Abstract:
A number of financial scandals exposed over the past years have been
perpetrated with the active involvement of auditors, negatively affecting the
perception of trust and usefulness of the audit. The scope of this research is to
understand auditors’ and clients’ perceptions of trust in the audit and identify
factors to restore trust. Such a research has not yet been conducted in Malta,
characterised mainly by small family businesses where all registered
commercial companies, regardless of size, need to have audited financial
statements. This study conceptualises a framework of trust-based auditing,
based primarily on factors such as ability, benevolence and integrity.
Perceptions and opinions from auditors and their respective clients were
collected using a questionnaire. The information collected determines whether a
framework based on service quality, ethical behaviour and professional
scepticism leading to audit usefulness could be established and to determine a
set of client attributes perceived to increase trust.
Results revealed that whereas auditors perceive that service quality, ethical
behaviour and professional scepticism increase trust, their clients, on the other
hand, opined that service quality is inversely linked to reputation and the latter is
inversely related to trust. Auditors perceive all observable factors as equally and
positively influencing service quality, ultimately increasing trust. Clients perceive
reputation as a substitute to trust and service quality as a substitute for
reputation. They also expressed the view that increasing the independence of
auditors will increase unethical behaviour. Findings revealed that auditors and
clients agree that assessing the company’s creditworthiness and performing a
review for possible bias, fraud or error, increases audit usefulness, and to a
lesser extent trust. A set of management attributes perceived by both auditors
and clients to increase service quality and ultimately trust in the audit were also
identified. These attributes mainly include the importance of adequate support
by management and accurate record keeping by the client.
