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Business Horizons (2008) 51, 223233

Available online at www.sciencedirect.com

www.elsevier.com/locate/bushor

Auditors gone wild: The other problem in


public accounting
Ronald Jelinek a,, Kate Jelinek b
a
b

School of Business, Providence College, 549 River Avenue, Providence, RI 02918-0001, USA
College of Business, University of Rhode Island, Ballentine Hall, 7 Lippitt Road, Kingston, RI 02881, USA

KEYWORDS
Deviant workplace
behavior;
Workplace deviance;
Sarbanes-Oxley;
Auditor behavior

Abstract
Following the scandals involving Enron, WorldCom, and Qwest Communications, the
accounting profession has spent the past several years trying to get back on track.
While Sarbanes-Oxley may improve the decision-making of audit professionals, and
help prevent future large-scale catastrophes that hurt stockholders and bring down
firms, there is another problem in public accounting that few consider and nobody has
proposed to solve: deviant workplace behavior. Previous research describes deviant
workplace behavior as the voluntary behavior of organizational members that
violates significant organizational norms and, in so doing, threatens the well being of
the organization and/or its members. Building from recent work in various business
literatures, this is the first research since the passage of Sarbanes-Oxley to examine
workplace deviance at Big 4 accounting firms. Taking a cross-disciplinary, collaborative approach, the authors endeavor to explain why workplace deviance has
infiltrated accounting firms and how it is undermining their effectiveness and
derailing their long-term prospects for success. After describing its genesis and
effects, the authors prescribe several managerial strategies for preventing deviance
and minimizing its effects on a firm.
2008 Kelley School of Business, Indiana University. All rights reserved.

1. Deviant workplace behavior


While the accounting world is clamoring to put
the bad press of the Enron, WorldCom, and Qwest
Communications scandals in the rear view mirror,
there is another problem lurking below the surface
for the Big 4 and other large firms. While its pres Corresponding author.
E-mail addresses: rjelinek@providence.edu (R. Jelinek),
kjelinek@uri.edu (K. Jelinek).

ence is very real, it has not manifested itself in


lawsuits, bankruptcies and ruined lives. At least, it
hasn't yet. This problem, or what we could call the
other problem being faced by accounting firms, is
less a case of failed ethics and more a case of
workplace deviance.
Robinson and Bennett (1995) explain that workplace deviance is the voluntary behavior of organizational members that violates significant organizational
norms and, in so doing, threatens the well being
of the organization and/or its members. Recently,

0007-6813/$ - see front matter 2008 Kelley School of Business, Indiana University. All rights reserved.
doi:10.1016/j.bushor.2008.01.011

224
business researchers in the areas of management and
organizational science (Bennett & Robinson, 2000;
Colbert, Mount, Harter, Witt, & Barrick, 2004; Dunlop
& Lee, 2004), consumer services marketing (Harris &
Ogbonna, 2002), and, most recently, in business-tobusiness selling (Jelinek & Ahearne, 2006a, b) have
examined the causes and effects of deviance. These
researchers have determined that workplace deviance can take three forms: it can be interpersonal,
meaning that it occurs between co-workers, and
includes things like spreading rumors about colleagues or finger-pointing blame; it can be organizational, such as when employees lash out against their
organization or an organizational figurehead like a
manager by doing things such as intentionally working
slowly or attending to personal matters on company
time (Dunlop & Lee, 2004; Robinson & Bennett,
1995); or, it can be front-line, such as when employees vent to customers about problems they are having
with their organization (Jelinek & Ahearne, 2006b).
Though some have previously examined workplace
deviance in public accounting (see, for example,
Schilit, 1984), overall research in this context is relatively limited. This shortage is surprising given the
unique boundary-spanning nature of the public
accountant's job. Unlike jobs with little client interaction, audit professionals spend a great deal of time
on the frontlines, providing direct services for clients
at client locations. As service providers, auditors
are the face of their firm; they are responsible for
building relationships with clients and are inseparable from the services they provide, meaning that
when clients evaluate their satisfaction with their
audit services, they evaluate their satisfaction with
the auditor who provides them. This is an important
distinction: while deviant behavior in other contexts
may not have significant consequences, deviance in
this service context likely does. Auditors who behave
deviantly impair the ability of their firm to provide
services and lessen the likelihood that the client will
be satisfied with the services provided.
In addition to being limited, research on auditor
deviance is also rather dated. This is because what
little research there is about deviant behavior by
auditors pre-dates many of the significant changes to
the accounting profession in recent years. As we will
explain, since 2001 a series of developments have had
an impact on the accounting profession, on the audit
professional and, we argue, on the corresponding
extent of deviant behavior occurring at large firms.
Before continuing it is important to realize that
workplace deviance has been haunting Big 4 firms
for some time. While it may not have been widely
discussed in public, in 1991 The Wall Street Journal
detailed how shouting matches and public displays of
aggression between accountants at big firms two

