Chapter 4 The Need for New Psychological Contracts in the Auditing Profession

A psychological contract (PC) reflects the relationship(s) between employees and their employers and involves a personal interpretation of the obligations and rewards between those parties. Within the auditing profession, while the actual “employers” of auditors are the auditing firms that pay the auditor’s salary, auditors engage in multiple functionally interdependent affiliations in which PCs are developed: auditor to auditor; auditor to the profession and its overseers; and auditors to the company being audited. Unfortunately, another party (society), which should be viewed as a critical part of the audit relationship, is often ignored. This paper poses the idea that the PCs existing between employees within auditing firms and between auditing firms and external parties may be important, but less recognized, underlying causes of the profession’s problems. Current auditor PCs appear to be internally contradictory and out-of-sync with the demands of the investing public and society in general. Suggestions are made about how PCs and relationships may be modified to be more attune to societal needs.