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Impact of social
The impact of social pressures, pressures
locus of control, and professional
commitment on auditors’ judgment
Indonesian evidence 163
Damai Nasution
School of Business and Economics, Åbo Akademi University, Åbo,
Finland and School of Economics and Business, Airlangga University,
Surabaya, Indonesia, and
Ralf Östermark
School of Business and Economics, Åbo Akademi University, Åbo, Finland

Abstract
Purpose – The purpose of this paper is to investigate the impact of improper social pressures on
auditors’ judgment in the setting of a high power distance and low individualism society. Auditors’
judgment in this paper is related to the case of auditors’ willingness to sign off on net equipment
balance for assets in question. Second, the paper investigates the role of locus of control and the
relationship of multidimensional professional commitment on auditors’ judgment under conditions of
social pressure.
Design/methodology/approach – The experimental method is used in this research. The paper
uses a case that was developed by Lord and DeZoort to manipulate the interest variable, social
pressures. The paper also uses locus of control and multidimensional professional commitment as the
explanatory variables.
Findings – The research finds that social pressures affect auditors’ judgment in a high power
distance and low individualism society. Auditors who contend with improper social pressures make
judgments that violate their integrity and professionalism. The paper also finds that locus of control
and multidimensionality of professional commitment might potentially affect auditors’ judgment.
Originality/value – The research takes into account cultural influence on auditors’ judgment. The
paper uses subjects who are in a high power distance and low individualism society. As Public
Accountant is a worldwide profession, it is important to understand the impact of cultural dimensions
on the profession. Moreover, insights drawn from this paper may be of assistance to regulators and the
public accountant profession in considering and developing a mechanism that can mitigate the impact
of improper social pressures.
Keywords Auditors’ judgment, Social pressures, Auditor independence, Culture,
Professional commitment, Locus of control, Ethical judgment, Auditing, Auditors, Indonesia
Paper type Research paper

Introduction
A number of corporate scandals recently occurred that were unfortunately, to some
extent, associated with the profession of public accountant. Examples of these scandals
are: One.Tel, Harris Scarfe, and HIH Insurance in Australia; Parmalat in Italia; Ahold in

This research has benefited from comments and suggestions from the seminar participants at
Asian Review of Accounting
the Mid Sweden University and the 34th European Accounting Association Annual Congress. Vol. 20 No. 2, 2012
Authors would like to thank to the IMHERE program at the Accountancy Department of pp. 163-178
r Emerald Group Publishing Limited
Airlangga University, the Accounting Department of Åbo Akademi University, and Stiftelsen för 1321-7348
Åbo Akademi University for the financial support. DOI 10.1108/13217341211242204
ARA the Netherlands; and Enron, WorldCom, Global Crossing, Qwest Communication
20,2 International, Dynegy, CMS Energy, Tyco International, Adelphia, Peregrine Systems,
Sunbeam, Baptist Foundation of Arizona, Waste Management, Xerox, and Lehman
Brothers in the USA. In each case, the public suffered huge losses along with the
reputational losses of the auditors and the profession.
The scandals raise the question, why do auditors compromise their integrity
164 and professionalism? In broad terms, this behaviour is referred to as dysfunctional
auditor behaviour (DAB). It is behaviour that decreases audit quality. AICPA’s Public
Oversight Board (2000) stated that DAB is a continuing concern for the auditing
profession. Several studies have attempted to answer this question. Most prior studies
have focused on the external pressures that are faced by auditors (Knapp, 1985;
Gul, 1991; Tsui and Gul, 1996; Lin and Fraser, 2008) while a few have focused on the
social pressures exerted by internal parties (within the accounting firm). It is widely
known that auditing is conducted by partners and managers as well as senior and
junior auditors. Social pressures are exerted by the partners (named obedience
pressure) as well as peers (named conformity pressure). Both types of pressures might
induce dysfunctional behaviour aimed at obtaining a good performance evaluation
from superiors or acceptance as a group member.
Lord and DeZoort (2001) investigated the impact of obedience and conformity
pressures on auditors’ judgment. However, they failed to provide support for their
hypothesis that conformity pressures affect auditors’ judgment. We believe that
cultural dimensions have significant impact on how auditors will behave in this
situation. Based on Hofstede’s cultural dimension, US society is classified as a high
individualistic and low power distance society. Hence, US auditors are not too
concerned with the pressures exerted by peers and even their superiors. In this
research, we used subjects who are classified as members of a high power distance
and low individualism society. This approach is different from previous studies. Since
public accountant is a worldwide profession, it is important to understand the impact
of cultural dimension on the profession. We argue that high power distance and low
individualism tends to amplify the impact of obedience and conformity pressures.
Therefore, we expect that our result will differ from that of Lord and DeZoort (2001).
Moreover, only recently has the Indonesian House of Representative signed a public
accountant legislation. The legislation is triggered by the public’s demand for public
accountant’s integrity and professionalism. Therefore, this research has benefits
for Indonesian regulators who need to establish whether or not auditor integrity and
professionalism is a problem in Indonesia.
We further investigate the impact of locus of control (LOC) and the
multidimensionality of professional commitment on auditors’ judgment under
conditions of social pressure. We use a construct that has been newly introduced in
the accounting field. The three dimensions of professional commitment in this research
consist of the affective professional commitment (APC), continuance professional
commitment (CPC), and normative professional commitment (NPC). Moreover, we use
subjects from four CPA firms; two Big Four and two non-Big Four CPA firms. This will
improve the external validity of our results compared to prior studies.

