitive motivation (facilitative effect) and
decreases audit quality for auditors who have higher appetitive motivation
(undermining effect).

In H1, we examine the effects of an audit quality bonus in a setting of low engagement

pressure. In this setting, participants have the potential to respond to the extrinsic incentive (i.e.,

audit quality bonus) with which they are faced. As such, this setting of low time budget pressure

and low compliance pressure provides us with a control condition to test cognitive evaluation

theory. In addition, the setting of high engagement pressure provides us with the opportunity to

extend cognitive evaluation theory by examining how the effects of an audit quality bonus and

the level of appetitive motivation influence audit quality when time budget pressure and

compliance pressure are high.

Research in psychology shows that pressures control people’s motivation and undermine

feelings of autonomy and self-determination (Deci & Ryan, 1987, 2000, 2008). Hence, in the

11
condition of high engagement pressure, controlled motivation likely plays a role. That is, the

cost-quality conflict in this condition provides conflicting pressures to meet the time budget and

to comply with auditing standards. Although this cost-quality conflict is consistent with the

complex environment of auditing practice, where auditors face various types of incentives and

pressures, it is less clear what kind of effects to predict for the condition of high engagement

pressure. On the one hand, the effects of H1 can be stronger in this setting because participants

are faced with multiple incentives and pressures (i.e., an audit quality bonus, time budget

pressure, and compliance pressure). In this setting, the high cost-quality conflict can reinforce the

goal pursuit of high audit quality that the audit quality bonus rewards when compliance pressure

dominates the cost-quality conflict. On the other hand, the effects of H1 can be weaker in the

setting of high engagement pressure because of the undermining effects of time budget pressure

on participants’ autonomy and self-determination (i.e., “crowding out”). That is, the high cost-

quality conflict can crowd out the effects of an audit quality bonus when time budget pressure

dominates the cost-quality conflict. Therefore, we hypothesize the effects of an audit quality

bonus in the condition of high engagement pressure in the null form as follows:

H2: When engagement pressure is high, an audit quality bonus has no effect on audit
quality for both auditors who have lower and higher appetitive motivation.

3. Research Method

3.1 Experimental Design

In this study, we employ a 2 x 2 x 2 experimental design in which an audit quality bonus

and the level of engagement pressure are manipulated between subjects. Additionally, we

measured participants’ appetitive motivation. We describe the manipulated and measured

variables in the next sections and provide an overview of the manipulations and variables of our

study in the Appendix.

12
 The experimental case describes a publicly traded audit client in the retail industry. 2

Participants were asked to take on the role of a manager working for an audit firm in the

Netherlands. They were provided with background information on the audit client, including a

financial reporting summary. Participants received a summary of an audit finding that described

a potential € 3 million audit adjustment in the inventory obsolescence allowance. This finding

relates to a deterioration which has been estimated based on a global substantive analytical

procedure and is currently not incorporated in the valuation of the inventory obsolescence

allowance. Participants were asked to choose which additional audit procedures they would

conduct based on this audit finding.

The case indicated that the materiality for the financial statements as a whole (planning

materiality) is € 6 million and the performance materiality (tolerable misstatement) in the audit is

€ 4.8 million. Further, the case indicated that there are no other audit differences. We created

tension in the task of selecting audit procedures because of the quality-type nature of this task

and the cost-quality conflict inherent in auditing practice. That is, on the one hand, the potential

adjustment is just based on a global substantive analytical procedure, increasing the need to

conduct additional procedures to examine whether the impact of the issue might be greater than

the observed € 3 million. On the other hand, the potential adjustment is below the materiality

level, allowing participants to justify their decision to maintain the time budget and to not

conduct additional audit procedures. Nevertheless, only 17 participants (4 percent) indicated that

no additional audit procedures were needed, suggesting the overall necessity to enhance audit

quality by extending audit procedures.

2
The original background information of the client was derived and adapted with permission from Cohen et al.
(2011). We performed a series of pilot tests with auditors from both Big 4 and non-Big 4 audit firms in the
Netherlands. After each pilot test, we made revisions in the background information, experimental questions, and/or
manipulation checks. Finally, we translated the materials into Dutch.

13
3.2 Manipulated Variables

We manipulated an audit quality bonus as “present” versus “absent.” When an audit

quality bonus is present, participants receive case materials describing that the results of the

engagement quality control review (EQCR) influence their compensation. That is, there is a

bonus equal to one month’s salary if the results of the EQCR are positive regarding the audit

procedures for which participants are responsible. In the absent condition, the results of the

EQCR do not influence compensation.

We manipulated the level of engagement pressure as “high” versus “low.” In the

condition of high engagement pressure, participants face a conflict between compliance pressure

and time budget pressure. That is, the audit was conducted inefficiently as a result of an untimely

start and failure to perform the appropriate audit procedures, creating a strong need to conduct

additional work to be compliant with auditing standards (high compliance pressure), whereas

there is little time available to perform additional procedures, and the budget for finalizing the

audit is difficult to achieve (high time budget pressure). In the condition of low engagement

pressure, the audit was well executed (low compliance pressure) with much time and budget

available to perform additional procedures (low time budget pressure).

To control for potential social desirability bias, we also manipulated the type of

questioning of our dependent variable as “direct” versus “indirect.” In the condition of direct

questioning, participants were asked to indicate which additional audit procedures were

necessary from their own perspective. In the condition of indirect questioning, participants were

asked to answer this question from the perspective of a colleague in the audit team. Inferences

remain unchanged when we include the type of questioning to the analyses, and this variable is

insignificant, indicating that the results of our study are not affected by a social desirability bias.

14
3.3 Measured Variable

We measured the participants’ appetitive motivation by using the Behavioral Approach

System (BAS) from Carver and White’s (1994) instrument, which is a motivational system that

refers to approaching goals (Corr, 2008, 2009, 2013; Corr et al., 2013). This BAS consists of

three types of appetitive motivation: BAS Drive (BAS_D), BAS Reward Responsiveness

(BAS_RR), and BAS Fun Seeking (BAS_FS). BAS_D represents “the persistent pursuit of

desired goals”, BAS_RR represents “positive responses to the occurrence or anticipation of

reward”, and BAS_FS represents “a desire for new rewards and a willingness to approach a

potentially rewarding event on the spur of the moment” (Carver & White, 1994, p. 322).

Although these three measures represent different types of appetitive motivation, we find

positive and significant correlations between BAS_D and BAS_RR (r418 = 0.341; p < 0.001),

between BAS_D and BAS_FS (r418 = 0.297; p < 0.001), and between BAS_RR and BAS_FS

(r418 = 0.303; p < 0.001). 3 Further, Carver and White (1994) provide evidence that these three

measures of BAS are positively and significantly correlated with positive affectivity and positive

temperament, suggesting that these measures represent certain aspects of approach. Hence, we

report the findings of our study across the three types of appetitive motivation separately.

The full BAS measure is captured by thirteen items on a fully labeled four-point scale

from very true for me to very false for me. Carver and White’s (1994) instrument is widely used

and validated in psychology literature (e.g., Corr, 2009, 2016; Corr & McNaughton, 2012; Corr

et al., 2013; Smillie et al., 2006; Van der Linden et al., 2007). We use the Dutch translation of

this instrument, which is validated by Franken et al. (2005). A principal components analysis

(not tabulated) on the BAS items reveals three factors that have eigenvalues greater than 1 and

3
All p-values are two-tailed, unless indicated otherwise.

15
explain 33.44 percent of the variance. Cronbach’s alpha is 0.68 for BAS_D and 0.69 for

BAS_RR, indicating reasonable reliability, but 0.46 for BAS_FS, indicating low reliability.

