Managerial Auditing Journal

Emerald Article: Time Budget Pressure and Filtering of Time Practices in InternalAuditing: A Survey Ali N. Azad

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To cite this document: Ali N. Azad, (1994),"Time Budget Pressure and Filtering of Time Practices in InternalAuditing: A Survey", Managerial Auditing Journal, Vol. 9 Iss: 6 pp. 17 - 25 Permanent link to this document: http://dx.doi.org/10.1108/02686909410061242 Downloaded on: 25-07-2012 References: This document contains references to 17 other documents Citations: This document has been cited by 1 other documents To copy this document: permissions@emeraldinsight.com This document has been downloaded 1456 times since 2005. *

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Time budgets are perceived to be tightening, resulting in auditors dysfunctional behaviours, such as filtering of time practices.

Time Budget Pressure and Filtering of Time Practices in Internal Auditing:

A Survey
Ali N. Azad

the budgetary system through premature sign-offs and under-reporting of time. Evidence obtained by Rhode[1] identifies time budget pressure as the primary motivating factor for the non-performance of an audit procedure. Similarly, other studies[4,2,5] have pointed out that time budget pressure is a significant dysfunctional influence that produces substandard audit work, leads to violations of auditing standards, and causes unethical conduct. To date, no study has been undertaken to determine any negative consequences of time budget pressure on the practice of internal auditing. Internal audit departments use time budgets, prepared in accordance with audit programmes, to plan and monitor auditing assignments. Section 520 of the Standard for the Professional Practice of Internal Auditing (SPPIA) published by the Institute of Internal Auditors (IIA) states, in part, that audit work schedules should include: (1) the estimated time required; (2) compare actual performance with the departments audit work schedule; (3) explain any major variances; (4) indicate any action taken if needed[6]. Once a time budget is set, it becomes a performance goal and internal auditors are expected to meet it. Undue emphasis on meeting budgeted time may create pressure on internal auditors in performing audit assignments. This in turn may lead to negative behaviour similar to that exhibited by independent auditors, such as premature sign-offs and under-reporting of time.

Purpose and Significance of the Study

Managerial Auditing Journal, Vol. 9 No. 6, 1994, pp. 17-25 MCB University Press, 0268-6902

Introduction
Premature sign-offs and under-reporting audit time are two of the negative behaviours that may result from time budget pressures. The negative influence of time budget pressure on the behaviour of independent auditors is well documented in the auditing literature[1,2,3]. Over the past two decades many studies have suggested that using time budget as a performance goal in audit settings induces pressure and may lead auditors to override
The author wishes to acknowledge the research support of the College of Business Administration, Loyola Marymount University.

The primary purpose of this study is twofold. It attempts to determine, first, the attitude of internal auditors towards time budget and, second the likely or perceived existence of premature sign-offs or other audit quality reduction acts in internal auditing function. Additionally, selected demographic information regarding the participants in the study is collected. The effect of internal auditors dysfunctional behaviours resulting from time budget pressure on audit quality is a significant problem. Internal auditors dysfunctional behaviours may be evidenced by a variety of negative actions such as: signing off an audit programme without performing the audit step or noting its omission, taking unwise curtailments and/or reducing the scope of the work performed below an acceptable level, under-reporting of time spent on an assignment, over-relying on the auditees explanations and presentations, failing to investigate a relevant issue, failing to follow-up on an audit recommendation, and other similar acts. In this study all these negative actions are referred to as filtering of time.