Theoretical framework and hypotheses development

Cultural dimensions
Culture can be defined as “the collective mental programming which distinguishes the
member of one group from another” (Hofstede, 1980, 1991). Each group shares its own
societal values and norms which are internalized by its members. Hence, how members Impact of social
behave, especially under social pressures, to some extent depends on their culture. pressures
Cohen et al. (1993) stated that a number of evidences support the contention that
auditors in different countries have different ethical perceptions and standards.
Therefore, it is important to examine the impact of culture on auditors’ (ethical)
judgment as when differences exist researchers can then resolve the problem based
on an understanding of the international setting (Cohen et al., 1993). 165
Hofstede (1998) identified five cultural dimensions that are distinguished among
nations. He named these uncertainty avoidance, individualism/collectivism,
masculinity/femininity, power distance, and short-term/long-term orientation.
However, for the purposes of our hypotheses, we concentrate on two dimensions
of interest in our research: power distance and individualism/collectivism. As defined
by Hofstede (1980) (cited in Smith and Hume, 2005), power distance is the degree
of a society’s tolerance and preference for unequal hierarchical power on the job. It is a
measure of the perceived power or influence between superior and subordinates.
Individuals from high power distance societies tend to fear disagreeing with their
supervisors and obey their supervisors’ commands. Individuals from low power
distance societies believe that inequality in distributed power should be minimized as
they will feel freer to disagree with their supervisors.
Individualism is the degree of relative importance that societal members place upon
their own views and welfare. Low individualism implies that individuals will try to
maintain harmony within the group because they place great importance upon the
group’s views and welfare, i.e. to minimize disagreement or conflict with the group or
the consensus opinion. High individualism means that societal members place great
importance upon themselves rather than the group.

Social pressures
Milgram (1974) believes that the behaviour adopted by a person is due to social
influences pressures. There are two kinds of social pressure: the obedience pressure
from superiors and the conformity pressure from peers. Milgram (1974) stated that
obedience and conformity both refer to the abdication of initiative to an external
source.

Obedience pressure
Milgram (1974) stated that obedience pressure is related to the person who has the
authority in a hierarchical context. The influence of one person upon another is due to
authorization because it is a form of legitimized power. A person with the authority
can influence other persons’ behaviour through his/her orders. The compliance of
subordinates in pressure situations will change the psychological autonomy condition
to an agentic shift condition. In a psychological autonomy condition, subordinates have
the capacity and capability of self-determination based on their values and beliefs.
In the agentic shift condition, individuals lose their self-determination capability and
behave in accordance with their superiors’ orders, even if the behaviour is not
consistent with their values and beliefs. The experiment conducted by Milgram (1974)
showed that authoritative sources may influence the behaviour of subordinates.
In auditing, partners have an authoritative power because they can give rewards,
valuable information, and also punish their subordinates.
DeZoort and Lord (1994) examined whether auditors were vulnerable to obedience
pressure in the form of improper orders from superiors. Using 46 auditors as subjects
ARA in the experimental design, the results showed that the auditors were vulnerable to
20,2 obedience pressure. Auditors who receive improper instructions from a partner or
manager tend significantly to violate professional norms or standards compared to
auditors under no pressure. Furthermore, auditors under obedience pressure from a
partner experienced greater influence than those with pressure coming from their
managers.
166 Lord and DeZoort (2001) examined whether the influence of obedience pressures in
public accounting firms would affect managers wishing to approve financial
statements that contain a material misstatement. The study was a response to
Solomon’s (1994) comments on the study by DeZoort and Lord (1994). One of Solomon’s
(1994) comments was related to the nature of response variable. Instead of using
specific point estimation, DeZoort and Lord (1994) were asked the participants to give
response in the form of probability or likelihood estimation. Using a specific point of
estimation can elicit a specific decision from participant. Lord and DeZoort (2001)
selected a specific point estimate in order to permit participants to take either anchor
point or a point of compromise. A sample of 171 auditors form one international firm
participated in a between-subjects experimental design. The results indicated
significant differences between the group under no pressure and the group under
obedience pressure.
We replicate and extend the approach by Lord and DeZoort (2001) with the main
distinctions being that we concentrate on the auditors’ cultural background and the
application of the explanatory variables: LOC and the multi-dimensional of
professional commitment. The subjects in this research are Indonesian auditors
characterized by a high power distance culture (Hofstede, 1983). This has implications
on the extent to which subordinates will obey their superiors’ orders. Subordinates
from high power distance cultures fear disagreeing with their superiors, or, in other
words, they tend to obey their superior’s orders compared to those from low power
distance cultures. In our study, subjects were asked to make a judgment (sign off) on
the net equipment balance for the assets in question. The larger the balance determined
the higher probability of the financial statements misstated. Based on the theory of
obedience pressure and cultural dimension we construct hypothesis one as follows:

H1. Auditors under obedience pressures will sign off higher on the net equipment
balance for the assets in question compared to auditors under no obedience
pressures.

Conformity pressure
Festinger (1954) developed a theory of social comparison processes to explain the
phenomenon of conformity pressure. The pressure is materialized in the individual’s
desire to be considered as a group member. This is achieved by following the
prevailing attitudes within the group. The individual’s tendency to follow group
behaviour is not based on the existence of rewards or punishment but rather on the
desire to gain recognition as part of a group. Although obedience and conformity
pressures exerted by an external source, however, they are different in the following
ways (Milgram, 1974):

(1) hierarchy: obedience pressure occurs within a hierarchical structure in the

organization; meanwhile, conformity pressure occurs among those of equal
status;
 (2) imitation: conformity is imitation of peers’ behaviour but obedience is not; Impact of social
(3) explicitness: in obedience pressure, commonly the prescription for taking some pressures
behaviour is explicit. In conformity pressure, it often remains implicit; and
(4) voluntarism: in conformity, individuals use voluntarism to explain their
behaviour.
Early research on conformity pressure was conducted by Asch (1951, 1956). His 167
experiments showed that when an individual has a set of information that has been
equally interpreted by all other members of the group, then the judgment of this
individual tends to follow the consensus agreement and he ignores his own perceptions
of the information presented, even if consensus interpretation contains errors.
Lord and DeZoort (2001) applied this theory in their study. However, they found no
support that conformity pressure affects auditors’ judgment. We argue that their result
may be due to cultural dimensions. Hofstede (1983) defines Indonesia as one of the
countries characterized by low individualism. Subjects from low individualism
cultures tend to minimize their disagreement of their peers’ opinions. Based on this
reasoning, the second hypothesis can be constructed as follows:

H2. Auditors under conformity pressures will sign off higher on the net equipment
balance for the assets in question compared to auditors under no conformity
pressures.
LOC
LOC refers to the extent to which individuals attribute the events in their lives to
actions or forces beyond their control. When individuals believe that the events in their
lives are the result of circumstances beyond their control (e.g. fate, chance, luck, or
destiny) and believe that they have little control over what happens to them then
they are classified as having an external LOC. Consequently, these individuals tend not
to consider themselves personally responsible for the consequences of unethical
behaviour. They will blame it on external factors. In contrast, individuals with an
internal LOC believe that what happens in their lives are the result of their decisions
and actions; hence, they will tend to consider themselves personally liable for the
actions taken. LOC has been widely applied in the accounting field (e.g. Singer and
Singer, 1985; Tsui and Gul, 1996; Hyatt and Prawitt, 2001; Patten, 2005). All of these
studies demonstrate that LOC is a robust determinant of individual behaviour in
accounting and auditing.
We argue that individuals with an internal LOC differ in their responses from
individuals with an external LOC. Auditors with an internal LOC will firmly hold on to
their opinions and will not be easily influenced, even when subjected to social pressures. In
the context of our research, auditors with an internal LOC will determine the net equipment
balance to be smaller than auditors with an external LOC under conditions of obedience
and conformity pressures. Based on this reasoning, H3 can be constructed as follows:
H3a. Auditors with an external LOC will sign off higher on the net equipment
balance under obedience pressures compared to auditors with an internal LOC
under similar pressures.
H3b. Auditors with an external LOC will sign off higher on the net equipment
balance under conformity pressures compared to auditors with an internal
LOC under similar pressures.
ARA Professional commitment
20,2 Professional commitment has been a concept of interest for researchers and
practitioners in accounting for more than 20 years (Hall and Langfield-Smith, 2005).
Professional commitment refers to the attachment of individuals in the profession or,
in other words, to the strength of an individual’s identification with a profession.
Individuals with high professional commitment are characterized as having a strong
168 belief in and acceptance of professional goals, having a strong desire to maintain
membership in the profession, and willing to use their efforts to advance the profession.
The strength of professional commitment has consequences on performance
improvement, turnover intentions, and the level of satisfaction on the profession
(Hall and Langfield-Smith, 2005). However, thus far, accounting researchers have
been using only a single dimensional construct to measure professional commitment.
Meyer et al. (1993) stated that by examining professional commitment in multiple
dimensions, a complete understanding of individual commitment to the profession
is provided.
The multidimensional construct of professional commitment has found support in
every profession and occupation (Meyer et al., 1993; Hall and Langfield-Smith,
2005). Hall and Langfield-Smith (2005) stated that focusing on a single dimension of
professional commitment only provides a partial understanding of the auditor’s
profession. The unique characteristics of the public accountant profession will have a
significant impact on all dimensions of professional commitment. This is of crucial
importance when analyzing the antecedents, correlations, and consequences of the
professional behaviour of auditors.
Lord and DeZoort (2001) only used a single dimension of professional commitment
as one of the predictors of auditors’ judgment under social influence. Moreover, their
findings did not support the hypothesized relationship between professional
commitment and auditors’ judgment. We argue that a single dimension is not
sufficient to cover all aspects of auditors’ professional commitment. Unlike previous
research, we use the concept and measurement of professional commitment developed
by Meyer et al. (1993) that was adapted for the accounting profession by Smith and Hall
(2008). To the best of our knowledge, this is the first study investigating the
relationship between the three dimensions of professional commitment and auditors’
judgment, particularly under conditions of social pressure.
Professional commitment consists of three dimensions: APC, CPC, and NPC. APC is
the extent to which individuals “want to stay” in the profession because they identify
with the goals of the profession and want to help the profession to achieve those goals.
CPC is the extent to which individuals feel they “have to stay” in the profession
because of the accumulated investment that they have (e.g. in study effort, training,
etc.) and the lack of other alternatives. NPC refers to the extent to which individuals
feel they “ought to stay” in the profession as an obligation. It seems likely that CPC
characterizes pragmatic individuals rather than idealistic individuals. Related to the
auditors’ judgment of the net equipment balance for the assets in question under social
pressures, we assume that auditors with higher APC and NPC tend to sign off lower
balances compared to CPC auditors. Based on this reasoning, the fourth and fifth
hypotheses can be constructed as follows:

H4a. Auditors with higher APC will sign off lower on the net equipment balance
under obedience pressures compared to auditors with lower APC under
similar conditions.
 H4b. Auditors with higher NPC will sign off lower on the net equipment balance Impact of social
under obedience pressures compared to auditors with lower NPC under similar pressures
conditions.

H4c. Auditors with higher CPC will sign off higher on the net equipment balance
under obedience pressures compared to auditors with lower CPC under similar
conditions. 169
H5a. Auditors with higher APC will sign off lower on the net equipment balance
under conformity pressures compared to auditors with lower APC under
similar conditions.

H5b. Auditors with higher APC will sign off lower on the net equipment balance
under conformity pressures compared to auditors with lower NPC under
similar conditions.

H5c. Auditors with higher CPC will sign off higher on the net equipment balance
under conformity pressures compared to auditors with lower CPC under
similar conditions.

Table I presents a summary of the hypothesized relation.

The research framework is depicted in Figure 1.

Research method
Research subjects. In the present study, we use real auditors as subjects. This will
increase the external validity of the study compared to using accounting students. A
sample of 70 auditors from two Big Four and two non-Big Four CPA firms participated
in the experiment. Using BIG Four and non-Big Four CPA firms will increase the

Hypothesis Expected relation

Table I.
H4a  Summary of expected
H4b  relation between
H4c þ professional commitments
H5a  and auditors’ judgment in
H5b  the context of social
H5c þ pressures

Research framework

Social pressures
Obedience pressure Auditors’
judgment
Conformity pressure

Locus of control
Figure 1.
Professional commitment Research framework
ARA generalizability of the findings compared to using auditors from just one CPA firm.
20,2 Data were collected by mailing the research instrument to contact persons in the CPA
firms. The contact persons administered the research instrument to participants
of their choosing. The participants completed the instrument and returned it to
the contact persons. The contact persons then mailed the completed instrument to the
researchers. A total of 83 out of 130 questionnaires were returned, corresponding to a
170 response rate of 63.84 per cent. From the returned instruments, 13 responses were
excluded as incomplete because of a failure in the manipulation checks or assessing the
net equipment balance to more than Rp2 billion[1].
Table II provides descriptive statistics showing that 37 (53 per cent) and 33 (47 per
cent) of the auditors were from Big Four and non-Big Four CPA firms. The rank of the
subjects was 31 (44.29 per cent) staff members, 37 (52.86 per cent) seniors, and two
(2.86 per cent) managers. A total of 46 (65.71 per cent) auditors were female and 24
(34.29 per cent) were male. The auditors had an auditing assignment experience
covering between six and 24 months for 21 (30 per cent), 25-36 months for 24 (34.29
per cent), and more than 36 months for 25 (35.71 per cent)[2].
Research design and procedures. We use a between-subject design in our
experiment. Subjects were divided into three groups: the group under no pressure as
control group (Group A), the group under obedience pressure (Group B), and the group
under conformity pressure (Group C). Random assignment was done to ensure
comparability among treatment groups.
The case study was implemented as a research instrument. The case[3] was adapted
from Lord and DeZoort (2001). In this case, subjects were asked to hypothesize
themselves as a senior auditor that had been assigned to a new client. The subjects
were informed that they were replacing their colleague who had served in the similar
assignment. In the auditing process, the subject could not verify the existence and
valuation of Rp2.5 billion of fixed assets. Based on this condition, the subject proposed
the client’s CFO to write off the assets. However, the client’s CFO refused this proposal
and suggested keeping the assets as recorded and begins deprecating the assets from
this year using the straight line method. As opposed to the original case, in our case,
subjects were not told that the client’s CFO threatened to change auditors. This was to
keep the case unbiased and focused only on social pressures.