These reliability statistics are reasonably consistent with prior research in psychology (e.g.,

Deemer et al., 2010; Fleischhauer et al., 2010; Franken et al., 2005; Keiser & Ross, 2011; Ross et

al., 2002; Segarra et al., 2014; Smillie et al., 2006; Smits & Boeck, 2006). We use the median to

split the sample into higher and lower appetitive motivation because the responses to the BAS

items are shown to be normally distributed.

3.4 Dependent Variable

The main experimental task was to select additional necessary audit procedures in

response to an audit finding in the valuation of an inventory obsolescence allowance. Participants

selected one or more of five predetermined audit tests: (1) a client inquiry, (2) a root cause

analysis to find out the causes of the deterioration of turnover and the impact on the extent to

which internal controls are relied on, (3) a substantive analytical procedure related to turnover,

(4) a substantive analytical procedure related to sales, and (5) a test of detail examining the

actual sales of obsolete products. 4 In addition to these five audit tests, participants had the

opportunity to add other procedures. Only 24 participants (6 percent) added other procedures,

indicating the appropriateness of the predetermined audit procedures. As these 24 participants

primarily provided additional explanation about how they would perform the selected procedures

or what kind of follow-up procedures they would conduct based on the findings of their selected

procedures, we focus in our analyses on the five predetermined audit tests.

4
These additional procedures are based on ISA 500 (IAASB, 2016). The root cause analysis relates to ISA 330,
which states in ISA 330.16 (IAASB, 2016) that misstatements detected by substantive procedures indicate that
controls are not operating effectively. Furthermore, according to ISA 330.17 (IAASB, 2016), the auditor should
make specific inquiries to understand this matter and its potential consequences.

16
 To evaluate each participant’s level of audit quality, we convened an expert panel of one

audit partner and three senior managers with an average of 16.5 years of audit experience. These

auditors are highly experienced with auditing inventory items because, on average, they score 6.0

on a scale from 1 (not very experienced) to 7 (very experienced) regarding inventory valuation

experience. We provided the expert panel with the experimental case, except for the

manipulations, and the audit procedures that participants could select. Each member of the expert

panel individually provided a score for each of the five additional audit procedures, indicating

his or her perception of the effectiveness of the procedure as a test that improves audit quality on

a scale from 1 (not very effective) to 7 (very effective).

Each test is coded separately as 1 if it is selected by the participant as an additional audit

procedure and 0 when it is not selected, creating five indicator variables. We computed an

overall audit quality score for each participant by multiplying these five indicator variables of

additional procedures by the average score of the expert panel on each test. Because all our

predefined tests are relevant based on the audit finding as described in the experimental case,

each additional audit procedure increases the level of audit quality to the extent of the

effectiveness score as indicated by the expert panel. Based on the expert panel’s scores for the

five audit tests, our audit quality score ranges from 0 (no audit tests selected) to 22.4 (all five

audit tests selected).

This composite measure considers both the number and the nature of additional audit

procedures. This is consistent with auditing standards, indicating that the combination of

procedures is important when obtaining audit evidence (IAASB, 2016, ISA 500.A2). As such, a

higher score on our continuous measure reflects a higher level of audit quality because the

selected audit procedures have higher effectiveness in improving audit quality. This is consistent

17
with common views on audit quality as a continuum where more (reliable) audit evidence is

assumed to be better than less (reliable) audit evidence in order to achieve greater assurance

(DeFond & Zhang, 2014; IAASB, 2014; Knechel et al., 2013). Our composite measure captures

this continuum and represents the cost-quality conflict in auditing because selecting more

procedures increases the likelihood of complying with auditing standards but decreases the

likelihood of meeting the time budget.

3.5 Data Collection

Fifty (50) part-time Master’s students majoring in Accounting at a Dutch university and

working part-time in auditing practice were involved in the process of recruiting auditors to

participate in our study. Before writing their Master’s theses in auditing, students attend an

auditing research course where they participate in a data collection project conducted by the

faculty. In return, the students were permitted to use parts of the dataset for their Master’s theses.

We directed them to find eight auditors (e.g., from their own offices) who were willing to

participate in the experiment. There was no penalty for students who failed to find this number of

participants.

We invited auditors to participate by sending them an e-mail with a link to the

experimental materials in Qualtrics. Participants were randomly assigned to one of the cells of

the experimental design. Additional Scheffe’s tests (not tabulated) show no significant

demographic differences between the experimental conditions. 5 One week after inviting the

auditors, we reminded them of the study by sending another e-mail. After an additional week, we

5
Additional Bonferroni tests (not tabulated) show a significant difference for inventory valuation experience.
Participants in the condition of no audit quality bonus and high engagement pressure score significantly higher on
inventory valuation experience than participants in the condition of an absent audit quality bonus and low
engagement pressure (p < 0.01). However, inferences remain unchanged when we add inventory valuation
experience as a covariate in the analyses, indicating that inventory valuation experience does not affect the results.

18
asked students to contact the auditors they had approached and ask them to complete the

experiment and respond if they had not yet done so. Students were blind to our hypotheses and

did not participate in the experiment; they were only involved in the process of inviting and

reminding participants.

3.6 Participants

Four hundred and seventy-two (472) auditors participated in this experiment. We exclude

participants from the analyses who did not complete the experiment (n = 15), who did not answer

the manipulation checks (n = 2), and who were not working for an audit firm (n = 35). 6 Our final

sample consists of 420 auditors, ranging from the level of audit staff to audit manager (44

percent work for Big 4 audit firms). We include a Big 4 indicator in our analyses.

The mean (standard deviation) of the participants’ general audit experience is 5.8 (4.1)

years, ranging from 2.3 (1.5) at the staff level to 11.0 (5.4) at the manager level. On a five-point

scale, fully labeled from 1 (never) to 5 (>=16 times), participants score 3.1 (1.1) on audit

planning experience and 2.4 (0.9) on inventory valuation experience. Inferences remain

unchanged when we add these measures of experience as covariates in the analyses. Overall,

participants have sufficient experience to make the decisions regarding additional audit testing.

Nevertheless, we conduct robustness tests on our hypotheses to examine whether our main

findings hold for managers and staff subsamples separately (see Section 4.4). Table 1 provides

the descriptive statistics of the individual characteristics of the participants in this study.

< Insert Table 1 about here >

6
Several students involved in data collection worked for the Dutch government or as auditors in business and
invited government auditors or auditors working in business. We exclude these participants from the analyses
because the experimental task relates to an audit manager and the decision to select audit procedures. Five hundred
and eleven (511) auditors were invited to participate and 472 of them responded, yielding a response rate of 92
percent. The number of recruited auditors is higher than what can be inferred from Section 3.5 (i.e., 50 students who
recruit eight auditors), because several students recruited more than the eight auditors indicated in our instructions.

