Organizational Error Climate and Auditors' Predispositions toward Handling Errors

ABSTRACT: Handling their own errors effectively is important for auditors to assure audit quality. Similarly, how auditors deal with their clients' errors may affect clients' cooperativeness, which is a prerequisite for conducting audits effectively and efficiently. Auditors' predispositions will likely influence how they actually approach errors. We introduce the constructs of (and develop measures for) the error climate of audit organizations and auditors' predispositions toward handling their own errors and client errors and relate them in a theoretical model. Empirical results from a sample of 284 external, internal, and public sector auditors support that an audit organization's error climate positively influences auditors' predisposition toward handling their own errors, which, in turn, positively influences their predisposition toward handling client errors. These results imply that an appropriately shaped error climate may serve as a “soft” management control mechanism by fostering predispositions...