Count %

Firm type
Big Four 37 52.85
Non-Big Four 33 47.15
Position
Staff 31 44.29
Senior 37 52.86
Manager 2 2.86
Gender
Female 46 65.71
Male 24 34.29
Experience
Table II. 6-24 months 21 30.00
Subjects’ descriptive 25-36 months 24 34.29
statistics 436 months 25 35.71
The subjects randomly received one of the research instrument versions (A, B, or C). Impact of social
Subjects in the control Group A did not receive any information about pressure to pressures
receive the client’s CFO’s suggestion both from a partner or colleague. Subjects under
the obedience pressure Group B were informed that when they asked the partner
about this condition, the partner suggested accepting the client’s CFO’s suggestion in
order to ensure retention of the client. Lastly, subjects under the conformity pressure
Group C were informed that the replaced colleague had suggested accepting the client’s 171
CFO’s suggestion and worried about the participant’s future career if the participant
refused the suggestion.
After receiving the instruments, subjects were asked to read the first introductory
section containing a description of the research objective, a guarantee of the anonymity
of the subject, and a statement that the participation was voluntary without any
penalty if the subjects refuse to participate. It was estimated that it would take 30-45
minutes to complete the research instrument. Subjects were requested to return the
finished research instrument to the contact persons.
The second part of the research instrument was a case study. The third part was
a manipulation check. The fourth part was a LOC instrument that consists of 29
statements. The fifth section was the three-dimensional of professional commitment
instrument. Each dimension consists of six statements. The last part was demographic
data such as age, gender, and duration of work experience in the auditing field.
Dependent variable. The subjects’ judgment (sign off) of the net equipment balance
for the assets in question is the dependent variable of this study. The subjects were
requested to determine the net equipment balance within the range from Rp0 to Rp2
billion. Table III presents the descriptive statistics of the subjects’ judgment. The
number of subjects in each group is respectively 23 in the control group, 25 in the
group subjected to obedience pressure, and 22 in the group under conformity
pressure.
Table III also presents frequency data for each group treatment. A total of 61 per
cent of the subjects in the control group assigned the net equipment balance of Rp0, 26
per cent assigned the net equipment balance of Rp2 billion, and 13 per cent assigned
the net equipment balance higher than Rp0 but lower than Rp2 billion. For the group
under obedience pressure, 24 per cent of the subjects assigned the net equipment
balance of Rp0, 56 per cent assigned the net equipment balance of Rp2 billion, and
20 per cent assigned the net equipment balance higher than Rp0 but lower than Rp2
billion. Finally, 23 per cent of the subjects in the conformity group assigned the net
equipment balance of Rp0, 64 per cent assigned the net equipment balance Rp2 billion,
and 14 per cent assigned the net equipment balance higher than Rp0 but lower than
Rp2 billion.
Independent variables. In the present research, we have both manipulated and
measured independent variables. Social pressures (i.e. obedience and conformity
pressures) are our main manipulated independent variable. We manipulate the variable

Percentage of subjects’ judgment

Treatment n Mean (Rp) SD (Rp) Rp0 Rp2 million Rp0oxoRp2 million

No pressure 23 641,304,348 881,714,777 61 26 13 Table III.