19
 On a scale from 4 to 16, the mean (standard deviation) of the participants’ score on

BAS_D is 11.1 (2.0). This is significantly higher (p < 0.001) than prior research using the Dutch

version of Carver and White’s (1994) questionnaire on two different samples of psychology

students (Franken et al., 2005; Smits & Boeck, 2006). 7 On BAS_RR and BAS_FS, the findings

are mixed. On a scale from 5 to 20, the mean (standard deviation) of the participants’ score on

BAS_RR is 16.6 (2.0). This score is significantly higher (p < 0.001) than the mean score

reported in Franken et al. (2005) but not significantly different (p = 0.112) from the mean score

reported in Smits and Boeck (2006). On BAS_FS, the participants’ mean score (standard

deviation) on a scale from 4 to 16 is 10.4 (1.7). This score is significantly higher (p < 0.001) than

the mean score reported in Franken et al. (2005) but significantly lower (p < 0.001) than the

mean score reported in Smits and Boeck (2006). Additional analyses (not tabulated) show that

our participants’ mean scores for BAS_D, BAS_RR, and BAS_FS are significantly higher (p <

0.001) than the theoretical midpoint of these scales, indicating that the auditing profession seems

to attract or retain people who have, on average, relatively high drive, reward responsiveness,

and fun seeking.

4. Results

4.1 Manipulation Checks

The first manipulation check concerns the audit quality bonus. We asked participants to

what extent they agreed with the statement that the results of the engagement quality control

review (EQCR) affect their compensation. We measured this question on a scale from 0

7
This finding might be driven by age because the average age of the psychology students in these samples is 20.7
years, whereas the average age in our sample is 28.2 years. Additional analyses (not tabulated) show that
participants in our lowest quartile of age (< 25 years, n = 91) have a score of 11.4 on BAS_D, which is still
significantly (p < 0.001) higher than in both samples of psychology students. Thus, our findings are not driven by
age.

20
(strongly disagree) to 100 (strongly agree) to examine how salient participants perceive the

manipulated bonus. As expected, participants in the condition where the audit quality bonus is

present score significantly higher on this question than participants in the condition where the

audit quality bonus is absent (61.0 versus 36.3; t418 = 8.56; p < 0.001), indicating that the

manipulation of the audit quality bonus was successful. 8

The second manipulation check concerns the level of engagement pressure. We used two

questions to assess the cost-quality conflict within this pressure. First, we asked participants to

assess the need for additional audit procedures on a scale from 0 (very low) to 100 (very high). 9

A higher (lower) perceived need indicates a higher (lower) level of pressure to improve audit

quality. As expected, participants in the high engagement pressure condition score significantly

higher on this measure than participants in the low engagement pressure condition (72.0 versus

64.5; t408 = 3.93; p < 0.001). Second, we asked participants to assess the time budget pressure of

the audit engagement as described in the case on a scale from 0 (very low) to 100 (very high). A

higher (lower) score on this measure indicates a higher (lower) level of pressure to achieve the

time budget. As expected, participants in the condition of high engagement pressure score

significantly higher on this question than participants in the condition of low engagement

8
We tested the sensitivity of our hypotheses testing by excluding the participants in the condition where the bonus
was absent (present) and who responded above (below) the midpoint. On H1 (low engagement pressure), we still
find a significant effect for participants with low drive, but we find no significant effect for participants with high
drive. On H2 (high engagement pressure), we find the same results.
9
This variable has also been used in a related working paper by Asare et al. (2022). That paper focuses on diversity
of personality traits (i.e., neuroticism, extroversion, openness, agreeableness, and conscientiousness) at
organizational (i.e., Big 4, medium-sized, and small audit firms) and experience levels (i.e., staff to partner). The
current paper has no nexus with diversity in accounting firms or the five personality traits. The two papers overlap
because the Asare et al. (2022) paper, as a supplementary analysis to show that diversity may matter, explores
whether diversity in personality traits can affect auditor judgments. For this analysis only, which is not a primary
focus of the paper, it uses this variable of the need to conduct additional audit procedures as used in the current
study.

21
pressure (68.0 versus 35.2; t409 = 16.92; p < 0.001). Overall, these findings indicate that the

manipulation of engagement pressure was successful. 10

4.2 Descriptive Statistics on Additional Audit Procedures

Figure 1 presents an overview of the selected audit procedures and the scores of the

expert panel. Overall, 59.8 percent of the participants selected client inquiry, which provides

additional insight into the inventory obsolescence and potential indicators for tendencies by

management. The overall expert panel’s score for client inquiry is 2.0 on a scale from 1 (not very

effective) to 7 (very effective), indicating low reliability of audit evidence. Nevertheless, these

participants perform higher quality audits by combining client inquiry with other highly effective

tests because additional analyses (not tabulated) show that they score higher on the composite

dependent measure than participants who did not select client inquiry (10.1 versus 7.3; t418 =

6.64; p < 0.001). This finding is consistent with the claim in auditing standards that inquiry is

used extensively throughout the audit in addition to other procedures (IAASB, 2016, ISA

500.A22). Moreover, it supports the need to examine the level of audit quality as a composite

measure based on the combination of audit tests participants selected.

< Insert Figure 1 about here >

10
As our manipulation of engagement pressure captures pressure to comply with auditing standards as well as
pressure to meet the time budget, we computed a ratio score to examine which of these two pressures seems
predominant. That is, we divided the need to conduct additional audit procedures by the perceived level of time
budget pressure. As such, a score higher than one suggests that compliance pressure seems the predominant driver,
whereas a score lower than one suggests that time budget pressure seems the predominant driver. On average,
participants score 2.0 on this ratio. Additional analyses (not tabulated) provide three interesting insights into our
manipulation of the cost-quality conflict. First, the mean score is significantly higher than one (t404 = 5.244; p <
0.001), suggesting that, in general, compliance pressure seems the predominant driver. Second, the ratio is
significantly lower when engagement pressure is high compared to low (1.2 versus 2.8; t211 = 4.248; p < 0.001),
suggesting that the manipulation of high engagement pressure provides a conflict between meeting time budgets and
complying with auditing standards, moving the ratio more towards a score of one. Third, we find no significant
differences in this ratio for the other variables of interest in this study (i.e., audit quality bonus absent versus present
and lower versus higher on the three types of appetitive motivation).

22
 Table 2 provides the descriptive statistics regarding the percentage of participants that

selected each audit procedure across experimental conditions. In each condition, client inquiry is

selected the most, which is not surprising since inquiry is where the auditor would start to

investigate the obsolescence issue. The substantive analytical procedure related to turnover is

selected the least in each condition, except for the conditions where an audit quality bonus is

present in the condition of high engagement pressure, in which case the substantive analytical

procedure related to sales is selected the least.