Filtering of time compromises internal audit quality. The adverse effect of a substandard internal audit quality is not limited to the entity itself. The detriment of a compromised audit quality may also extend to the independent auditors, vis--vis, a hidden increase in the overall external audit risk. For example, dramatic financial scandals and fraud cases of the past decade followed by an ever- increasing liability exposure of the public auditing profession have, once again, brought the issue of corporate fraud and the external auditors responsibility for its detection to the forefront of public debate. Independent auditors responsibility for detection of fraud under the current Statement on Auditing Standards (SAS 53, 1989) is to assess the risk that errors and irregularities material to financial statements have occurred; and to design the audit to provide a reasonable assurance that such errors and irregularities will be detected[7]. Under SAS 53, the assessment of the risk should be done in the light of the auditors understanding of the internal control structure. Such an assessment of control risk, absent knowledge or suspicion of internal auditors filtering of time may be unrealistic, if not impossible, and consequently may unknowingly increase independent auditors overall audit risk. With respect to the entity itself, a compromised audit quality may adversely affect both efficiency and effectiveness of the internal audit. As for efficiency, internal auditors frequently perform financial audits similar to those performed by independent auditors. According to auditing standard, independent auditors may rely on the work of internal auditors to reduce the scope of their examination (SAS No. 65, 1991)[8]. External auditors reliance on the work of their internal counterparts often results in a direct cost saving to the client[9,10]. Also owing to the independent auditors time savings, the client may receive a wider mix of auditor services for the same cost[11]. A survey by Ward and Robertson concluded that the extent of external auditors reliance on the work of internal auditors is positively correlated with the quality of the internal audit function[12]. To that extent, an inferior internal audit quality prompted by time budget pressure may increase, or fail to decrease, external audit cost. With respect to the effectiveness of internal auditing, this dimension is measured in terms of the ability of internal auditing to meet its objective, which is to provide the members of the organization with analysis, appraisals and recommendations concerning the activities reviewed. The purposes of the review of activities are to ascertain: (1) the reliability and integrity of financial information; (2) compliance with policies, laws and regulations; (3) the safeguarding of assets;

(4) the economical and efficient use of resources[6]. A substandard internal audit quality may not succeed in meeting its objectives in the areas of financial, operational, or compliance auditing.

The Study
A survey was conducted to gather data concerning time budget pressure and its potential influence on the behaviour of internal auditors. A preliminary questionnaire was pilot tested and modified according to the result of the pilot study. The final questionnaires were mailed to 638 internal auditors who were members of the IIA. The sample was chosen randomly from the memberships directory of Atlanta, Dallas/Fort Worth, Houston and Los Angeles Chapters of the Institute. It is believed that the memberships in these local chapters represent a cross-section of the IIAs membership. This study utilized three waves of questionnaires. Owing to the sensitive nature of the study, the participants were promised anonymity. To ensure complete anonymity and thus improve overall response rate, no survey document was in any way coded to be identified with a given respondent. Of the 638 questionnaires mailed, a total of 312 were returned. However, not all were usable; 15 respondents did not wish to participate in the study and 35 questionnaires were returned substantially incomplete. A total of 262 usable questionnaires were received and the usable response rate was over 41 per cent. Using an approach similar to that used by Pany and Reckers[13], a comparative analysis of responses to the three waves of mailings did not reveal any statistically significant differences between the responses, thereby, minimizing the likelihood of any non-response bias[14,15].

Data Analysis and Findings

The data presentation is divided into two sections. The first section reports the results of survey responses to the time budget and filtering of time-related questions. The second section reports the demographic information. The survey questions investigate a variety of areas. They start with a few general questions and proceed to cover specific questions regarding time budget and its perceived influence on internal audit functions. Remaining questions concern the likely or perceived existence of premature sign-offs in internal auditing, their causes, audit areas most likely affected and means of reducing them. The results of the survey are presented in Table I which depicts the survey questions, distribution of responses in percentages, mean values calculated using the respondents answers on a one-to-five scale (with one and five representing strong disagreement and strong agreement, respectively), and standard deviations. Since, for the

Table I. Distribution of Responses (in per cent), Mean Values, and Standard Deviations to Survey Questions
Question number Strongly Strongly disagree Disagree Undecided Agree agree Mean Standard (1) (2) (3) (4) (5) value deviation 1.5 3.8 3.4 51.7 39.6 4.24 0.82