Obedience pressure 25 1,447,000,000 845,586,581 24 56 20 Descriptive statistic of the
Conformity pressure 22 1,454,545,455 843,872,746 23 64 14 subjects’ judgment
ARA through a case that randomly assigned to the subjects. We manipulate the variable into
20,2 three treatments: no social pressure, obedience pressure, and conformity pressure.
Meanwhile, our measured variables are LOC and professional commitment.
LOC was measured using the instrument developed by Rotter (1966) and it consists
of 29 statement items. This instrument has been used extensively in accounting
research (Tsui and Gul, 1996; Hyatt and Prawitt, 2001; Chong and Eggleton, 2003;
172 Donnelly et al., 2003; Patten, 2005). Subjects were asked to respond whether they
agreed with the statements. They were asked to respond agree if the statements
reflected their personal beliefs, or disagree otherwise. Theoretically, LOC scores can
range from 0 to 23, with lower scores indicating internal tendencies and higher scores
indicating external tendencies. The actual LOC scores in our study ranged from 1 to 16.
The median value is used to divide subjects into internal or external LOC groups.
Professional commitment was measured using the instrument developed by Meyer
et al. (1993) and adapted for the accounting profession by Smith and Hall (2008).
Professional commitment consists of APC, CPC, and NPC dimensions. Each dimension
has six question items and subjects were asked to respond on a seven-point Likert-type
scale. The scale can range from 1 (strongly disagree) to 7 (strongly agree). We tested
the validity and the reliability of the instrument using factor analysis and the Cronbach
a statistic (Cronbach, 1951). In the present research, each dimension of professional
commitment is one-dimensional and each question has a factor loading exceeding 0.5,
except for question numbers 3 and 4 (CPC items), hence these items are removed from
CPC dimension. For the remaining items, the a reliability statistic shows 0.898 on APC,
0.773 on CPC, and 0.849 on NPC.
Manipulation check. A set of manipulation checks was designed to examine whether
our subjects feel pressure in each treatment group. Subjects were asked to respond yes
or no. In addition, subjects were asked to respond whether or not the case was realistic.
Subjects were asked to respond on a seven-point Likert-type scale from completely
realistic (1) to completely unrealistic (7). All subjects under social pressure treatment
that were included in the analysis responded that they felt pressure from the partner or
colleague because of the case instrument. Moreover, the subjects answered that the
case was realistic with mean value 1.91.

Analysis and results

Obedience and conformity pressures
H1 states that auditors experiencing obedience pressure will sign off higher the net
equipment balance for the assets in question compared to auditors without pressure.
Moreover, H2 states that auditors under conformity pressure will sign off higher the
net equipment balance than auditors without pressure. To test the first and second
hypothesis, a one-way analysis of variance (ANOVA) was performed. Table IV reports
the results of hypothesis testing for H1 and H2. The mean value of auditors’ judgment
for the group under no pressure is Rp641,304,348; for the group under obedience

F p value

Control vs obedience pressure 10.440 0.002*

Table IV.
Control vs conformity pressure 9.975 0.003*
Results of hypotheses
testing: H1 and H2 Note: *Significant at the 0.05 level
pressure is Rp447,000,000 (F ¼ 10,440; po0.002); and for the group under conformity Impact of social
pressure is Rp454,545,455 (F ¼ 9,975; po0.003). Therefore, H1 and H2 are supported. pressures
LOC
H3a and H3b state that – compared to auditors with an internal LOC tendency –
auditors with an external LOC tendency will sign off the net equipment balance higher
both under obedience and under conformity pressures. In the group under obedience 173
pressure, subjects that are classified as having an internal/external LOC tendency
comprise of 11 and 14 subjects, respectively. In the group under conformity pressure,
the corresponding numbers comprise of ten and 12 subjects, respectively.
To test H3a and H3b, an ANOVA was conducted. Table V shows the mean of
judgment values and the F values for each LOC category. Although the mean of the net
equipment balance for an external group is higher than that of an internal, both under
obedience and conformity pressures, the differences are not statistically significant.
Therefore, H3a and H3b are not supported.

Professional commitment
H4a, H4b, and H4c predict that there is a relationship between the degree of auditors’
professional commitment and their judgment of the equipment account balance. H4a
states that – under obedience pressure – auditors with higher APC will sign off lower
the net equipment balance than auditors with lower APC under similar conditions. H4b
states that – under obedience pressure – auditors with higher NPC will sign off lower
the net equipment balance than will auditors with lower NPC under similar pressure
conditions. Finally, H4c states that – under obedience pressure – auditors with higher
CPC will sign off higher the net equipment balance than auditors with lower CPC under
similar pressure conditions. H5a, H5b, and H5c have an analogous construction but
under conformity pressure.
To test these hypotheses, a bivariate Pearson correlation analysis was performed.
Table VI presents the correlations between the auditors’ judgment and professional
commitment dimensions computed separately for subjects under both obedience
and conformity pressures. Table VII presents the summary of hypothesized relation
and actual relation. The results indicate that although the correlation signs support the
expected relation (except for H4a); however, the results are not statistically significant
at conventional levels (except for H5a).
Like Lord and DeZoort (2001), we also asked subjects to indicate the impact of
presenting the net equipment balance for the assets in question in the amount of Rp2
billion in the financial statements. The responses, on a five-point Likert-scale ranging
from 1 (not materially misstated at all) to 5 (materially misstated), are summarized in
Table VIII. We note that 91 per cent of the subjects across groups agree that if the net