R. Jelinek, K. Jelinek
examples of interpersonal deviance had gotten so
bad that many large firms had begun consulting with
outside behavioral psychologists (Berton, 1991). More
recently, a 1998 survey asking CPAs to assess the
seriousness of various problems facing the field revealed that 35% of respondents reported that abuse
of expense accounts, a form of organizational deviance, was a moderate to major problem (Yetmar,
Cooper, & Frank, 1998). This survey, taken before the
Enron scandal, ranked this behavior as a greater
problem than conflicts of interest involving business
or financial relationships with clients or competitors
that influence, or appear to influence, one's ability to
carry out his or her responsibilities (Yetmar et al.,
1998). In other words, these CPAs considered deviant
workplace behavior more of a problem than what
many believe caused Enron.
Those who study deviant behavior in the workplace do not find this surprising; stressed-out workers
tend to behave deviantly. Unfortunately, public
accounting has its share of highly stressed workers;
it is among the most stressful professions in America
(Fogarty, Singh, Rhoads, & Moore, 2000). This is
largely because a single Big 4 auditor serves a portfolio of clients, each of whom demand sage, expert
advice and attention, and who want reports filed
faster than the previous year and at a lower cost. In
response, audit firms increasingly lean on their auditors to get more done in less time. For audit professionals, this means increased travel, unwanted
overtime, and an overloaded schedule that demands
they bounce from client to client. It also means that
the busy season swallows up more and more of the
calendar every year, which, in effect, cuts into personal time and increases the burden felt by the
auditors' families, which in turn ratchets up feelings
of guilt and perpetuates even higher levels of stress.
It is no wonder why a 2001 US study conducted by the
makers of the pain reliever Excedrin found that
auditors suffer more headaches than any other
professionals (Satov, 2003). In the UK, the suicide
rate among male accountants is 10% higher than that
of the rest of the population (Nixon, 2004).
While suicide may be an extreme outcome,
increased tension, burnout, and dysfunctional behavior
are not. In fact, the American Psychological Association
(APA) and the Families and Work Institute are beginning
to take the effects of work stress very seriously: they
report that 34% of overworked employees feel resentment toward coworkers, and 39% feel anger toward
their employer (Overworked, 2006), and the APA
suggests work stress is fast becoming a major workplace problem (Nadel, 2006). While accountants at
large firms have been facing stress for years, the
troubling news is that three recent developments in the
profession, which we call aggravators, are making

Auditors gone wild: The other problem in public accounting

Figure 1

The causes and consequences of deviant auditor behavior

the auditor's job even more stressful, therefore making


it likely that accounting firms could face more deviant
workplace behavior in the coming years.
The first aggravator is Sarbanes-Oxley (SOX),
the legislation enacted to curb unethical practices

Table 1

225

occurring at the accounting-client interface. While


SOX was passed in an effort to better protect investors, certain provisions of the legislation have
placed a tremendous burden on audit staff. Interestingly, while this legislation was meant to discourage

Deviant audit behaviors

Deviant Organizational Behavior

Deviant Interpersonal Behavior Deviant Front-line Behavior

Falsifying a reimbursement report


Mindfully working slowly with little
concern for the budget
Showing disregard for the importance of
proprietary work documents and information
(e.g., misplacing prior year work-papers
of accounts you are not working on)
Cyber-loafing or excessively
surfing the Web
Using company resources
(supplies, fax, copier)
for personal purposes
On accounts you will be rotating off of,
leaving poor notes/directions for
next year's audit team
Falsifying time reports (e.g., misclassifying
work hours as unassigned or assigning
hours to the wrong account)
Going AWOLor running personal
errands on company time
Cutting corners to get work
done faster, even if it means
sacrificing the accuracy of work
Ignoring manager and/or partner
input on how to do the job

Spreading rumors about other


members of the engagement team
Cursing at a co-worker
Blaming other members of the
audit team when things go wrong
Harshly criticizing a co-worker
to his/her face
Speaking badly of a co-worker
to that co-worker's manager/
partner
Accepting credit for someone
else's work
Unnecessarily passing work on to
a colleague to eat up their time

Sharing job-related frustrations with


clients
Making the firm or a high-ranking person
at the firm (e.g., manager, partner)
look bad to a client
Airing the firm's dirty laundry out in
front of a client
Complaining to the client about the firm
(e.g., They promised vacation but staffed
me out before I could take it, or They say
I'm on flex time but it essentially means I
cram 5 days of work into 4, or I haven't
had a Saturday off in 4 months, etc.)
Breaking a client protocol
(e.g., purposely wearing business casual
when the client dress code is
formal/professional)

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unethical practices, it may be indirectly encouraging
greater deviance among accounting firm members.
The second aggravator stems from a growing
imbalance between the ever-surging demand for
accounting professionals versus the lagging supply of
available talent. With more opportunity and more
bargaining power than ever before, accounting professionals are going to the highest bidder; often
leaving their firms for competitors and, in the process,
leaving their former co-workers and colleagues with
piles of additional work. The third aggravator emanates from the public disgust remaining from the
accounting scandals of the past five years. There is
still a dark cloud hanging over the profession, and
until it lifts completely, there seems to be a tendency
for some of those in the profession to point to that
dark cloud as a justification for deviant behavior.
Before discussing how deviance is impairing the
accounting firm's efficiency and effectiveness, and
explaining what firms might do to better prevent it,
we detail these aforementioned aggravator effects
more thoroughly. Figure 1 illustrates these effects
and Table 1 is a classification of deviant behaviors
in a public auditing context.