Question

n 261

1. The inclusion of specific audit steps in the audit programme facilitates the proper overall conduct of an audit 2. The auditors professional judgement is always sufficient to overrule the performance of a specific audit step 3. In my opinion, some auditors in my department signoff required audit steps, not covered by other audit steps, without completing the work or noting the omission of procedures (hereafter referred to as premature sign-off) 4. The time budget interferes with the proper conduct of an audit 5. The performance of a specific audit procedure is the primary responsibility of the person performing the procedure 6. The time budget has a significant influence on the auditors job performance 7. The time budget is a necessary management tool for the evaluation of an internal audit department 8. The time budget is a necessary management tool for the evaluation of an internal auditor 9. When the time budget is exceeded in one phase of an audit, the internal auditor feels a need to save time elsewhere 10. There is a natural conflict between the concept of a time budget and the gathering of sufficient competent evidential matter 11. Review procedures in my department are adequate to detect premature sign-offs 12. Internal audit personnel sometimes take work home and dont report the time so as to meet the time budget 13. Time budgets have become tighter in recent years 14. Pressure from time budgets leads to internal audit staff and senior turnover 15. High overall performance evaluation would lead to promotion and advancement 16. High overall performance evaluation would lead to job satisfaction 17. High overall performance evaluation would lead to job security 18. In my opinion, premature sign-offs are the result of: a. an audit step appearing unnecessary or immaterial b. dislike for the specific work required c. time budget constraint d. inadequate supervision e. misunderstanding of professional responsibilities f. lack of specific technical knowledge g. desire to obtain a favourable performance evaluation h. inclinations to readily accept operating personnel explanation as sufficient competent evidential matter

260

6.5

47.3

12.3

23.8

10.0

2.84

1.16

260

18.5

29.2

14.2

31.9

6.2

2.78

1.24

261 262

6.1 1.9

41.0 11.8

13.0 4.2

29.9 58.8

10.0 23.3

2.97 3.89

1.65 0.96

262 261 261 260

2.7 3.1 5.0 2.3

24.8 17.6 21.5 18.1

9.5 14.6 18.0 5.8

45.8 52.5 47.9 56.5

17.2 12.3 7.7 17.3

3.50 3.53 3.31 3.69

1.12 1.07 1.05 1.04

262

3.1

29.0

11.5

43.1

13.4

3.35

1.23

261 259 261 260 260 260 262

7.7 10.4 2.3 5.0 2.3 1.5 2.7

25.7 14.3 17.2 38.1 8.1 14.9 24.4

12.3 6.6 13.8 29.6 11.5 15.3 16.0

44.1 44.4 39.1 18.8 55.0 54.6 47.3

10.3 24.3 27.6 8.5 23.1 13.7 9.5

3.24 3.58 3.72 2.87 3.89 3.64 3.37

1.17 1.28 1.11 1.04 0.94 0.95 1.04

262 258 261 261 261 260 261 260

1.9 5.0 1.5 2.3 3.4 2.7 7.7 2.3

13.6 29.1 16.5 14.9 21.1 30.0 36.0 13.8

8.2 14.7 13.8 13.8 18.8 16.2 22.6 13.1

66.1 45.7 55.6 55.9 48.3 42.7 26.1 61.5

10.1 5.4 12.6 13.0 8.4 8.5 7.7 9.2

3.69 0.90 3.17 1.07 3.61 0.96 3.63 0.97 3.37 1.02 3.24 1.05 2.90 1.11 3.62 0.92 (Continued)

Table I.
Strongly Strongly disagree Disagree Undecided Agree agree Mean Standard (1) (2) (3) (4) (5) value deviation

Question number

Question

19. In my opinion, premature sign-offs generally are likely to occur in the audit phase of: a. review and testing of internal control system b. cash c. receivables d. physical inventory counts e. other inventory work (tests of extensions, footings, etc.) f. examination of fixed assets g. payroll h. accounts payable i. long-term and other debt j. owners equity k. expenses l. revenue recognition 20. In my opinion, premature sign-offs could be reduced by: a. tighter supervision of staff (less than two years experience) b. tighter supervision of all internal auditors c. greater allowance for professional judgement at all levels d. greater allowance for professional judgement at staff levels e. de-emphasis of the time budget f. increased variety of work assignments g. improved communication within the audit team 21. In my opinion, premature sign-offs generally are likely to occur in: a. financial auditing b. operational auditing c. compliance auditing