n Mean (Rp) F p value

Group under obedience pressure 1.738 0.195

Auditors with an internal LOC 14 1,250,000,000
Auditors with an external LOC 11 1,697,727,273
Group under conformity pressure 0.051 0.824 Table V.
Auditors with an internal LOC 12 1,416,666,667 Results of hypotheses
Auditors with an external LOC 10 1,500,000,000 testing: H3a and H3b
ARA Jud (obedience pressure) Jud (conformity pressure)
20,2
APC
Pearson correlation 0.115 0.451
Significance (one-tailed) 0.292 0.018*
n 25 22
174 NPC
Pearson correlation 0.002 0.137
Significance (one-tailed) 0.496 0.272
n 25 22
CPC
Pearson correlation 0.153 0.141
Significance (one-tailed) 0.233 0.266
n 25 22
Table VI.
Results of hypotheses Notes: Jud, auditor’s judgment; APC, affective professional commitment; NPC, normative professional
testing: H4 and H5 commitment; CPC, continuance professional commitment. *Significant at the 0.05 level

Hypothesis Expected relation Actual relation Significance

Table VII.
Summary of expected H4a  þ ns
relation and actual relation H4b   ns
between professional H4c þ þ ns
commitments and H5a   Significant
auditors’ judgment in the H5b   ns
context of social pressures H5c þ þ ns

Response N %

Table VIII. Would not be materially misstated at all 1 1

Subjects’ response on the Would not be materially misstated 1 1
impact of presenting Rp2 Not sure 4 6
billion in financial Would be materially misstated 35 50
statements Would be materially misstated at all 29 41

equipment balances of Rp2 billion is presented in financial statements, then it will

materially misstate the financial statement. Nevertheless, 49 per cent of the subjects
signed off on the net equipment balance of Rp2 billion. A minor portion of the
subjects (i.e. 16 per cent) decided to compromise with the client and signed off the net
equipment balance to more than Rp0 but less than Rp2 billion. This result indicates that
auditors are more lenient in their integrity and professionalism under social pressures.

Discussion and concluding remarks

We investigate the impact of social pressures on auditors’ judgment. The results
indicate that social pressure affects auditors’ judgment, i.e. both obedience pressure
from partners and conformity pressure from peers/colleagues. These evidences
confirm the results of Lord and DeZoort (2001) for auditors under obedience pressure Impact of social
conditions but disconfirms for auditors under conformity pressure. As we discussed pressures
above, we believe the difference to be due to cultural dimensions. The respondents of
our research are members of a society that is characterized by a low individualism and
high power distance culture. Therefore, our results indicate and support the argument
that cultural dimensions have a significant impact on auditors’ behaviour and
therefore should be considered in the auditing field both in theory and in practice. 175
In addition, prior studies focused only on external pressures faced by auditors and
ignored internal pressures. Our findings suggest the profession and its regulators
taking into account the internal pressures that exist within CPA firms. Action should
be undertaken to ensure the minimizing of internal pressures. Auditing education and
training should implement curriculum that includes how auditors should properly
behave under conditions of not only external but also internal pressures. Especially in
the Indonesian context, this research gives some evidence that auditors’ integrity and
professionalism could be in danger under conditions of social pressure because these
pressures are imbued with the Indonesian culture, i.e. high power distance and low
individualism.
We also investigate the impact of auditors’ LOC on auditors’ judgment under
conditions of social pressure. Our results show that auditors with an internal LOC
signed off on the net equipment balance lower than auditors with an external LOC. The
mean value of the net equipment balance is as we expected. Individuals with an
internal LOC are more responsible in their behaviour because they believe that they
have control over the events in their lives. Although neither is statistically significant,
the lack of significance does not eliminate the potential impact of this variable. Further
research should investigate the variable in the context of social pressures and a larger
sample is needed.
The multidimensionality of professional commitment is a new construct in the
accounting and auditing field. Prior studies have considered this variable as one
potential variable that explains auditor behaviour. However, they have only focused on
a single dimension of professional commitment. Future study should use this variable
to examine the impact of each dimension on auditors’ behaviour and judgment. The
signs of correlation among multidimensional of professional commitment and auditors’
judgment are in accord with our expectations; however, this correlation is not
statistically significant. Future research should more deeply explore each dimension in
the context of the auditing field. A larger sample is required to thoroughly explore
and examine each dimension.
Our results should be interpreted with caution due to limitations of the experimental
method and to the difficulties of manipulating the treatment variables to more closely
reflect a realistic situation. Moreover, we used field experimental setting to conduct our
experiment. We realize that these could influence our internal validity. Lastly, a number
of replications are needed to further substantiate our claim that cultural dimensions
affect auditors’ judgment in the conditions of social pressure.
Notes
1. Our research was conducted in an Indonesian setting with all currency stated in Rupiah (Rp),
1 USD is approximately equal to 9,000 rupiah.
2. We run CPA firms, position, gender, and experience as covariates in our main analysis. The
results show that none of the covariates significantly affected our main analysis.
3. Appendix
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Further reading
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pp. 372-8.
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organization: evaluation of measures and analysis of concurrent and time-lagged
relations”, Journal of Applied Psychology, Vol. 75 No. 6, pp. 710-20.
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normative commitment to the organization: a meta-analysis of antecedents, correlates,
and consequences”, Journal of Vocational Behavior, Vol. 61 No. 1, pp. 20-52.