< Insert Table 2 about here >

4.3 Test of Hypotheses

Low Engagement Pressure (H1)

Table 3 provides the findings on audit quality in the condition of low engagement

pressure to test H1. Figure 2 provides a graphical display of the mean levels of audit quality

across the conditions to test H1. The results of an ANCOVA show a significant interaction

between an audit quality bonus and BAS Drive (BAS_D) when engagement pressure is low (F1,

208 = 8.387; p = 0.004; see Panel A2), but we find no significant interactions for BAS Reward

Responsiveness (BAS_RR; see Panel B2) and BAS Fun Seeking (BAS_FS; see Panel C2). 11 To

further test the direction of the significant interaction between an audit quality bonus and

BAS_D, we conducted simple effects analyses, comparing the presence versus absence of an

audit quality bonus in both conditions of low and high drive (see Panel A3). The results of these

simple effects analyses show an increase in audit quality for auditors with lower drive (t119 =

11
In addition, we conducted a full ANCOVA with audit quality bonus, engagement pressure, and appetitive
motivation as independent variables and Big 4 as a covariate. Results of these ANCOVAs (not tabulated) show a
significant three-way interaction for audit quality bonus, engagement pressure, and BAS_D (F1, 411 = 4.638; p =
0.032). For BAS_RR and BAS_FS we did not find significant three-way interactions.

23
1.845; p = 0.034, one-tailed) and a decrease in audit quality for auditors with higher drive (t84 =

−1.958; p = 0.027, one-tailed).

< Insert Table 3 and Figure 2 about here >

We conducted two different robustness tests (not tabulated). First, we used a different

expert panel to calculate our dependent measure of audit quality. This alternative expert panel

consists of five audit partners from one non-Big 4 firm who ranked the five audit procedures

from 1 (least effective) to 5 (most effective). 12 Second, we used the number of selected audit

procedures (from 0 to 5) as the dependent variable. The findings as presented in Table 3 hold for

both alternative dependent variables, indicating the robustness of our results. Overall, the results

of our study show that, when engagement pressure is low, an audit quality bonus is facilitative

for auditors with lower drive and undermining for auditors with higher drive, whereas we find no

effects for reward responsiveness and fun seeking. A potential explanation for these findings

might be that drive relates more closely to appetitive motivation (innate tendency to pursue and

attain goals) than reward responsiveness and fun seeking. Thus, these findings provide support

for H1, but only for drive as one of the three types of appetitive motivation.

High Engagement Pressure (H2)

Table 4 provides the findings on audit quality in the condition of high engagement

pressure, and Figure 3 provides a graphical display of the mean levels of audit quality across the

conditions to test H2. The results of an ANCOVA show no significant interaction between an

audit quality bonus and appetitive motivation when engagement pressure is high for BAS_D (see

Panel A2), BAS_RR (see Panel B2), and BAS_FS (see Panel C2). Inferences remain unchanged

12
These five audit partners have an average of 25 years of audit experience. We thank two part-time Master’s
students in Accounting for providing us with the data for this robustness test.

24
when we use the different expert panel or the number of selected procedures as our dependent

variable.

< Insert Table 4 and Figure 3 about here >

Because H2 is posited in the null form, we conducted Bayesian ANCOVAs and

calculated Bayes factors to quantify the relative evidence for the null model compared to the

alternative model. Comparing these models, the Bayes factors (BF01) are 60.419 for the analyses

using BAS_D, 203.928 for BAS_RR, and 55.011 for BAS_FS, indicating that the null model is

60 times, 203 times, and 55 times more likely than the full model with both main effects,

interaction, and covariate (for drive, reward responsiveness, and fun seeking, respectively).

Based on guidelines from the Bayesian literature (Harms & Lakens, 2018; Stefan et al., 2019;

Van Doorn et al., 2021), these results provide strong evidence for the null model. Overall, the

results of our study show that, when engagement pressure is high, an audit quality bonus has no

effect on audit quality, independent of auditors’ levels of appetitive motivation.

The findings as presented in Tables 3 and 4 provide several important insights for

auditing practice. First, the participants in our study do not provide higher audit quality when

engagement pressure is high (9.0) rather than low (8.9), although this condition includes a

greater need to do more work, and compliance pressure seems the predominant driver in this

manipulation of a high cost-quality conflict (see footnote 11). Based on these findings, it seems

that time budget pressure is an important factor in hindering audit quality, even when compliance

pressure is high. Second, we find a marginally significant main effect of BAS_D in the condition

of high engagement pressure, indicating lower audit quality for auditors with higher drive. This

finding is consistent with research in psychology (Deci & Ryan, 1987, 2000, 2008) showing that

25
pressures undermine feelings of autonomy and self-determination. Thus, a high cost-quality

conflict decreases the professionalism of auditors with higher drive.

4.4 Additional Analyses

Subsamples Based on Participant’s Level

Whereas about half of the participants in our study work at the manager’s level, the other

half primarily consists of audit seniors and audit staff who score significantly lower on task

experience than the managers (t418 = −8.418; p < 0.001 for audit planning experience and t397 =

−4.549; p < 0.001 for inventory valuation experience). Therefore, we reran our analyses to

examine whether our findings hold for the managers and staff subsamples separately.

In the managers subsample, the results of an ANCOVA (not tabulated) show a marginally

significant interaction between an audit quality bonus and BAS_D when engagement pressure is

low (F1, 102 = 3.672; p = 0.058). The results of simple effects analyses, comparing the presence

versus absence of an audit quality bonus, show an increase in audit quality for audit managers

with lower drive (10.8 versus 7.8; t55 = 2.358; p = 0.011, one-tailed) and no significant effect for

audit managers with higher drive (9.9 versus 9.6; t48 = 0.291; p = 0.772). Consistent with our

main findings, we find no significant interaction effects in the other conditions.

In the staff subsample, the results of an ANCOVA (not tabulated) show a significant

interaction between an audit quality bonus and BAS_D when engagement pressure is low (F1, 101

= 7.109; p = 0.009). The results of simple effects analyses, comparing the presence versus

absence of an audit quality bonus, show no significant difference in audit quality for audit staff

with lower drive (8.5 versus 8.1; t62 = 0.382; p = 0.703) and a decrease in audit quality for audit

staff with higher drive (6.3 versus 10.5; t40 = −3.086; p = 0.002, one tailed). Consistent with our

main findings, we find no significant interaction effects in the other conditions.

26
 These findings on managers and staff subsamples provide interesting additional insights

to the main results of our study. In the condition of low engagement pressure, we find an audit

quality bonus has a facilitative effect for audit managers with lower drive and an undermining

effect for audit staff with higher drive. 13 In the condition of high engagement pressure, an audit

quality bonus makes no difference at all, irrespective of auditors’ appetitive motivation and

experience level. As managers play an important role in managing the conflict between

complying with auditing standards and meeting time budgets, they likely face high engagement

pressure in their daily practice. However, in this setting, we did not find any effects of an audit

quality bonus on audit quality. Potential reasons for the undermining effects for audit staff might

be different perceptions about audit quality rewards, different goal pursuits, different

responsibilities, and/or different levels of experience compared to audit managers. Future

research is needed to better understand the effects of audit quality rewards on auditors with

varying levels of experience.

Subsamples Based on Audit Firm’s Type

Our Big 4 covariate is significant in the ANCOVAs focused on low engagement pressure

and (almost) marginally significant in the ANCOVAs focused on high engagement pressure.

Additional independent t-tests show that Big 4 participants score higher on our measure of audit

quality than non-Big 4 participants (9.8 versus 8.3; t418 = 3.338; p = 0.001). Further, when we

rerun our analyses on Big 4 and non-Big 4 subsamples separately, we find a significant

interaction between an audit quality bonus and BAS_D in the low engagement pressure

condition for non-Big 4 participants (F1, 122 = 5.712; p = 0.018), but not for Big 4 participants

13
These different findings between managers and staff subsamples are not driven by different scores on drive
because these scores do not significantly differ between managers and staff (11.1 versus 11.0; t418 = 0.392; p =
0.695).