248 247 245 247 248 248 248 247 247 247 247 247

3.6 12.1 8.6 4.0 1.6 1.6 6.5 4.5 4.1 3.7 4.9 3.7

21.4 53.8 42.0 25.5 17.1 24.4 47.2 34.7 28.2 23.3 30.8 29.4

17.3 20.2 22.0 21.5 26.0 27.6 23.6 31.0 33.5 39.6 26.7 34.7

48.4 12.1 26.5 40.9 47.2 41.1 20.3 28.2 31.8 29.8 36.0 29.4

9.3 1.6 0.8 8.1 8.1 5.3 2.4 1.6 2.4 3.7 1.6 2.9

3.84 2.37 2.69 3.23 3.43 3.24 2.65 2.88 3.00 3.06 2.99 2.98

1.03 0.91 0.98 1.05 0.92 0.96 0.95 0.93 0.93 0.91 0.96 0.92

257 257 257 257 259 257 256

1.6 1.6 2.3 4.3 0.4 1.9 0.8

16.3 23.7 35.0 33.9 17.8 17.1 2.7

11.3 18.7 23.0 26.1 21.6 18.7 8.2

59.1 51.0 31.1 30.4 47.9 46.7 60.2

11.7 5.1 8.6 5.4 12.4 15.6 28.1

3.63 3.34 3.09 2.99 3.54 3.57 4.12

0.94 0.95 1.05 1.02 0.94 1.01 0.73

254 253 252

3.9 1.2 1.2

31.5 18.2 17.1

22.8 17.8 19.0

36.6 53.8 51.6

5.1 9.1 11.1

3.08 3.51 3.54

1.02 0.93 0.94

22. In performing your work within the last 12 months, which of the following actions would you have been more likely to take in response to time budget pressures: a. perform task assignments and report time 256 worked over the budget b. cut down on some follow-up-procedures 257 c. perform task assignments on my personal time 258 and do not report that time d. employ my judgement to overrule some audit 257 procedures 23. Time budget attainment is a major factor in the performance evaluation process 24. High overall performance evaluation generally leads to the receipt of pay rises 25. Meeting time budgets contributes to a high overall performance evaluation 258 260 260

5.1 5.4 12.8 1.2 1.9 1.2 1.5

17.2 31.5 24.8 19.1 29.1 12.7 18.1

7.0 16.3 7.0 8.9 15.9 10.8 13.8

53.1 42.8 39.9 58.8 41.1 55.0 54.6

17.6 3.9 15.5 12.0 12.0 20.4 11.9

3.61 3.08 3.20 3.61 3.32 3.81 3.57

1.12 1.06 1.32 0.97 1.08 0.94 0.97

most part, not every respondent answered all questions, the number of respondents answering each question is also presented under column n. As shown in Table I, over 91 per cent of internal auditors surveyed either agree or strongly agree that audit programmes facilitate the proper conduct of an audit. However, one-third of these respondents also believe that an auditors professional judgement is always sufficient to overrule the audit programme.

