The Relationship Between Time Budget Pressure and Reduced Audit Quality

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This paper will evaluate the impact of time budget pressure on the audit quality in audit assignments.


There has been a lot of focus on time budget pressure and its impact on audit quality. It has been argued that high time budget pressure causes changes in auditor behaviour which may adversely affect the audit quality (Coram, Ng & Woodliff, 2003). The auditor may sign off prematurely on audit procedures. Certain audit steps may be scrapped. Several items in the sample may not be audited. There may be material errors and irregularities that will not be detected (Houston, 1999).


This is a literature review of seven articles on the effect of time pressure on audit quality. I will analyse whether time budget pressure is the major factor that causes auditors to change their procedures during audit process. The change in audit behaviour at times shows that there are other weaknesses in the audit process. Secondly I am interested to find out whether time budget pressure at times affects the audit quality positively causing the auditors to focus on high risk areas.

The Audit Planning Process and Audit Quality

The auditing standards clearly give a guideline when it comes to resource management. The audit manager should ensure that in every assignment, there are sufficient resources for the work to be done well. Resources include the number of staff, qualifications and expertise and time. The guideline was given to ensure that the audit is performed both effectively and efficiently. If one of the resources is insufficient, it may lead to lower levels of auditor’s effectiveness. The topic of time budget pressure is therefore a critical research area in the field of audit.

Literature Review

Premature Signing-Off of Audit Procedures: An Analysis

Raghunathan carried out a research on the finer details concerning premature signoffs by gathering data on the extent of the sign-offs, the stages at which such actions were pervasive, the reasons given for the actions and any differences in the behaviour of personnel at different levels in the organization.

The researcher targeted personnel in the Big Eight accounting firms. The research findings showed that 55% of the staff admitted that they had engaged in premature signoffs. 73% of the 55% staff admitted that they had only done it rarely. Most sign offs occurred at the analytical review and internal control testing stages. It is therefore argued that time pressure may not be a major cause of premature sign offs since these stages are the initial stages of the audit and not the latter stages (Raghunathan, 1991).

Low risk was noted to be the most prevalent reason given for premature signoffs. The results suggest that premature sign offs is not an area of high risk. Senior personnel compared to junior staff had higher incidences of engaging premature sign-offs. This shows a weakness in the audit planning process. Unnecessary audit steps should have been identified and eliminated.

Time pressure was the second highest in the reasons given for premature sign-offs. Attention should be focused on the seniors since they are the people who face the most time pressure.

People have a tendency to portray a positive picture. They may lie about the frequency of premature sign-offs. It might have been more effective if there were control groups with assignments where varying levels of time budget pressure is applied. The researchers would then review the work done against audit program to determine the level of premature sign-offs.

The Effects of Fee Pressure and Client Risk on Audit Seniors’ Time Budget Decisions

Houston analyses the impact of fee pressure and client risk on the preparation of the time budget. There is a lot of competition in the market that may tempt audit firms to limit their audit investment in order to control the costs and increase the profitability of the company. On the other hand, there are clients who are quite risky and it would be prudent to make a significant audit investment. If the auditors are insensitive to the aspect of client risk due to fee pressure then this would reduce audit quality.

Houston carried out a research study to test the hypothesis that audit seniors would reduce audit investment in times of high fee pressure. His second hypothesis states that the client risk assessments would not be adjusted with high risk factors in times of high fee pressure.

Nine auditors from the Big Six audit firms participated in an audit planning exercise with fictitious clients. Client risk and fee structure were manipulated in the preliminary information. The only course of action was for the auditors to change the extent of their audit procedures. The results showed that the auditors only increased the audit hours for risky clients when there was no fee pressure. Increased client risk did not affect the judgements of the auditors when planning budget hours in times of high fee pressure (Houston, 1999).

It is important to note that the auditors may have reduced low-risk audit procedures to increase efficiency and effectiveness in periods of high fee pressure. Research studies should be designed that investigate the types of adjustments made to the planning documents in periods of high fee pressure. This will clearly show the positive or adverse effect of client risk and fee pressure on the audit plan.