2. Aggravators: Increasing auditor stress


and deviance
2.1. Aggravator 1: The Sarbanes-Oxley effect
In response to the accounting scandals at the turn of
the century, Congress passed into law the SarbanesOxley Act (SOX) of 2002. SOX is considered to be
the most sweeping securities-related reform since
the 1933 and 1934 Securities Acts, which were a
direct result of the Great Depression. While passage
of SOX has dramatically changed the responsibility
of both audit firms and the entities they audit,
sections 101-109 of the Act establishing the Public
Company Accounting Oversight Board (PCAOB) and
section 404 requiring auditors to simultaneously offer
an opinion on their client's financial statements, as
well as an opinion on the client's internal controls,
have had a particularly profound impact on auditors.
First, with the creation of the PCAOB, the
accounting profession is no longer self-regulated.
Before the PCAOB was put in place by SOX, the
private-sector group AICPA oversaw the accounting
profession. Today the PCAOB governs the accounting
profession by setting the auditing, quality, and
ethics standards to be followed by all audit firms.
Among other things, the PCAOB now performs inspections to monitor whether or not auditors are compliant
with rules and regulations; this governing body has the
power to suspend or revoke a CPA firm's registration for
noncompliance.

R. Jelinek, K. Jelinek
According to SOX, the PCAOB must do yearly
inspections of any firm that audits more than 100
public companies. This means the Big 4 and other
large firms now face annual inspections. The PCAOB
has been performing such inspections since 2003, and
has voiced strong concern for how firms have been
documenting their audit findings, which prompted
this governing body to issue PCAOB Auditing Standard
No. 3. The net effect of this is two-fold: (1) staff
auditors, who are responsible for the bulk of the audit
documentation, are feeling tremendous increased
pressure to dot all of their i's and cross all of their
t's, and (2) due to fear of having their firm's license
revoked or, worse, having their firm turn into the
next Andersen, managers and partners are micromanaging the work of audit staff like never before.
The effect, while certainly unintended, has been
to increase the stress level of an already stressed
audit team.
In addition to inspections by the PCAOB, SOX (by
way of Section 404) requires auditors to conduct
much broader tests of internal control than typically
done previously. Internal controls are the mechanisms
put in place by clients to decrease misstatements
in their financial statement records. Such misstatements result from either simple human error or
outright fraud, or both. As an example of a type of
internal control commonly referred to as segregation
of duties, the employee responsible for physically
collecting cash from customers is not also responsible
for authorizing credits to customer accounts for
returned merchandise. Such segregation of duties
ensures the employee cannot pocket the cash
collected from the customer and cover it up by recording a sales return. Prior to SOX, auditors were only
required to test internal controls as they related to the
financial statements. If, during the audit, auditors
assessed control risk to be low, the auditors could
then rely on the client's internal controls and effectively do less work regarding financial statement
account balances and transactions. In contrast, SOX
mandates that auditors who provide an opinion on the
financial statements also provide assurance related
to internal controls. Specifically, Section 404 requires
that a client company's management assess and attest to the effectiveness of the internal control system. The auditor must then audit management's
assertions that internal controls are adequate to
prevent misstatement, and issue a separate opinion
on internal controls. As such, the auditor's test of
controls requires a great deal more work, and must
be extensive enough to give the auditor a high level
of assurance about the effectiveness of a client's
controls.
CPA firms are struggling to meet the requirements
of SOX Section 404, and the effect has been to further

Auditors gone wild: The other problem in public accounting


burden an already stressed staff. In fact, as recorded
in a recent Journal of Accountancy article, an AICPA
director refers to Section 404 as a huge human
resources concern (Vigilante, 2004, p. 62), while
a firm's audit and consulting director complains,
Rule 404 has given more work to our profession
with the same number of staff to go around. In
interviews we conducted with Big 4 auditors in coordination with this research, one staff auditor
commented that, 404 is more work than the financial audit. It is too much work it never seems
to go away it just lingers. An experienced manager at another Big 4 remarked,
SOX has brought stress and time constraints.
The addition of the 404 work has doubled the time
we need to give each public client. And we just
don't have the time these public companies drain
our resources. I have to cancel appointments with
private company clients just to stay afloat.
With that in mind, consider this: a survey of
accounting professionals taken after the passage of
SOX revealed that 72% of accountant respondents
reported that their jobs were becoming more
stressful, leading 25% of respondents to report that
they regretted their decision to enter the accounting
profession (Nixon, 2004). In the UK, where SOX
inspired the Higgs and Smith reports which effectively
increased the stringency of accounting guidelines for
UK-listed companies, more than half of accountant
respondents reported that they had experienced
burnout symptoms related to job stress in the
past six months, and 40% of accountants in this survey
reported frustration that their firms were not doing
anything to ease their stress (Hayward, 2005).
Because SOX has increased the level of stress faced
by auditors, it is also ramping up various types of
deviance. One Big 4 staffer admitted to us that she
cut corners to get through laborious 404 work, and
said that some of her colleagues purposely worked
slowly to retaliate against budgets that deserved to
be blown for being laughably inadequate. She
reported that some would waste time on the Internet
while others duck away during work hours to do
personal things. One Big 4 client employee concurred; she reported that auditors on her account
frequently slipped away to use her company's on-site
gym, a facility that everyone knew was only for
company employees. To make matters worse, she
told us that they did not use the gym after work, but
instead used it after lunch during business hours.
While that may seem pretty overt, another Big 4
staffer told us that deviant behavior is sometimes less
obvious. I've seen people complain to their manager
when they think they've been assigned too much