time practices. Operational auditing is a close second. Although financial auditing appears to be the safest among the three types, 42 per cent acknowledge premature sign-off in this area! In financial auditing the different phases of the audit are not affected equally. Using the mean values of the responses, review and testing of internal control appears to be the most vulnerable. Audit of inventory (both physical count and other related procedures) and examination of fixed assets are ranked next in terms of their susceptibility. Audit of long-term debt, expenses, revenues, payables, receivables and payroll are ranked sixth to eleventh, respectively. Examination of cash is ranked last with two-thirds of respondents acknowledging no premature sign-offs in this area. With regard to the perceived causes of premature signoffs, respondents were presented with eight possible reasons prompting auditors dysfunctional behaviour. The top four culprits (with mean values in 3.60 range) are: (1) perceived inessentiality or immateriality of an audit step; (2) inadequacy of supervision; (3) overreliance on the delineation of operating personnel; (4) time budget pressure. Misunderstanding of professional responsibilities, lack of technical knowledge (personal attributes), and dislike for a given audit task are ranked fifth to seventh, in that order. Internal auditors desire to obtain a favourable performance evaluation is considered the least important reason for premature sign-offs. The study solicited respondents ideas as to how to combat auditors negative behaviours. Improved communication within the audit team is identified as the most effective way of reducing premature sign-offs. The next most effective method is perceived to be tighter supervision of internal auditors, particularly those with less than two years of audit experience. Increased variety in work assignment and the de-emphasis of time budget are the other often-mentioned solutions. The respondents perceive the greater allowance for professional judgement (especially at staff level) as the least responsive method. In the last area of the survey, an attempt is made to determine internal auditors beliefs about: (1) The effect of performance evaluation on job satisfaction, job security, and pay rises. (2) The perceived relationship between the attainment of time budget and performance evaluation.

Auditors cut down on follow-up procedures and under-report time spent

As for the prevalence of premature sign-off in internal auditing, over 38 per cent of the respondents indicate its perceived existence. Over two-thirds report performing audit work in their own time to meet the time budget (under-reporting of time) and almost 78 per cent affirm the necessity of saving time elsewhere when the audit time is overspent. In the area of budgetary ramifications, two-thirds of the respondents corroborate the significant influence of time budget on the job performance of internal auditors. While 78 per cent of the participants perceive the time budget as a necessary tool for evaluation both of internal audit departments and individual internal auditors, nonetheless, 40 per cent of them agree that a time budget interferes with the proper conduct of an audit. Almost three-fifths of internal auditors concede to a natural conflict between the concept of time budget and the gathering of sufficient and competent audit evidence. Sixty-six per cent agree that time budgets have become tighter in recent years. Despite mostly negative feelings, however, time budget pressure, nevertheless, is not perceived as a culprit in staff turnover. Concerning how internal auditors cope with the time budget pressure, it seems that 67 per cent report the time worked over the budget. About 46 per cent cut down on follow-up procedures, and over half under-report the time spent. Finally, an alarming 70 per cent attest to using their own judgement to overrule audit procedures (i.e. premature sign-off or other negative deviations from the audit programme). Among the three types of internal auditing, compliance auditing appears to be most susceptible to filtering of

An overwhelming 75 per cent agree that high overall performance evaluation leads to pay increases. Almost 70 and 57 per cent agree that it leads to job satisfaction and job security, respectively. While over two-thirds of respondents predict a relationship between meeting time budget and high overall performance evaluation, ironically, however, only about one-third consider their desire to obtain a favourable performance evaluation as the underlying reason for premature sign-off.

performance evaluation[17]. As for audit quality, the audit programmes, while providing for specific procedures to be performed, are generally regarded as the minimum standard of performance to achieve audit quality. Thus, if some of the audit procedures are not performed and/or audit programmes are overruled, audit quality may be sacrificed. Regarding planning, planning for repeat assignments is a crucial phase of an overall internal audit and is influenced by the actual time spent on previous engagements. It is reasonable to expect, therefore, that failure to report the actual time worked or the actual time that should have been worked if all audit steps were performed, will lead to unrealistic time estimates for subsequent engagements.