Survey of Time Budget Pressure and Reduced Audit Quality among Australian Auditors

The effect of budget pressure on audit quality has received a lot of attention from researchers. The research area has come to be known as reduced audit quality (RAQ). Coram, Ng and Woodliff carried out a survey of auditors in Australia to find out whether they had exhibited RAQ behaviours. They also wanted to know in which areas the behaviour was pervasive.

The data was gathered using questionnaires. The researchers targeted audit seniors who had worked for at least two to three years and had completed the Advanced Audit Module in the ICA program. The second group consisted of auditors with at least one to five years’ experience who had not done the Advanced Audit Module.

63% of the respondents confessed that they sometimes exhibited RAQ behaviours. According to the auditors the behaviours that qualified as RAQ included rejecting the audit of awkward looking items, partial testing of the items in the audit sample and accepting doubtful information or evidence.

The findings revealed that the auditors engaged in RAQ due to low risk work and time pressure. This is consistent with the research findings of Raghunathan (1991). However in this research study time pressure was higher in rank than low risk. The auditors felt budgeted audit hours were often not sufficient for the tasks. The company usually dealt with the problem by increasing pressure on the auditors (Coram, Ng & Woodliff, 2003)

The limitation in this study is the same as the one experienced by Raghunathan (1991). Auditors will want to give a good impression by saying that they do not engage in RAQ. Secondly low risk may be used as an excuse for time pressure. A research should be carried out for assignments where risk based approaches were utilized. If a company engages in risk based audit then low risk would not arise.

The Relationships between Senior Auditor Budget Participation, Job Structuring, Job Consideration and Staff Auditor Time Budget Pressure

Kelley and Margheim investigated the relationship between time budget pressure and the behaviour of the senior auditors. They wanted to know whether senior auditors restructured the jobs of staff in times of high time pressure. There were several hypothesis stated. It was proposed that if the supervisor participated highly in the planning process the staff would experience less time pressure. It was also proposed that seniors would engage in high levels of job consideration and restructuring in times of high time pressure.

The researchers selected audit seniors and juniors who had worked together on audit assignments. Questionnaires were emailed to them for their responses. When it came to time pressure, the seniors and juniors rarely perceived time budget pressure in the same way. In instances where a high number of juniors felt the budget to be tight, only half of the seniors felt the same way. The rest of the seniors felt that the budget was attainable. This showed a lack of communication between the two parties concerning the audit plan. Majority of the seniors participated in time budget planning. Juniors confessed they felt more time pressure when the supervisors were highly involved in time budget planning.

Seniors on the other hand felt that there was less time pressure when they are involved in planning. Their staff felt that the seniors lowly participated in job consideration and restructuring practicesin times of high time budget pressure. These are leadership skills that should be utilized by supervisors in order to reduce the time pressure (Kelley & Margheim, 2002)

There was a high level of objectivity achieved in the research as the audit staff and seniors had worked together before. The information gathered was from both sides. It clearly shows the communication barriers between seniors and juniors in work assignments.

Survey on the Differential Effects of Time Deadline Pressure Verses Time Budget Pressure on Audit Behaviour

Kelley, Margheim and Pattison investigated the differential effects of both deadline and time budget pressure on audit behaviour. The deadline refers to the overall completion time of the audit project while the time budget pressure aims at reducing the audit hours in the budget.

The survey was carried out on both audit seniors and juniors. The researchers targeted auditors from the Big 6 and non-Big 6 auditors in their experiment. It was proposed that seniors would face higher levels of deadline pressure while the staff would experience higher levels of time budget pressure. The findings proved that seniors experience more deadline pressure. Interestingly, the junior staff experienced equal degrees of pressure when it came to deadline and time budget pressures. The auditors felt deadline pressure was not within their control. Secondly, it was faced at a team level where there was a lot of social support and supervisory assistance. Time budget pressure on the other hand is faced at an individual level. Time budget pressure was viewed as more critical in performance appraisals. It therefore poses a greater risk as it can lead to low job satisfaction and low audit quality (Kelley, Margheim & Pattison, 1999).