27
(F1, 83 = 2.491; p = 0.118). In the high engagement pressure condition, this interaction is not

significant in either subsample, consistent with the main findings. The findings related to

BAS_RR and BAS_FS are consistent with the main findings. These findings show that the

effects of an audit quality bonus are weaker in the context of Big 4 audit firms, which is

interesting because these firms have implemented this type of quality reward.Future research is

needed to examine the long-term effects of audit quality rewards.

5. Conclusions

In this study, we investigate the effects of an audit quality bonus. This is relevant because

rewarding auditors for achieving high audit quality is perceived as a good instrument for

motivating them to improve audit quality (CAQ, 2016; PCAOB, 2015; Peecher et al., 2013).

However, little is known about the effectiveness of these incentives in practice. We examine

whether the effects of an audit quality bonus are contingent on engagement pressure (related to

the environment) and appetitive motivation (related to the person) because prior research

indicates that the effects of financial rewards on performance are influenced by factors

surrounding the environment and the person (e.g., Bonner & Sprinkle, 2002).

Relying on cognitive evaluation theory, we expect that extrinsic incentives have the

potential to shift auditors’ motivation (Deci, 1971, 1972; Gagné & Deci, 2005; Kunz & Pfaff,

2002; Ryan & Deci, 2000). Hence, we hypothesize that an audit quality bonus is an extrinsic

incentive that increases audit quality for auditors who have lower appetitive motivation but

decreases audit quality for auditors who have higher appetitive motivation. However, we expect

that this interaction is contingent on the level of engagement pressure because pressures have the

potential to undermine feelings of autonomy and self-determination (Deci & Ryan, 1987, 2000,

2008). We focus on engagement pressure because this pressure reflects the conflict between

28
meeting time budgets and complying with auditing standards auditors face in practice. Hence, we

hypothesize that the interaction between an audit quality bonus and appetitive motivation applies

to the setting where there is no conflict between time budget and compliance pressures

(engagement pressure is low). When engagement pressure is high, the facilitative and

undermining effects of an audit quality bonus are less clear because of the joint influence of

extrinsic incentives and conflicting pressures.

The findings support our hypothesis in the setting where engagement pressure is low, but

only for drive as one of the three types of appetitive motivation. Thus, in the setting of low

engagement pressure, an audit quality bonus increases audit quality for auditors with lower drive

and decreases audit quality for auditors with higher drive. We find no support for these effects

for the remaining two types of appetitive motivation. Further, we find no effects of an audit

quality bonus when engagement pressure is high. In this study, we find limited support for the

effectiveness of an audit quality bonus, being constrained to low engagement pressure. This

constraint has important implications for practice because managers are likely to work on audit

engagements with high pressures to meet time budgets and to comply with auditing standards.

In interpreting the findings, it is important to consider the limitations of this study that

also provide opportunities for future research. First, we focused our study on extrinsic incentives

that have the potential to undermine motivation. However, prior research shows that

informational rewards, convey positive information about people’s competence, enhance

intrinsic motivation (Deci et al., 2017; Eisenberger & Cameron, 1996; Eisenberger et al., 1999).

Future research can examine this type of informational audit quality rewards. Second, we

manipulated an audit quality bonus based on just describing an extrinsic incentive aimed at

increasing audit quality without performing a review or providing a real bonus. Future research

29
can examine whether performing a real review or providing a real bonus provide additional

insights on the topic of motivating and rewarding auditors for high audit quality. Third, we

examined the effects of an audit quality bonus, whereas in practice auditors face both rewards

and penalties. Although the condition of high engagement pressure consists of an implicit

penalty, future research can examine the joint effects of audit quality rewards and penalties.

Fourth, the experimental task focuses on the testing phase of an audit. Future research might look

at different auditor decisions, such as adjustment and reporting decisions, or focus on other

stages of the audit engagement, such as the planning and interim phases. Fifth, we measured

three different types of appetitive motivation, which do not necessarily reflect intrinsic and

extrinsic motivation. Therefore, future research can examine the roles of intrinsic and extrinsic

motivation in the setting of providing audit quality rewards by using different measures of

motivation. In this setting, it is important to consider Deci and Ryan’s (2000) findings that

people can internalize extrinsic motivations, such that controlled motivation can move towards

autonomous motivation. Finally, examining the long-term effects of providing audit quality

rewards is relevant because people might be less sensitive to rewards that are granted on a

regular basis. Despite these limitations, the role of audit quality rewards is an important area for

auditing practice and future research.

30
Acknowledgments

We thank William Messier (editor), two anonymous reviewers, Steve Asare, Olof Bik, Monika Causholli,
Kristina Demek, Bright Hong, Mike Mayberry, Robert Mocadlo, Christine Nolder, Mathijs van
Peteghem, Marcel van Rinsum, Steve Salterio, Greg Trompeter, Ken Trotman, and Arnie Wright, and
participants at the 2018 Auditing Section Midyear Meeting, 2017 ABO Research Conference, 9th
European Auditing Research Network (EARNet) Symposium, 3rd PhD Conference of Nyenrode Business
University, 1st European Network for Experimental Accounting Research (ENEAR) Conference, and
27th Audit & Assurance Conference for their thoughtful and constructive comments on prior versions of
this paper. Finally, we gratefully acknowledge the participation of the auditors in this experimental study.
A previous version of this paper was titled ‘Rewards and Pressure to Improve Audit Quality: Facilitative
for Auditors With Low Drive but Undermining for Auditors With High Drive’ and received the Best
Paper Award at the 9th EARNet Symposium.

Disclosure statement

The authors report there are no competing interests to declare.

Data availability statement

The data that support the findings of this study are available from the corresponding author upon
reasonable request.

31
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Appendix

Panel A: Description of Manipulations

Audit Quality Bonus Present: “The results of this quality review have an
influence on your compensation. You will receive a bonus
equal to one month’s salary if the results of the quality
review are positive regarding the audit procedures for
which you are responsible.”
Absent: “The results of this quality review do not have an
influence on your compensation.”
Engagement Pressure High: “The audit was conducted inefficiently, because of
an untimely start and failure to perform the appropriate
audit procedures. Therefore, little time is available to
perform additional audit procedures. The budget for
finalizing the audit is difficult to achieve.”
Low: “The audit was conducted efficiently, because of a
timely start and the performance of the appropriate audit
procedures. Therefore, much time is available to perform
additional audit procedures. The budget for finalizing the
audit is easy to achieve.”
Panel B: Description of Variables

Dependent variable:
Level of Audit Quality A score representing the level of audit quality based on
additional audit procedures. Direct questioning: “Please
indicate which of the following additional audit
procedures you would conduct (multiple answers
possible).” Indirect questioning: “Please indicate which of
the following additional audit procedures your colleague
would conduct (multiple answers possible).”