Discussion of Results
The studys strongest result confirms that time budget induces internal auditors to react negatively in the conduct of their audit through premature sign-offs, underreporting of time, and overruling audit programmes. These negative acts are capable of producing substandard audit work and thus decreasing the effectiveness and efficiency of the internal audit function. On the other hand, the respondents overwhelmingly agree that audit programmes facilitate the proper conduct of an audit. A majority of them also agree that time budgets are a necessary management tool for evaluation of internal audit departments and internal auditors. What appears to be disheartening and paradoxical, however, is the widespread negative opinion of time budget ramifications on internal auditing and the strong consensus that the auditors judgement is always sufficient to overrule the audit programme. Time budgets are viewed as an undesirable interference with the proper conduct of an audit. Time budgets are perceived to be tightening, and thus viewed as a barrier to the process of gathering sufficient and competent evidence. The findings that somewhere between 33 and 70 per cent of the total respondents indicate a perceived or likely involvement in some form of negative behaviour seems to suggest a serious situation. For example, the results suggest that the filtering of time is most likely in the review and testing of the system of internal control. This finding is particularly disturbing because of the significance of the system of internal control in any organization. Internal control structure remains a crucial element of any control environment to ensure compliance both with management objectives and the statutory requirements (in the USA) of the Foreign Corrupt Practices Act 1977[16]. Additionally, the system of internal control is the underlying basis for the determination of the nature, timing and extent of all subsequent audit procedures.

Filtering of time may preclude valid comparisons of performance

Finally, in the area of performance evaluation, to the extent that internal audit departments use the attainment of time budget as the basis for performance evaluation, internal auditors filtering of time may prejudice the process. Filtering of time by some may preclude valid comparisons of performance and may avert the firms evaluation system resulting in an unjustified favourable outcome for those engaged in negative behaviours. In the event of such a collapse of the system and the ensuing perceived inequity, other auditors also may be motivated to filter time in the upcoming engagements and consequently perpetuate a wider dimension of unethical conduct.

Recommendations
There may be many factors capable of explaining the unethical and unprofessional conduct of internal auditors. Internal auditors may be overriding audit steps or signing-off required audit steps without completing the work because: (1) they do not fully understand the significance of a particular step in the audit programme; (2) they may not fully understand how each step (despite its perceived insignificance) relates to other audit objectives and the entire examination; (3) they fail to comprehend the potential risks of nonperformance of some audit procedures;

Implications
The discussion of the implications of this study is presented in the areas of audit quality, audit planning and

(4) they perceive the time budget detrimental to their performance evaluation and consequently filter time to meet the budgeted time. Some other explanations for filtering of time may be inadequate supervision, dislike for specific work required, lack of specific technical knowledge and the over-reliance on operating personnel representations. Whatever may be the reason(s) or explanation(s) for internal auditors negative behaviour, certain corrective actions may help to remedy the situation through decreasing internal auditors propensity to filter time. The listing of possible corrective actions, which is partially based on the respondents suggestions, is as follows:
q q q

Moreover, like other designs, survey research suffers from certain limitations. Respondents, for example, may lack sufficient knowledge about the issues being investigated, or they may provide responses believed to please the researchers. Last, given the sensitive nature of the study regarding negative behaviour, the respondents may have understated the real extent of their filtering of time practices.

Demographic Information
Demographic data are presented in Table II. Perhaps the most important feature of the demographic information is that the respondents seem to represent a broad crosssection of internal auditors in all aspects (Table II). This, of course, reduces the possibility of any systematic bias in the study, thereby adding strength to its findings.

improving communications within the audit team; tightening supervision of internal audit staff; improving auditors technical competence through rigorous training and continuing education programmes; promoting compliance with professional standards; promoting ethical conduct; publicizing the positive attributes of time budget rather than its negative ramifications; establishing attainable time budget in the form of a range rather than a specific number of hours; de-emphasizing the attainment of time budget in the performance evaluation process; increasing variety in work assignments; eliminating unnecessary or redundant audit steps; establishing quality control policies and procedures for the internal audit department.

q q q q q q q q

The prior work experience of the respondents was considerable

Table II reveals some other interesting features. The internal auditors surveyed were well educated (two-thirds held a college degree and about one-third held advanced degrees such as masters or a doctorate). About 50 per cent of the respondents held professional certification as either CIA, CPA, or both. Finally, the length of prior work experience of the respondents was considerable and 39 per cent of them had prior public accounting backgrounds.

