BETWEEN-COUNTRY VARIATIONS IN THE APPLICATION OF THE PRINCIPLE OF AUDITOR CONFIDENTIALITY: A EUROPEAN SETTING

Abstract

Proponents of mutual recognition of accounting principles and auditing standards across-borders assume a minimal level of uniformity in the application of basic accounting and auditing standards. Furthermore, international accounting firms proclaim a worldwide uniformity of the services they render. The first goal of this research was to test the existence of such uniformity as it applies to the principle of auditor confidentiality when placed within a dilemma setting. The second goal was to examine the uniformity of the factors that influenced the auditor’s decisions regarding their implementation of the confidentiality principle. The third goal was to examine whether any observed between-country differences in the application of auditor confidentiality or the factors that influenced that judgment could be associated with the frequently

used cultural constructs identified by Hofstede (1984).

This research examines the importance of confidential information obtained from one client on the audit opinion expressed on a second client. The sample includes 287 partners, senior managers, managers and seniors from international auditing firms located in Denmark, Ireland, Italy, Spain, Sweden, the Netherlands, and the United Kingdom. The analysis indicated the presence of inter-country differences in auditor confidentiality. Our analysis indicates considerable between-country variation in the relative importance of the factors considered when making that decision – with some similarity based on geographic region. The analysis also indicated that the only significant Hofstede cultural construct factor associated with the noted variances was that of masculinity/femininity. The implications of these findings potentially affect the policies and claims relating to mutual between-country recognition of accounting and auditing practices.