Participants were provided with the following

possibilities:
- “No additional audit procedures.”
- “Client inquiry. A discussion with the employees
of the client involved to gain insight into the
obsolescence of the inventory and determine
whether there are indications of potential
tendencies in management.”
- “Root cause analysis. An analysis to find out the
causes of the deterioration of the turnover, how

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 management dealt with it, and what the impact is
on the extent of reliance on the internal controls.”
- “Substantive analytical procedure. A procedure in
which the valuation of the obsolete products is
audited based on the last two years’ net turnover in
the product group in relation to industry figures
and budgeted turnover for next year.”
- “Substantive analytical procedure. A procedure in
which the expected sales of the obsolete products
are estimated based on empirical data from the
response to marketing efforts. These expected
sales are audited with the actual sales in the
financial year and the period between the balance
sheet date and audit date.”
- “Test of detail. A test in which the actual sales of
the obsolete products after marketing efforts are
audited based on delivery notes, invoices, and
credit notes. This test is extended to the period
between the balance sheet date and audit date.”
- “Other (please explain).”

The level of audit quality is computed by multiplying each

of the five additional audit procedures (1 when selected
and 0 when not selected) by the expert panel’s score. For
each audit test the expert panel provides a score,
indicating the effectiveness of the test in improving audit
quality, on a scale from 1 (not very effective) to 7 (very
effective) with a midpoint of 4 (moderately effective).
Manipulated independent variables:
Audit Quality Bonus [AQB] An audit quality bonus, coded as 0 if it is “absent” and 1 if
it is “present.”
Engagement Pressure The level of engagement pressure, coded as 0 if it is “low”
and 1 if it is “high.”
Measured independent variables:
BAS Drive (BAS_D) An indicator variable coded as 1 if it is above the median
of BAS Drive and 0 otherwise. BAS Drive is a continuous
score on the personality trait of drive, which is a type of
the Behavioral Approach System (BAS). The score is
based on the sum of four items of the questionnaire of
Carver and White (1994). Items are measured on a fully
labeled four-point scale from 1 (very true for me) to 4
(very false for me). One item example: “When I want
something, I usually go all out to get it.” The score on

42
 BAS Drive consists of the items 3r, 9r, 12r, and 21r
(r=reversed item).
BAS Reward Responsiveness An indicator variable coded as 1 if it is above the median
(BAS_RR) of BAS Reward Responsiveness and 0 otherwise. BAS
Reward Responsiveness is a continuous score on the
personality trait of reward responsiveness, which is a type
of the Behavioral Approach System (BAS). The score is
based on the sum of five items of the questionnaire of
Carver and White (1994). Items are measured on a fully
labeled four-point scale from 1 (very true for me) to 4
(very false for me). One item example: “When I get
something I want, I feel excited and energized.” The score
on BAS Reward Responsiveness consists of the items 4r,
7r, 14r, 18r, and 23r (r=reversed item).
BAS Fun Seeking (BAS_FS) An indicator variable coded as 1 if it is above the median
of BAS Fun Seeking and 0 otherwise. BAS Fun Seeking
is a continuous score on the personality trait of fun
seeking, which is a type of the Behavioral Approach
System (BAS). The score is based on the sum of four
items of the questionnaire of Carver and White (1994).
Items are measured on a fully labeled four-point scale
from 1 (very true for me) to 4 (very false for me). One
item example: “I crave excitement and new sensations.”
The score on BAS Fun Seeking consists of the items 5r,
10r, 15r, and 20r (r=reversed item).
AQB*BAS_D A term representing the two-way interaction between
Audit Quality Bonus and Drive.
AQB*BAS_RR A term representing the two-way interaction between
Audit Quality Bonus and Reward Responsiveness.
AQB*BAS_FS A term representing the two-way interaction between
Audit Quality Bonus and Fun Seeking.
Age A continuous score representing the ages of participants,
calculated as the year of data collection minus the year of
birth.
Years of Audit Experience A continuous score of the participant’s years of auditing
experience.
Industry Experience The participant’s experience in the industry, measured as:
“Approximately how much of your time did you spend on
audit clients in the retail industry during the last three
years?” on the scale from 0% to 100%, labeling the
endpoints and the midpoint.

43
Audit Planning Experience The participant’s experience with the experimental task of
planning additional audit procedures, measured as:
“Approximately how many times were you involved in
planning audit procedures last year?” on a fully labeled
scale: 1 (never), 2 (1-5 times), 3 (6-10 times), 4 (11-15
times), and 5 (>=16 times).
Inventory Valuation Experience The participant’s experience with inventory valuation,
measured as: “Approximately how many times were you
involved in inventory valuation audit issues last year?” on
the fully labeled scale: 1 (never), 2 (1-5 times), 3 (6-10
times), 4 (11-15 times), and 5 (>=16 times).
Big 4 An indicator variable coded as 1 if it is a Big 4 participant
and 0 otherwise.

44
 FIGURE 1

Overview Selected Procedures and Scores Expert Panel

Note. This figure shows the percentage of participants that selected each of the five additional audit procedures and
the score of the expert panel to represent the effectiveness of each procedure in improving audit quality on a scale
from 1 (not very effective) to 7 (very effective). Variable definitions are provided in the Appendix.

45
 FIGURE 2

Mean Levels of Audit Quality Across Conditions of Low Engagement Pressure (H1)

Panel A: BAS Drive (BAS_D)

Panel B: BAS Reward Responsiveness (BAS_RR)

46
Panel C: BAS Fun Seeking (BAS_FS)

Note. This figure shows the mean levels of audit quality across the conditions to test H1 (low engagement pressure).
Variable definitions are provided in the Appendix.

47
 FIGURE 3

Mean Levels of Audit Quality Across Conditions of High Engagement Pressure (H2)

Panel A: BAS Drive (BAS_D)

Panel B: BAS Reward Responsiveness (BAS_RR)

48
Panel C: BAS Fun Seeking (BAS_FS)

Note. This figure shows the mean levels of audit quality across the conditions to test H2 (high engagement pressure).
Variable definitions are provided in the Appendix.

49
 TABLE 1

Demographic Data

Panel A: Mean (Standard Deviation) of Experience

Junior Audit
Total Manager Manager Senior Staff Other
n = 420 n = 47 n = 162 n = 109 n = 84 n = 18

Age 28.2 35.1 29.1 26.2 24.7 29.8

(5.1) (6.7) (3.8) (2.9) (3.0) (7.5)
Years of Audit Experience 5.8 11.0 7.0 4.3 2.3 7.6
(4.1) (5.4) (3.0) (2.0) (1.5) (7.1)
Industry Experience 23.1 25.9 21.1 22.2 27.5 18.9
(23.2) (24.8) (22.6) (22.0) (25.3) (18.3)
Audit Planning Experience 3.1 3.7 3.5 2.9 2.3 3.1
(1.1) (1.3) (1.0) (1.0) (0.8) (1.5)
Inventory Valuation Experience 2.4 2.7 2.6 2.3 2.0 2.5
(0.9) (1.2) (0.9) (0.8) (0.6) (1.0)

Panel B: Motivation (n = 420)

Mean Std. Min Lower Median Upper Max

BAS Drive 11.1 2.0 5.0 10.0 11.0 12.0 16.0

BAS Reward Responsiveness 16.6 2.0 8.0 15.0 17.0 18.0 20.0
BAS Fun Seeking 10.4 1.7 4.0 9.0 10.0 12.0 16.0

Note. “Other” positions consist of junior staff, staff, senior manager, auditor, and audit partner. The BAS types of
appetitive motivation are measured on a scale from 1 (very true for me) to 4 (very false for me). BAS Drive consists of
four items, BAS Reward Responsiveness consists of five items, and BAS Fun Seeking consists of four items. Variable
definitions are provided in the Appendix.