Summary
Over the past decade some empirical evidence has come to light regarding the adverse influence of undue time budget pressure on the performance of external auditors. Based on such evidence, the public accounting profession has taken many steps to overcome the negative behaviour of the independent auditors. To date no study has been done to determine the internal auditors dysfunctional behaviours under time budget pressure. The primary objective of this study was to explore the likely or perceived practice of premature signoffs, under-reporting of time, and other similar negative behaviours generally referred to as filtering of time in the profession of internal auditing. The study covered many aspects of internal auditors quality reduction acts. The areas investigated were internal auditors likely or perceived ramifications of time budgeting and time budget pressure, extent of filtering of time practices,

The above list of recommendations is not intended to be all-inclusive. Naturally, there may be other remedial actions more suitable to specific needs of a given entity. Regardless of the type of action taken, development and implementation of any recommendation capable of modifying internal auditors behaviour would require pragmatic leadership and moral support from top management.

Limitation of the Study

The respondents in this study were internal auditors selected randomly from the membership directories of certain local chapters of the IIA. Thus, the results of this study may not be indicative of those internal auditors who were not members of the selected chapters. This restriction, of course, may limit the generalizability of the findings.

Table II. Demographic Data

Demographic Educational background Some college education College degree Masters degree Doctorate Gender Female Male Professional certification status CIA CPA Both CIA and CPA Neither Other Respondents years of internal audit experience Less than one year More than one year but less than three years More than three years but less than five years More than five years Respondents public accounting experience Yes No Number Per cent

internal audit areas most affected by time filtering, and finally, causes and means of reducing auditors negative behaviours. According to the survey results, respondents, for the most part, perceive time budget as an interference with the proper conduct of the audit. They concede to a natural conflict between the concept of time budget and the gathering of sufficient and competent evidence. Time budgets are perceived to be tightening, resulting in auditors dysfunctional behaviours, vis--vis filtering of time practice. The survey results indicate the filtering of time to be a relatively widespread phenomenon in internal auditing. While compliance auditing appears to be most susceptible to such a practice, operational auditing is a close second. Financial auditing, which is viewed as most immune to filtering of time, is itself a target of audit quality reduction acts by over 40 per cent of the respondents! In the area of financial auditing, the filtering of time is most likely to occur in the review and testing of internal control arguably the single most important phase of the audit. These findings are alarming and may suggest serious impairment of internal auditing function in terms of its integrity, effectiveness and efficiency. The results of the study identify inessentiality or immateriality of audit steps, inadequacy of supervision, over-reliance on representations by operating personnel, and time budget pressures as the four major culprits in time filtering practices. The respondents overwhelmingly acknowledge the vital role of improving communication between audit members as an effective means of reducing internal auditors dysfunctional behaviours. Other suggestions to combat the problem are tighter supervision of internal auditors and de-emphasis of time budget attainment.

8 178 67 9

3.1 67.9 25.6 3.4

75 186 261 33 75 21 78 48 255

28.7 71.3 100.0 12.9 29.4 8.2 30.6 18.8 100.0

4 26 72 160 262

1.5 9.9 27.5 61.1 100.0

102 160 262

38.9 61.5 100.0

Respondents years of public accounting experience Less than one year 16 More than one year but less than three years 37 More than three years but less than five years 29 More than five years 20 102a Respondents position title Director of internal audit department 46 Audit manager 51 Audit senior/supervisor or equivalent 102 Audit staff or equivalent 46 Other 17 262
aTotal

15.7 36.3 28.4 19.6 100.0 17.6 19.5 38.9 17.6 6.5 100.0

For Future Research

The current research was the first study of its kind in the area of internal auditing. Therefore, it was exploratory research. Even though the results of the study represent the internal auditors filtering of time behaviours, they do not determine the potential influence of certain variables on such behaviour. A list of potential variables of interest to this type of study may include internal auditors personality type, years of audit experience (both external and internal), years of education, rigour of training and continuing education programmes, position, title, etc. It is believed that one future extension of this study should centre on a quantitative determination of the influence of these or other similar variables on the time filtering behaviour of internal auditors.

number of respondents with public accounting experience

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Ali N. Azad is Associate Professor of Accounting at the College of Business Administration, Loyola Marymount University, Los Angeles, California, USA.