227

workthey can sometimes get their manager to pass


assignments off to other more efficient members of
the audit team.
But the deviance is not always just interpersonal
or organizational in nature. A Big 4 staffer admitted
that stressed colleagues sometimes even vent to
clients about SOX. I've seen auditors complain to
clients about the long hours and the work load, she
told us. A manager at another Big 4 firm told us that
this sort of behavior tends to increase around the
holidays when the SOX work burden collides with
time otherwise spent with family: Staff complain
to clients that they don't understand why our firm
doesn't give a week off at Christmas like some
others do. While frontline deviance like this may
be surprising, it is consistent with research in other
boundary-spanning settings and is due to the fact
that embedded within every business exchange is
an interpersonal relationship. As Jacobs, Hyman, and
McQuitty (2001) point out, disclosing information
about oneself is a key component in any relationship,
and in business relationships parties can disclose
information that is exchange-specific (related to the
pending business transaction) and information that is
more personal in nature. Although business providers
should avoid disclosing personal or non-exchange
specific concerns to their clients, they often share
too much of this information with exchange partners. Because of this, boundary-spanners often carry
work-related frustrations into their interactions with
customers (Jelinek & Ahearne, 2006a).

2.2. Aggravator 2: The market effect


While demand for accounting professionals has historically been good, market conditions have driven it to
unprecedented levels in recent years. This ratcheting
up of demand stems in large part from the increased
audit load required by SOX. Unfortunately for audit
firms, this increase in demand came on the heels of a
sharp drop in the supply of accounting graduates in the
late 1990s. According to Business Week, there were
more than 50,000 accounting graduates coming out of
US colleges and universities in the late 1980s and early
1990s; that number dropped to fewer than 35,000 in
the late 1990s (Byrnes, 2005). While part of this decline can be attributed to business students opting
out of accounting to pursue degrees geared more to
finding jobs in the then-booming tech sector (Byrnes,
2005), several research teams have empirically
demonstrated that the drop in supply is largely due
to passage of the AICPA's 150-hour rule (Billiot,
Glandon, & McFerrin, 2004; Boone & Coe, 2002).
This rule, adopted by 48 of 54 licensing jurisdictions,
requires students to have 150 college credit hours
before sitting for the CPA exam, which deters students

228
from majoring in accounting and further constrains the
supply of qualified talent (Bierstaker, Howe, & Seol,
2004).
With supply low and demand surging, large firms
are swept up in the eye of a perfect storm. In an effort
to ride it out, Big 4 firms have declared a war for
talent (Lorinc, 2006); PricewaterhouseCoopers
aimed to hire 3100 new grads in 2005, a 19% jump
from 2004, while Ernst & Young set out to top that by
adding 4000 new employees, up 30% from 2004. Firms
like Deloitte & Touche have taken their search for new
talent to another level; eyeing Labor Department
projections that accounting firms will need to add
49,000 new jobs a year through 2014, they have begun
traveling to New York high schools to attract students
to the accounting major before they have even
stepped foot in a college classroom (Byrnes, 2006).
It does not stop there; these firms are also doing all
they can to attract experienced staff. In some
markets, the going rate for audit professionals with
just a few years' experience is in the $7075,000/year
range, and year-over-year wage hikes are as much
as $10,000 (Lorinc, 2006). A director of recruiting
at Ernst & Young reports that firms are providing
$2000$7000 referral bonuses to employees who help
bring in new talent (Lorinc, 2006).
Some firms are beginning to acknowledge that
market conditions may be spiraling out of control.
As one Big 4 manager put it, things have changed
so much in recent years, and the situation has
become almost unmanageable. He explains that
when a member of his audit team leaves the firm
for a competitor willing to pay more, the result is
that those who remain are left with more work to
do, and this increases stress and breeds deviance.
The manager adds that when staffers feel like work
has been dumped on them, they get stressed and
increasingly vocal. He has heard more than a couple
protest that this is not what I signed up for! When
auditors are stressed, it can spill over into their
interactions with others on the team; staffers get
worked up and curse at co-workers, which is another
act of interpersonal deviance. In the manager's
words, stressed staffers can easily get caught up in
the moment and become too aggressive in their
tone and language with others.
This manager reminded us that stressed auditors
can also take it out on the firm itself, I've seen staff
overcharge meals, mileage and other non-work
stuff. Again, sometimes it does not stop there;
deviant behavior can spill over into frontline interactions as well. Stressed auditors vent to clients about
staffing shortages and a lack of manpower to get the
work done. Whether the behavior is interpersonal,
organizational or frontline, it is a toxic combination of
factors that causes the deviance. The staffers and

R. Jelinek, K. Jelinek
senior auditors feel overworked but at the same time
know that their firms are at their mercy because they
are in both limited supply and great demand. When
stress pushes them to their limits, as the manager
suggested it sometimes could, the auditors feel
empowered to lash out and act in a deviant manner.