50
 TABLE 2

Descriptive Statistics Regarding the Additional Audit Procedures Selected by Participants

Panel A: BAS Drive (BAS_D)

Low Engagement Pressurea High Engagement Pressurea

Audit Procedure I II III IV I II III IV

Client Inquiry 56.7% 66.7% 72.1% 53.2% 68.0% 54.4% 53.6% 52.3%
Root Cause Analysis 40.0% 46.7% 50.8% 46.8% 44.0% 36.8% 44.6% 43.2%
Substantive Analytical Procedure - Turnover 26.7% 28.9% 34.4% 23.4% 30.0% 28.1% 37.5% 34.1%
Substantive Analytical Procedure - Sales 36.7% 33.3% 34.4% 34.0% 59.0% 33.3% 28.6% 29.5%
Test of Detail 31.7% 57.8% 39.3% 38.3% 44.0% 42.1% 50.0% 38.6%

a
The conditions I, II, III, and IV represent the four cells of the experimental design, where low engagement pressure represents H1 and high engagement
pressure represents H2. I = audit quality bonus absent and low BAS_D. II = audit quality bonus absent and high BAS_D. III = audit quality bonus present and
low BAS_D. IV = audit quality bonus present and high BAS_D. Variable definitions are provided in the Appendix.

51
Panel B: BAS Reward Responsiveness (BAS_RR)

Low Engagement Pressurea High Engagement Pressurea

Audit Procedure I II III IV I II III IV

Client Inquiry 62.7% 57.9% 67.1% 57.1% 64.1% 55.8% 53.6% 51.6%
Root Cause Analysis 35.8% 55.3% 45.2% 57.1% 42.2% 37.2% 43.5% 45.2%
Substantive Analytical Procedure - Turnover 26.9% 28.9% 28.8% 31.4% 26.6% 32.6% 33.3% 41.9%
Substantive Analytical Procedure - Sales 32.8% 39.5% 34.2% 34.3% 40.6% 39.5% 29.0% 29.0%
Test of Detail 44.8% 39.5% 43.8% 28.6% 45.3% 39.5% 47.8% 38.7%

a
The conditions I, II, III, and IV represent the four cells of the experimental design, where low engagement pressure represents H1 and high engagement
pressure represents H2. I = audit quality bonus absent and low BAS_RR. II = audit quality bonus absent and high BAS_RR. III = audit quality bonus present
and low BAS_RR. IV = audit quality bonus present and high BAS_RR. Variable definitions are provided in the Appendix.

Panel C: BAS Fun Seeking (BAS_FS)

Low Engagement Pressurea High Engagement Pressurea

Audit Procedure I II III IV I II III IV

Client Inquiry 59.6% 62.3% 64.4% 63.3% 59.3% 62.5% 53.6% 52.3%
Root Cause Analysis 51.9% 34.0% 40.7% 59.2% 44.1% 35.4% 51.8% 34.1%
Substantive Analytical Procedure - Turnover 23.1% 32.1% 28.8% 30.6% 25.4% 33.3% 33.9% 38.6%
Substantive Analytical Procedure - Sales 36.5% 34.0% 33.9% 34.7% 42.4% 37.5% 32.1% 25.0%
Test of Detail 38.5% 47.2% 39.0% 38.8% 39.0% 47.9% 50.0% 38.6%

a
The conditions I, II, III, and IV represent the four cells of the experimental design, where low engagement pressure represents H1 and high engagement
pressure represents H2. I = audit quality bonus absent and low BAS_FS. II = audit quality bonus absent and high BAS_FS. III = audit quality bonus present
and low BAS_FS. IV = audit quality bonus present and high BAS_FS. Variable definitions are provided in the Appendix.

52
 TABLE 3

Level of Audit Quality within Low Engagement Pressure (H1)

Panel A1: Mean (Standard Deviation) for Audit Quality (BAS_D)

Drive
Low High Row Mean
Audit Quality Bonus
Absent 7.9 10.0 8.8
(4.8) (3.6) (4.4)
n = 60 n = 45 n = 105

Present 9.5 8.3 9.0

(4.4) (4.8) (4.6)
n = 61 n = 47 n = 108

Column Mean 8.7 9.1 8.9

(4.6) (4.3) (4.5)
n = 121 n = 92 n = 213

Note: This table shows the findings of an audit quality bonus and BAS Drive (BAS_D)
on audit quality when engagement pressure is low. Audit Quality Bonus is a
manipulated variable, indicating 1 if present and 0 if absent. Drive is a measured
variable, indicating 1 if participants score above the median and 0 otherwise. The level
of audit quality is a composite measure, computed by multiplying the five indicator
variables of additional audit procedures (1 if selected and 0 if not selected) by the
expert panel's score of each test. Higher scores indicate that participants selected
additional audit procedures that are more effective in improving audit quality according
to the expert panel. Variable definitions are provided in the Appendix.

53
Panel B1: Mean (Standard Deviation) for Audit Quality (BAS_RR)

Reward Responsiveness
Low High Row Mean
Audit Quality Bonus
Absent 8.5 9.4 8.8
(4.9) (3.4) (4.4)
n = 67 n = 38 n = 105

Present 9.1 8.6 9.0

(4.4) (5.0) (4.6)
n = 73 n = 35 n = 108

Column Mean 8.8 9.0 8.9

(4.6) (4.2) (4.5)
n = 140 n = 73 n = 213

Note: This table shows the findings of an audit quality bonus and BAS Reward
Responsiveness (BAS_RR) on audit quality when engagement pressure is low. Audit
Quality Bonus is a manipulated variable, indicating 1 if present and 0 if absent. Reward
Responsiveness is a measured variable, indicating 1 if participants score above the
median and 0 otherwise. The level of audit quality is a composite measure, computed
by multiplying the five indicator variables of additional audit procedures (1 if selected
and 0 if not selected) by the expert panel's score of each test. Higher scores indicate that
participants selected additional audit procedures that are more effective in improving
audit quality according to the expert panel. Variable definitions are provided in the
Appendix.

54
Panel C1: Mean (Standard Deviation) for Audit Quality (BAS_FS)

Fun Seeking
Low High Row Mean
Audit Quality Bonus
Absent 8.8 8.9 8.8
(4.8) (4.1) (4.4)
n = 52 n = 53 n = 105

Present 8.6 9.4 9.0

(4.1) (5.1) (4.6)
n = 59 n = 49 n = 108

Column Mean 8.7 9.2 8.9

(4.4) (4.6) (4.5)
n = 111 n = 102 n = 213

Note: This table shows the findings of an audit quality bonus and BAS Fun Seeking
(BAS_FS) on audit quality when engagement pressure is low. Audit Quality Bonus is a
manipulated variable, indicating 1 if present and 0 if absent. Fun Seeking is a measured
variable, indicating 1 if participants score above the median and 0 otherwise. The level
of audit quality is a composite measure, computed by multiplying the five indicator
variables of additional audit procedures (1 if selected and 0 if not selected) by the
expert panel's score of each test. Higher scores indicate that participants selected
additional audit procedures that are more effective in improving audit quality according
to the expert panel. Variable definitions are provided in the Appendix.