Appendix. Instrument (the obedience pressure treatment)

Please assume yourself as stated in the case:

You are a CPA who is senior in a large accounting firm and your career has been advancing rapidly.
You expect to have an excellent chance of being promoted to manager next year which would be at
least one year ahead of your peers. To replace another senior that has been assigned to a new
engagement, you have been assigned the fieldwork responsibilities for the 2010 audit of Gregg
Technology, Inc. (GT) a publicly held manufacturer of scientific computers. You have not worked
previously on GT audit team. Although it may seem unusual, because of your experience and ability
you are now the highest level non-partner assigned to the GT audit. Your duties include planning
and coordinating the audit, supervising the audit staff, and communicating with GT management.
During the 2010 audit, you attempt to verify the existence and valuation of 2.5 billion Rupiah
of assets described on GT’s books as “Assets in Process”. The Assets in Process account is used
by GT to group together the costs of functionally related equipment acquired by GT until all the
fixed assets are acquired. It is GT’s practice to transfer the accumulated cost of the equipment to
a fixed asset account, “Equipment”, and commence recording depreciation on the equipment only
when it is placed in service.
ARA During the audit you are told by GT production engineers that the equipment (Assets in
Process) in question had been purchased and placed in service at the beginning of 2006, and that
20,2 the equipment had a five year useful life. However, you find that no depreciation has been
recorded during the five years since the acquisition and placement of the equipment. Although
working papers from prior audits reflected the existence and cost of the assets, when you attempt
to verify the existence and cost of the equipment, GT employees are unable to describe the
equipment in detail or to provide you with invoices supporting the original purchase and cost of
178 the equipment. Moreover, GT management is unable to physically locate the equipment in
question. As a result, you conclude and document in working papers that the equipment in
question cannot be physically located, is not identifiable from GT’s books and records, and
should have already been fully depreciated if, in fact, the equipment exists. You proposed
an audit adjustment to write-off the Assets in Process in question as an expense in the amount of
2.5 billion Rupiah. Planning materiality for the audit was 5 per cent of income. GT’s unadjusted
net income after all other adjustments, but before considering the assets currently recorded in the
Assets in Process account, is 10 billion Rupiah. Thus, the proposed adjustment would reduce
GT’s income from 10 to 7.5 billion Rupiah.
GT’s CFO disagrees with your recommendation to write-off the Assets in Process in question.
The CFO said that the equipment is there but cannot be separately identified because it was
incorporated into an existing production line in 2008 when the company moved to its current
production facility. GT’s CFO proposes to shift the Assets in Process balance of 2.5 billion Rupiah
to the Equipment account and to record 500 million Rupiah of depreciation expense starting in
2010, with the remaining balance depreciated straight line through the year 2014.
The partner from the previous year’s audit of GT is no longer with your firm. During the
audit, the new partner in-charge of the engagement held several discussions with the client’s CFO
about the Asset in Process account in question. Despite agreeing with the audit evidence and the
documented conclusions of you and your staff, the audit partner suggests the circumstances
are ambiguous enough to justify a compromise given the concern about losing the client. The
partner tells you it would be best for the firm to accept the CFO’s proposal to shift the Asset in
Process balance to Equipment at 2.5 billion Rupiah (cost) with 500 million Rupiah depreciation
expense recorded for 2010, and an agreement that GT depreciates the remainder of the asset over
the next four years. Consistent with the senior, the partner instructs you to sign-off on working
papers reflecting a 2010 net Equipment balance of 2 billion Rupiah.

*Instruction: You may refer to any of the preceding pages to answer the following question.
Without considering tax effects, what net Equipment balance for the assets originally recorded
as “Assets in Process” would you sign-off in the 2010 working papers (i.e. the net balance should
be X0 Rupiah and p2 billion Rupiah)?

About the authors

Damai Nasution is a PhD Candidate in the School of Business and Economics at Åbo Akademi
University, Finland; and a Lecturer in the Faculty of Economics and Business at Airlangga
University, Indonesia. Research interests include auditing, financial accounting, and
management accounting. Damai Nasution is the corresponding author and can be contacted
at: dnasutio@abo.fi or damai.nasution@feb.unair.ac.id
Ralf Östermark is a Professor of Accounting and Optimization Systems in the School of
Business and Economics at Åbo Akademi University. Research interests include auditing,
financial accounting, and optimization systems.

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