2.3. Aggravator 3: The public enemy effect


How is it to work in a field that has undergone major
critical scrutiny in the last five years? Not easy.
Following Enron, criticism was not limited to Andersen. The scandal tainted practically every accountant
in the nation. Following the debacle, Gallup reported a
precipitous drop in the public's perception of the
entire profession (Accountants' Public Image, 2003).
The public shifted from thinking about accounting as a
gentleman's profession (Can Money, 2003, p. 19)
to viewing it as a charlatan's craft. And for firm
members, this fall from greatness added burden to an
already difficult job.
An unending flood of jokes among the public
prompted widespread soul-searching among many
auditors (Knapp, 2007, p. 20). Such soul-searching
was fueled by what social psychologists call cognitive dissonance, or a feeling of discomfort resulting
from performing an action that runs counter to one's
customary conception of oneself (Aronson, Wilson, &
Akert, 2002). In context, after the Enron-Andersen
debacle, audit professionals found themselves in an
unfamiliar place, facing an unsettling question: If
the field of public accounting is as corrupt as the
public perceives it to be, how can I, as a good person,
possibly be working in it?
It is important to point out that for many
audit professionals, this question and the sort of
self-doubt implicit in it are at least somewhat, if
not completely, unjustified. In an interview with
practicing accountants after the scandal, Coustan,
Leinicke, Rexroad, and Ostrosky (2004) gave voice
to a growing frustration from within the profession.
David Costello, President and CEO of the National
Association of State Boards of Accountancy,
admitted that even he felt the profession had
suffered unfairly. But he urged accountants to band
together to fix our problems and move forward
(Coustan et al., 2004). However, some executives
felt these problems were being overstated.
Some, like Ken Zika, the retired controller of
Caterpillar, felt that what happened between
Enron and Andersen was not representative of the
typical interaction between clients and auditors:
Congress has underestimated the relationship
between most companies and their auditors
(Coustan et al., 2004). Some auditors took this
personally, and their resentment did not end after
the passage of SOX. Outraged over rules stating that

Auditors gone wild: The other problem in public accounting


practicing CPAs were forbidden from chairing the new
governing board PCAOB, and that non-accountants
would make up a majority of the board, one
accountant remarked, The ban on practicing CPAs
implies that CPAs in practice cannot be trusted. This is
a political standard, not a practical one. Another
accountant added, Can you imagine an oversight
board created for the legal profession comprised of a
majority of non-lawyers? (Hill, McEnroe, & Stevens,
2005).
Some Big 4 auditors blame their firms for failing to
get out front to defend the profession, and are
outraged because they feel that this failure led
Congressional regulation to unjustifiably castigate
the entire profession as public enemy #1. One client
of a Big 4 firm suggested that some of her auditors feel
like they are being punished, and seem to resent their
new work requirements. She tells us that members of
her audit team actually preface requests to her with,
This is insane that I have to ask you this, but
Still other practicing accountants took the charges
lobbed against the profession to heart. Rather than
rejecting the public's perception and Congress's action
as being off-base, these auditors struggled to figure
out how they fit into a seemingly corrupt profession.
Social psychologists suggest that this can be very
discomforting, and often leads those suffering to look
for ways to reduce the cognitive conflict. For some,
this might mean leaving the profession altogether,
while for others it could mean staying and trying to
actively improve it. For still others, the decision could
be to stay put, hold on to their well-paying jobs and
join the public's chorus of discontent from the inside.
Like an agent who infiltrates the bad guy's operations,
these people feel like they have special permission to
behave deviantly; when the newspapers and the cable
news shows excoriate the profession, they feel
empowered to break firm rules, ignore managers,
and slack off. While this approach may both help these
auditors save face and ingratiate themselves with an
outraged public who welcome the fury of insiders, it
adds insult to injury for a firm trying to improve its
public image. Now, when public dissent may be
subsiding, polls seem to indicate the public's perception of accounting may be improving, although
people's perceptions are still below pre-Enron levels
(Accountants' Public Image, 2003). Until the ship is
completely righted, deviant insiders will likely continue to have a sympathetic ear if they want to vent.

