Psychological contract, time pressure, organizational commitment and audit quality

Abstract

This research was induced by the desire to explain the increased incidences of financial institutions in Uganda being shut down after having been audited and given clean bills of operation. These events provided an unusually rich curiosity to investigate the auditor environment and its subsequent contribution to the perceptions and the accruing outcome on audit performance there from. This therefore is a study on psychological contract, organizational commitment and time budget effect on audit quality. The research design was cross sectional and quantitative. Data was collected from a sample size of 179 audit firms and financial institutions (audit firms 127 and 52 financial institutions) in Uganda. A close-ended self-administered questionnaire was used to collect data and was analyzed using SPSS to generate descriptive and inferential statistics. The findings indicate that both Organizational Commitment and Psychological Contract have a positive correlation with audit quality (r = .52**, p<.01) and (r = .50**, p<.01) respectively. On the other hand time pressure has a significant negative correlation with audit quality (r = -.69**,p<.01). The regression model revealed that Organisational Commitment and psychological contract both had positive predictive values on audit quality β = .277 and β = .119 respectively, while time pressure was revealed to be a significant negative predictor of Audit Quality β = -.533. These results have many implications on audit quality among which include, the effect of time budget pressures on the quality of the audit work, the auditor’s perceived psychological contract terms of staff employment and its effect on their work. It is therefore recommended that audit firms ensure a clearly addressed psychological contract reviewed periodically to address changing environment. The management should device means of obtaining feedback from employees to enable them develop and improve on environment work structures. Further, the time budget allocations should be made in consultation with the audit staff.