This is an interesting concept since deadlines and time budget pressure do have a relationship yet it is an area that has not been researched a lot. The researchers should have gone further to investigate the RAQ associated with time deadline pressure compared to time budget pressure.

The Effects of Time Pressure and Audit Program Structure on Audit Performance

It is important to weigh whether time pressure in an audit assignment increases the effectiveness and efficiency of the auditors. McDaniel carries out a research study on the relationship between time pressure and the efficiency and effectiveness of audit procedures.

Several auditors from a national public accounting firm were given an inventory audit assignment that required testing of details. It was a partial year audit. This is usually a high time pressure task.

Time pressure was applied at four different levels. There were two groups or teams. One used structured audit programs while the other used unstructured programs. The researcher proposed that in times of high time pressure, there would be decreased efficiency and effectiveness where structured programs are used. The results proved that the hypothesis is true. Time pressure had an adverse effect on the processing accuracy of the auditors and the sampling adequacy.

Efficiency however increased with time pressure whether the auditors were using structured or unstructured programs. The auditors worked much faster than before (McDaniel, 1990)

The researchers looked at an audit area that is highly structured. They could have looked at an area that is more complex such as analytical review. Unstructured programs may give better results in effectiveness due to their flexibility.

Time budget pressure and auditor dysfunctional behavior within an Occupational stress model

NcNamara and Liyanarachchi carried out a research to find out how auditors dealt with time budget pressures. What were the coping mechanisms usually used? They wanted to know whether these coping mechanisms had any effect on the personnel and the firm as a whole. Questionnaires were distributed to a sample of 594 auditors from the New Zealand Institute of Chartered Accountants.

The results showed that as time pressure increased the staff engaged in reduced audit quality practices. This confirms the findings of Coram, Ng and Woodliff (2003).

The researchers qualify RAQ as a dysfunctional behavior. It was noted that the seniors increased RAQ as a way of coping with time budget pressure. In the long run the auditors experienced low job satisfaction especially in the big firms where the work is a lot and time pressure is high. The researchers view RAQ as an occupational stress condition that can be dealt with using primary, secondary or tertiary means. The management may reduce the time pressure by creating realistic timelines. The staff may be trained on how to meet the deadlines. Support programs can also be introduced at the work pace to deal with the time pressure (NcNamara & Liyanarachchi, 2008)

The paper is a good research paper since it offers solutions on how audit staff in various organizations can deal with time budget pressures. It provides solutions for the audit organization.


In analysing the journal articles, it is clear that time budget pressure is a major factor affecting audit quality. There are certain justifications given by the auditors for RAQ such as removal of low risk procedures. This may be true or not true. It could be a cover up as some may not want to admit that they did not finish the audit properly. There are also other factors that increase time budget pressure such as fee pressure and deadline pressure. Audit firms should address the problems highlighted in the research articles.


Coram, P., Ng, J., & Woodliff, D. (2003). Survey of Time Budget Pressure and Reduced Audit Quality among Australian Auditors. Australian Accounting Review, 13(1): 38-44.

Houston, R. (1999). The Effects of Fee Pressure and Client Risk on Audit Seniors’ Time Budget Decisions. Auditing: A Journal of Practice and Theory, 18(2): 70-86.

Kelley, T., & Margheim, L. (2002). The Relationships between Senior Auditor Budget Participation, Job Structuring, Job Consideration And Staff Auditor Time Budget Pressure. Journal of Applied Business Research, 18(2): 105-113.

Kelley, T., Margheim, L., & Pattison, D. (1999). Survey on the Differential Effects of Time Deadline Pressure Verses Time Budget Pressure on Audit Behaviour. The Journal of Applied Business Research, 15(4): 117-128.

McDaniel, (1990). The Effects of Time Pressure and Audit Program Structure on Audit Performance. Journal of Accounting Research, 28(2): 267-285.

NcNamara, S., & Liyanarachchi, G. (2008). Time budget pressure and auditor dysfunctional behavior within an Occupational stress model. Accountancy Business and the Public Interest, 8(1): 1-43.

Raghunathan, B. (1991) Premature Signing-Off of Audit Procedures: An Analysis. Accounting Horizons, 5(2): 71-79.

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