3. The impact on efficiency and


effectiveness
Does deviant behavior really have an impact on the
audit firm? The answer is a resounding yes. As service

229

providers, audit firms are in business to attract,


retain and build relationships with clients. When the
frontline employees responsible for providing the
audit service behave deviantly, audit firms are both
less efficient and less effective.
Firms that are efficient are smart about their
use of time in an effort to keep the cost of production
low; they consume fewer labor hours and other
inputs when servicing their clients. In some cases it
is very easy to see how certain deviant behaviors are a
direct drag on efficiency. Auditors who pad expense
reports and spend company time attending to personal matters are unnecessarily adding to the cost
of the audit and, in effect, creating inefficiencies.
Several reports in non-audit settings estimate that
deviant workplace behaviors like these can cost
companies between $6 billion (Murphy, 1993) and
$400 billion (MSNBC, 1996) annually.
One example of organizational deviance cyberloafing, or spending excessive time surfing the Internet for non-work related reasons is hurting the
efficiency of Big 4 firms so much that at least one of
these firms put out an official request asking their
associates not to install instant message software
on their company-issued laptops. But a staffer at
this firm told us the request had little effect. A coworker of mine was surfing so much that the senior
manager had to threaten to physically unplug his
Internet connection! A manager at another Big 4
firm echoed this frustration, and admitted that nonwork related Internet use there remains a problem.
This is not surprising; a recent survey indicates
that 45% of all workers admitted that surfing the
Web is their favorite waste of time at work (Miles,
2006). In fact, the US Department of Interior recently
conducted a study of its own employees, and estimated that it was losing 104,221 hours annually at a
cost of $2 million a year due to excessive improper
use of the Internet (Gross, 2006). Such deviance
is very inefficient and very costly. While the cost
of other deviant behaviors like rumor-milling
and petty quarreling with co-workers is not definitively known, these behaviors certainly distract from
the job, and make the audit environment less
efficient.
Because it serves as an obstacle to building good
relationships with customers, deviance also hurts
effectiveness. Firms that are effective successfully
sell the audit to clients and satisfy them to such an
extent that the clients perceive the service to be
highly valuable and worthy of a higher fee the next
year. As the boundary-spanners responsible for providing these services, auditors are key players in this;
if they act professionally and provide expert service,
auditors will likely enhance their firm's effectiveness.

230
But if they share job-related frustrations with the
client or complain to the client about work-related
matters, which are two examples of front-line
deviance (Jelinek & Ahearne, 2006b), they will likely
weaken the firm's effectiveness. One manager
explained it this way: Our staffers and seniors are
the public face of the firm. When they are disgruntled
and they complain to the client, it is bad for the
relationship. I've seen clients want to fire our firm for
stuff like that.
This manager reminded us that clients are always
evaluating their auditors, and judgments are being
formed based on how auditors behave and present
themselves. One day a (staff) senior showed up at
a client of mine with his shirt unbuttoned and untucked. He was just a complete slob just no regard
for how he looked or what the client thought. And
before I could say anything, in walked the CFO. He
didn't say anything, but it was clear he was taken
abackit was inappropriate. A Big 4 client told us
that the audit team on her account took exceptionally long lunches. It happened so much that the
client's personnel asked her, Are those auditors
taking another three hour lunch?
At a minimum, these sorts of frontline deviant
behaviors send a bad message to the client. At
worst, they prompt clients to reassess the value of
the audit service provided. This is a risk audit firms
cannot afford. New SOX regulations now prohibit
firms from cross-selling business consulting services
to their audit clients as they once were allowed,
which makes firms more reliant on audit services
(as compared to supplemental, add-on services) to
bring in revenues. If current audit clients are dissatisfied with their audit services, the audit firm has
a real problem with effectiveness.

4. What can be done: A blueprint for


managers
Dispirited managers should take heart: though deviant behavior is a real and growing problem, there
are things firms can do to try and right the ship.
Our prescriptions tie directly back to our model,
and range from endeavoring to neutralize the three
aggravators, to trying to diminish the stress of the
audit environment, and finally, to looking for more
constructive ways to manage and cope with deviance. While our focus is to rout out deviance at Big
4 accounting firms, we believe that managers of
other types of service firms will find value in at least
several of our recommendations. It is important to
remember that deviant behavior is not isolated to
the large accounting firms, and can be quite insidious
in any service context.

R. Jelinek, K. Jelinek

4.1. Sarbanes-Oxley
Since its passage in 2002, SOX has been widely discussed and debated. While informed observers
question the law's practical implications (Dalton
& Dalton, 2007; Hill et al., 2005; Pollock, 2006;
Wolkoff, 2005), legislators have been reluctant to
back off of any of its major provisions. In 2005,
Congressman Jeff Flake (R-AZ) backed HR 1641, a
bill that would make Section 404 voluntary as opposed to mandatory, but lawmakers were reluctant
to seriously consider it (Pollock, 2006). In fact, aside
from some interest in a recommendation by the SEC's
Advisory Committee on Smaller Public Companies to
immunize smaller publics from the onerous requirements of 404, Capitol Hill has signaled that it is
unlikely to change much about SOX (Dunham, 2006;
Wolkoff, 2005). With that in mind, audit firms may
be smart to take what they can. If firms can lobby
Congress to at least amend the scope of the law so
that small publics can opt out of 404 if they choose,
this may lessen auditors' workloads somewhat, and
allow them to manage assurance work better on
larger public companies that still require a 404 audit.
On this point, we spoke to a financial officer at a
smaller-sized public company and he offered, 404
work for my company is insaneand we aren't big. I
can't imagine what the audit work is like for larger
companies.