55
Panel A2: ANCOVA Results (BAS_D)

F- p-
Source df SS MS
statistic value

Corrected Model 4 323.6 80.9 4.241 0.003

Audit Quality Bonus (AQB) 1 1.1 1.1 0.055 0.814
BAS_D 1 5.6 5.6 0.296 0.587
AQB*BAS_D 1 160.0 160.0 8.387 0.004
Big 4 1 173.7 173.7 9.109 0.003
Error 208 3,967.2 19.1

Panel B2: ANCOVA Results (BAS_RR)

F- p-
Source df SS MS
statistic value

Corrected Model 4 175.1 43.8 2.213 0.069

Audit Quality Bonus (AQB) 1 0.3 0.3 0.017 0.895
BAS_RR 1 0.0 0.0 0.002 0.964
AQB*BAS_RR 1 16.5 16.5 0.833 0.362
Big 4 1 151.4 151.4 7.650 0.006
Error 208 4,115.6 19.8

Panel C2: ANCOVA Results (BAS_FS)

F- p-
Source df SS MS
statistic value

Corrected Model 4 166.2 41.5 2.095 0.083

Audit Quality Bonus (AQB) 1 0.8 0.8 0.043 0.837
BAS_FS 1 4.3 4.3 0.216 0.642
AQB*BAS_FS 1 3.2 3.2 0.163 0.687
Big 4 1 143.5 143.5 7.237 0.008
Error 208 4,124.6 19.8

56
Panel A3: Results of Simple Effects (BAS_D)

Mean Standard t- p-
Source Difference df Error statistic value

Audit Quality Bonus Present vs.

1.539 119 0.834 1.845 0.034
Absent within Low Drive
Audit Quality Bonus Present vs.
-1.731 84a 0.884 -1.958 0.027
Absent within High Drive
Drive High vs. Low within Audit
2.083 103 0.853 2.440 0.008
Quality Bonus Absent
Drive High vs. Low within Audit
-1.187 106 0.887 1.339 0.184
Quality Bonus Present

a
The degrees of freedom are lower because the Levene's test rejects the assumption of equal variances.
Therefore, we report the findings based on the test where equal variances are not assumed. Inferences remain
unchanged when we use the test based on equal variances assumed (t90 = -1.946; p = 0.028).

57
 TABLE 4

Level of Audit Quality within High Engagement Pressure (H2)

Panel A1: Mean (Standard Deviation) for Audit Quality (BAS_D)

Drive
Low High Row Mean
Audit Quality Bonus
Absent 9.8 8.3 9.0
(4.6) (4.9) (4.8)
n = 50 n = 57 n = 107

Present 9.4 8.5 9.0

(4.0) (4.6) (4.3)
n = 56 n = 44 n = 100

Column Mean 9.6 8.4 9.0

(4.3) (4.8) (4.6)
n = 106 n = 101 n = 207

Note: This table shows the findings of an audit quality bonus and BAS Drive (BAS_D)
on audit quality when engagement pressure is high. Audit Quality Bonus is a
manipulated variable, indicating 1 if present and 0 if absent. Drive is a measured
variable, indicating 1 if participants score above the median and 0 otherwise. The level
of audit quality is a composite measure, computed by multiplying the five indicator
variables of additional audit procedures (1 if selected and 0 if not selected) by the expert
panel's score of each test. Higher scores indicate that participants selected additional
audit procedures that are more effective in improving audit quality according to the
expert panel. Variable definitions are provided in the Appendix.

58
Panel B1: Mean (Standard Deviation) for Audit Quality (BAS_RR)

Reward Responsiveness
Low High Row Mean
Audit Quality Bonus
Absent 9.2 8.7 9.0
(5.0) (4.6) (4.8)
n = 64 n = 43 n = 107

Present 9.0 8.9 9.0

(4.4) (4.2) (4.3)
n = 69 n = 31 n = 100

Column Mean 9.1 8.8 9.0

(4.6) (4.4) (4.6)
n = 133 n = 74 n = 207

Note: This table shows the findings of an audit quality bonus and BAS Reward
Responsiveness (BAS_RR) on audit quality when engagement pressure is high. Audit
Quality Bonus is a manipulated variable, indicating 1 if present and 0 if absent. Reward
responsiveness is a measured variable, indicating 1 if participants score above the
median and 0 otherwise. The level of audit quality is a composite measure, computed by
multiplying the five indicator variables of additional audit procedures (1 if selected and
0 if not selected) by the expert panel's score of each test. Higher scores indicate that
participants selected additional audit procedures that are more effective in improving
audit quality according to the expert panel. Variable definitions are provided in the
Appendix.

59
Panel C1: Mean (Standard Deviation) for Audit Quality (BAS_FS)

Fun Seeking
Low High Row Mean
Audit Quality Bonus
Absent 8.8 9.3 9.0
(4.8) (4.9) (4.8)
n = 59 n = 48 n = 107

Present 9.7 8.1 9.0

(4.4) (4.1) (4.3)
n = 56 n = 44 n = 100

Column Mean 9.3 8.7 9.0

(4.6) (4.5) (4.6)
n = 115 n = 92 n = 207

Note: This table shows the findings of an audit quality bonus and BAS Fun Seeking
(BAS_FS) on audit quality when engagement pressure is high. Audit Quality Bonus is a
manipulated variable, indicating 1 if present and 0 if absent. Fun seeking is a measured
variable, indicating 1 if participants score above the median and 0 otherwise. The level
of audit quality is a composite measure, computed by multiplying the five indicator
variables of additional audit procedures (1 if selected and 0 if not selected) by the expert
panel's score of each test. Higher scores indicate that participants selected additional
audit procedures that are more effective in improving audit quality according to the
expert panel. Variable definitions are provided in the Appendix.

60
 Panel A2: ANCOVA Results (BAS_D)

F- p-
Source df SS MS
statistic value

Corrected Model 4 133.8 33.4 1.634 0.167

Audit Quality Bonus (AQB) 1 0.6 0.6 0.030 0.864
BAS_D 1 59.7 59.7 2.916 0.089
AQB*BAS_D 1 1.9 1.9 0.092 0.762
Big 4 1 52.5 52.5 2.563 0.111
Error 202 4,135.5 20.5

Panel B2: ANCOVA Results (BAS_RR)

F- p-
Source df SS MS
statistic value

Corrected Model 4 84.3 21.1 1.018 0.399

Audit Quality Bonus (AQB) 1 0.0 0.0 0.002 0.964
BAS_RR 1 8.6 8.6 0.416 0.520
AQB*BAS_RR 1 3.2 3.2 0.153 0.696
Big 4 1 77.6 77.6 3.748 0.054
Error 202 4,184.9 20.7

Panel C2: ANCOVA Results (BAS_FS)

F- p-
Source df SS MS
statistic value

Corrected Model 4 142.4 35.6 1.743 0.142

Audit Quality Bonus (AQB) 1 0.8 0.8 0.037 0.847
BAS_FS 1 24.0 24.0 1.173 0.280
AQB*BAS_FS 1 49.2 49.2 2.406 0.122
Big 4 1 73.8 73.8 3.615 0.059
Error 202 4,126.8 20.4

61

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