The control problem in public accounting firms: An empirical study of the impact of leadership style

Abstract

Prior research has highlighted the problem of dysfunctional reactions to control systems. Studies carried out in auditing firms have revealed high levels of budget pressure leading to a variety of dysfunctional behaviours which can be difficult to control. This study examines how subordinates' reaction to control systems is influenced by the leadership behaviour of supervisors. Data were collected by means of a questionnaire sent to all audit seniors in three Big Six audit firms. Two forms of dysfunctional behaviour were measured: under-reporting of time and audit quality reduction behaviour. A leadership style characterized by high structure and low consideration was found to be associated with the highest level of dysfunctional behaviour for all behaviours examined, while the lowest level of dysfunctional behaviour was associated with a style depicting low structure and high consideration. Perceived environmental uncertainty was found to moderate these relationships, and to exercise a stronger moderating effect for audit quality reduction behaviour than for under-reporting of time.