4.2. The market


There are a couple of supply-side strategies the Big 4
can adopt to offset disadvantageous market trends.
First, as mentioned, researchers have empirically
demonstrated that the 150-hour rule remains the
major obstacle for new entrants into the profession.
Many students cannot afford a fifth year of college,
and even those who can do not always see the benefit
outweighing the cost. Interestingly, the rule was
crafted in 1988 at a time when an overwhelming
number of grads were aspiring to enter the accounting profession. While the AICPA approved the bylaw
revision in part due to a desire to maintain the
prestige of the profession, it is fair to say, that was
then, this is now. The supply of audit talent has
dwindled to an unsustainably low level. At this point,
it is important to remember that individual state
accountancy boards are responsible for implementing
the 150-hour rule. Several, including Delaware and
Colorado, have opted not to require 150 hours. We
believe Big 4 firms should get behind the examples set
by these jurisdictions, and lobby other states to
follow their lead. These efforts to get states to
retract their 150-hour provisions speak to a second
broader, and perhaps more important, point: firms

Auditors gone wild: The other problem in public accounting


should understand efforts to get new talent need to
be rigorous but not overly restrictive. This is a
precarious balancing act because while firms should
continue to look for the best and brightest in the pool,
they need to acknowledge the reality that the pool is
shrinking, and it is time for them to do more to increase its size.

4.3. The public enemy


In an effort to more proactively change the public
enemy perception, Big 4 firms need to aggressively
publicize the changes they have made since the
fallout from Enron. As part of an integrated marketing campaign, firms should target investor and active
news watcher segments in the media with advertisements highlighting how they have actively rebuilt and
restored trust. These ads would have two benefits.
They would continue to assuage externals (i.e., the
public and other stakeholders) who may still doubt
that anything has changed since 2001. More importantly, they would help to lift the spirits of hardworking internals (i.e., auditors). In addition to advertising, the campaign should also include a major
public relations component where firms directly
interface with business school professors from all
disciplines. Because undergraduates get a lot of their
business news from professors, and frequently form
judgments about companies and potential career
fields based on the viewpoints of these professors,
often doing so before declaring their specific major,
it is important that firms build relationships with
all business faculty. This approach, which is wider
in scope than simply going to career services and
attracting students after they become majors, has
the benefit of upgrading the firm's image with future
business leaders, and potentially increasing the pool
of accounting majors from which to hire. In effect,
this strategy could both neutralize the public enemy
effect and the market effect.

4.4. Stress
Large firms need to devise a multi-pronged strategy
for dealing with auditor stress. First, they need to
amend the techniques used to screen and interview
prospective hires. Since many recruits, especially
recent college grads, often have no idea how stressful their new positions will be, this requires doing
two things: (1) employing a greater use of stressinterview techniques to better gauge and assess
the ability of prospective employees to deal with
audit-related stress, and (2) making better use of
the firm's college networks to educate accounting
majors of the stresses inherent in the profession.
The fact that a recent survey reveals that one out
of every four auditors regrets their decision to en-

231

ter the field (Nixon, 2004) suggests that audit firms


should do more (and do more earlier) to inform recruits about the profession. After doing what they
can to improve screening of job prospects, firms need
to ensure that those they have hired receive sufficient training in a timely manner. Research shows
that a major source of work stress derives from perceptions of role ambiguity when employees believe
that they do not have enough information to do their
jobs. Because the audit environment has dramatically changed in recent years, it is essential that
firms support their frontline auditors by setting
up both employee only workshops and sponsoring
employee-client workshops where both audit professionals and the companies they audit can learn
about new requirements, like those mandated by
SOX.
The next component of the strategy is to make
sure human resource professionals at the firm are
regularly conducting a thorough job analysis of the
audit position. Because employees often suffer from
stress in part because they believe management
does not accurately understand the nature of their
role and their many responsibilities, it is important
that HR has a realistic and up-to-date understanding
of the auditor's job. It should endeavor to do this for
every level of audit staff by speaking to current
auditors at that level (e.g., Staff 1) and auditors
directly one level higher than that level (e.g.,
Staff 2). Doing this regularly will help management
get an accurate picture of what the auditor actually does day-to-day, enable HR to identify and diagnose parts of the job that auditors find particularly
taxing and burdensome, and, if there are systemic
trends among staffers, help the firm to plan specific
interventions.
In addition to performing a job analysis for each
level of auditor, a more detailed analysis should be
conducted on each individual audit employee's
workload. In this step, HR should review the work
schedule for every member of the firm with each
member's mentor. Most firms already assign mentors to lower level employees to help acclimate
them to audit work. During this review, mentors
should evaluate their mentee's work schedules, and
offer HR input if they feel the individual has been
given a particularly grueling portfolio of clients.
Since it is common knowledge among firm members that certain client assignments tend to be
particularly demanding, the firm might codify this
information and devise a rating system for each
client. For example, clients could be rated an A,
B, C, or D whereby a client would be rated
an A if the company required the highest relative
level of audit work, and a D if they required the
lowest relative level of audit work. Using such a

