Auditors’ judgment subordination and the theory of planned behavior

Purpose: The purpose of this paper is to examine circumstances under which auditors subordinate their judgment. More specifically, the authors investigate factors associated with auditors’ propensity to accept client-preferred accounting methods that conform to accounting standards but do not faithfully represent the entity’s financial position, financial performance and cash flows. Design/methodology/approach: Based on the theory of planned behavior (TPB), the authors developed a survey that was sent to auditors at a non-Big 4 audit firm. Findings: Main results suggest that auditors tend to agree with a client’s preferred accounting method when they anticipate little fallout from this decision, they believe they can easily justify the method, and they perceive that colleagues, shareholders and creditors would also agree with the decision. Practical implications: Results benefit auditing standard setters and regulators and are relevant for accounting institutes and audit firms because practitioners can learn about circumstances under which auditors subordinate their judgment. Originality/value: This study contributes to the audit literature by using the TPB to identify factors associated with auditors’ judgment subordination. In addition, it applies the TPB in a context where a client-preferred accounting method is considered acceptable but is not the most appropriate in light of the audited entity’s specific circumstances.