232
rating system would enable staffers and mentors
to collaboratively ensure that no auditors would be
assigned an unbalanced, and overwhelmingly stressful, work schedule (e.g., a high percentage of A
level clients).
While these steps should help, even the best
processes are not going to end auditor stress entirely.
As such, we also recommend that firms consider
instituting procedures for assisting auditors when
they do experience stress. Management should implement and support the use of a confidential,
company-sponsored 24-hour call center through
which stressed auditors could speak to professionals
trained in stress-management. In addition, firms
should consider scheduling evening stress-reduction
workshops that staffers can elect to attend, and also
consider employing trained mental health professionals to visit individual audit teams in the field to
discuss job-related stresses and stress management
techniques. Because physical exercise tends to be a
healthy outlet for stressed workers, firms might also
want to consider providing discounted gym memberships to their staff and/or making on-site yoga classes
part of a basic benefit package. While admittedly less
traditional than other measures, many companies
outside the field of accounting have started offering
such things. Canadian-based companies like Certicom
Corporation offer yoga and massage therapy to employees, and have started lunchtime workshops
focusing on heath and wellness, while OPSEU Pension
Trust responded to suggestions from their employees
to adopt several similar stress-reduction initiatives
(Smith, Rennie, Griffin, Wood, & Therrien, 2004).
Even Wall Street hedge fund gurus have turned to
things like yoga to reduce job stress and improve
workplace decision-making (Chaffin & Silverman,
2000). Human resource experts point out that innovative approaches like these are useful in helping
to manage work stress and its consequences (Ornelas
& Kleiner, 2003).

4.5. Managing deviance


Beyond attempting to neutralize the aggravators
and alleviate auditor stress, firm managers should
acknowledge the likelihood that boundary-spanning
auditors at their firm are behaving in a deviant
manner, and adapt accordingly. Notably, at least two
of the Big 4 firms appear to be doing this and have
significantly stepped up efforts to train employees on
professionalism. In senior staff training, Ernst &
Young now dedicates two full days to explaining the
importance of on-the-job personal responsibility
and professional behavior. Similarly, KPMG uses new
staff training sessions to remind new hires that, in
both the way they behave and the things that they
do, employees must always represent the firm

R. Jelinek, K. Jelinek
well. In fact, the firm now expressly tells new staffers that their futures at the firm hinge on behaving
professionally. Given the current environment and the
seriousness of deviance, these are welcome changes.
In addition to re-tooling training sessions to warn
staffers about the perils of behaving deviantly, firms
should also adapt their control system strategy. The
sales force management literature speaks to the issues
of control management, and suggests that supervisors
have two choices when managing boundary-spanning
employees: they can either take a behavior-based
approach where managers focus on overseeing more
directly and almost micro-managing the behaviors of
these employees, or they can opt for an outcomebased approach where they focus only on the results
or ends achieved, and do not consider the means
boundary-spanning employees use to get there (Oliver
& Anderson, 1994). With respect to deviant behavior,
there is an obvious danger in taking a purely
outcome-based approach. If audit firm managers
and partners look only at outcomes for example,
that the annual audit was completed they may be
missing that the audit client is dissatisfied with the
conduct and behavior of the respective audit team.
One might infer from this that taking a behaviorbased approach is therefore the way to go. This, too,
would be wrong. Not only is a behavior-based
approach very costly and inefficient, it also adds
bureaucracy to the process that we know tends to
lead to higher levels of workplace deviance (Jelinek &
Ahearne, 2006b). As the sales management literature
suggests, often the answer lies somewhere in the
middle of these two extremes. With respect to
curbing deviant behavior among the audit staff,
while we suggest that managers do not move too far
from the center of the continuum, we recommend
they lean a bit more toward a behavior-based
control strategy. For example, if management conducts a more judicious review of expense reports and
suggests a more codified approach for handling
various work situations, they will leave less wiggle
room for auditors to determine for themselves what
they think is acceptable behavior and, in effect,
make the environment less ripe for deviance.

5. Final observations
Misbehavior in the workplace is not a new phenomenon. In recent years, however, it has received
much more scholarly attention. Today it has a name:
workplace deviance. It also has symptoms and causes
as well as consequences and implications. Unfortunately for the accounting profession, recent developments in the field have ramped up a known driver of
deviance workplace stress and audit managers
and partners must now respond. The challenge to the

Auditors gone wild: The other problem in public accounting


firm, while not insurmountable, is great, and the
ability of the firm to steer through these rough waters
is at stake. In response, firms must better educate
themselves on the underlying causes of deviance,
better understand how this behavior impairs the firm's
effectiveness and efficiency, and take cues from
academics and other boundary-spanning professionals
on how best to curb the deviance of audit staff.

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