Root causes within this category refer to the application of broader organizational strategies and policies, and their influence within the firm. Root causes in this category lie within the scope of the strategic choices made by leadership and could be described as prioritization, tone from the top, and change management. We elaborate on the prioritization and change management.

The root cause prioritization might occur when leadership makes strategic decisions in prioritizing which lead to new goals or key performance indicators (KPIs). For example, an audit firm might decide to schedule the courses for the auditors in the fall while simultaneously committing to a KPI on a timely completion of the planning phase, which for the auditors coincides with the timing of the courses. Depending on which KPI is perceived as the most important in daily practice, this might lead to diverging outcomes. On the one hand, people might choose to prioritize fulfilling the firm’s training requirements, not meeting the deadline for completing the planning phase, pushing planning tasks into the execution phase and potentially leaving insufficient time for reflection later in the audit process. On the other hand, they might prioritize complying with the deadline for the completion of the planning phase, but fail to meet the training deadlines, potentially missing the latest knowledge updates needed for the audit. As such, leadership’s prioritizations, or lack thereof, might be a root cause for quality issues due to insufficient process management by not meeting the KPI of timely completion of the planning phase, or a root cause for quality issues due to insufficient knowledge.

Another root cause in Strategy and policy could be change management, which refers to the approach surrounding organizational transitions to a desired future state. For example, let us consider the implementation of a revised standard. An audit firm might set up a change management program, including training, communication of the revisions and the impact on the daily practice, and adjustments of the working programs to ensure correct application of the new requirements. When the change program is not set up appropriately, for example because the need for behavioral change is not incorporated in the program sufficiently, it can lead to quality findings related to the revised standard. Although each element in the change program (i.e., training, communication, or working program) may serve as a root cause and fit into one of the established root cause categories, there might also be an overarching issue stemming from shortcomings in the change management approach itself, such as the absence of a coherent change management strategy. In the case of the latter, the root cause refers to a broader organizational strategy as it lies within the scope of the strategic choices made by leadership.

Root causes within this category lie within the systems and procedures in place, which includes the IT-systems, internal procedures, working programs and tools used, and their influence.​ Furthermore, root causes can refer, for example, to the way audit standards have been incorporated in the firm’s audit procedures manual. In this section we elaborate on the roles and responsibilities and the design of the systems and procedures.

Regarding the root cause on roles and responsibilities, it can be the issue that there is a lack of clarity in who has which roles and responsibilities in a certain procedure. This problem can manifest in audit engagements, where ambiguous roles and responsibilities can lead to significant inefficiencies and misunderstandings. The responsibilities in the context of an audit entail a clear understanding of specific tasks that need to be performed, the designation of the team members to these tasks and the accountability of these individuals. Tasks can include execution and documentation of audit procedures, review of work performed, communications in the process of the audit, which also includes internal and external reporting. The ambiguity can lead to duplication of tasks, tasks being overlooked, inconsistent execution of tasks, confusion about who should be doing what. When tasks are overlooked, it could mean that work performed on a high risk element of the audit is not reviewed at the level needed, as each team member involved in the related review tasks has an assumption that another team member has covered the review at the expected level of depth.

Another illustration of a root cause in this category relates to the design of processes and systems. For example, an auditor might use several systems in preparation of and during the audit (e.g., a system for the acceptance and continuance of clients and engagements, a system for the audit file, and a system for the creation of reports or engagement letters). However, it is possible that these systems do not have an interface, requiring manual work, as such that inconsistencies can emerge and lead to issues. For instance, an auditor documents their work in their audit files, but some information is also relevant for the acceptance and continuance process. When this process is documented in a different system, which is not connected to the audit file, difference might emerge between the latest insights in the audit file and the information required by the acceptance and continuance process.

Root causes in this category refer to the level of knowledge, experience, education, and understanding.​ Given the knowledge-intensive nature of auditing (Knechel et al. 2020), it is crucial for auditors to possess an appropriate foundation of knowledge and understanding in various areas, including audit standards and financial reporting (NBA 2017, 2019) and sufficient understanding of the entity and its environment (ISA 315). Another example in this category can refer to the level of project management skills. Furthermore, to comply with the internal system of quality management, auditors must also be knowledgeable on internal (risk management) procedures and guidance. These knowledge areas are subject to constant change and development, necessitating the need to continuously update one’s knowledge (NBA 2019). This category, thus, gathers all root causes that refer to the auditor’s lack of know­ledge and understanding.

An example of a root cause within this category might be an insufficient understanding of a accounting issue, which might be specific for the engagement, thus not common. Due to the insufficient knowledge of the specific accounting topic, the issue can become an ‘unknown unknown’ for the auditor and as such does not trigger consultation with accounting specialists, potentially leading to overseeing a material error in the financial statements.

Furthermore, root causes: in this category might relate to internal procedures on, for example, the procedures in an audit firm’s system of quality management to ensure its independence (ISQM1). These procedures might consist of guidance and tools or systems that need to be used. However, when auditors have insufficient understanding of the applicable internal independence procedures or are unsure on where to find the relevant guidance, independence issues might occur.

Root causes in this category refer to matters regarding allocated resources and capacity, which are themes that have been defined as important drivers of audit quality in prior literature (NBA 2017, 2019). Examples of root causes we identified in this category are availability, flexibility and continuity. In this section we elaborate on the root causes availability and continuity.

Availability refers to the presence of the required number of team members, with the knowledge and experience needed for the specific audit. When there is insufficient availability of the right people for the audit, for example due to sickness or employee turnover, the remaining team members may pick up the tasks of the sick colleague within the allocated time. This can result in quality findings occurring in the form of material errors in the financial statements being overlooked or not meeting certain audit standard requirements. As with all root causes, the root cause availability often presents itself in combination with other root cause categories. If a client does not deliver the required information within the agreed-upon period (Client matters), an issue with the audit team’s time and capacity might arise when they have insufficient availability by the time the required information is received. On the positive side – when the availability of the team members is appropriate, the right people have sufficient time and capacity to make adequate judgments and decisions within the audit, and document those properly. Additionally, if the team does have sufficient availability of the needed level of experience, it might facilitate time and space for knowledge spillover effects within the team (Knowledge and understanding).

Another root cause in this category is the continuity of resources, which relates to the prolonged assignment of team members to a client, enabling them to acquire specific client knowledge and understanding of its business, as well as building a good relationship with the client. As such, client specific knowledge can build up and subsequently contribute to high quality audits (NBA 2017). However, when the team is not stable over time, gaps can arise in the understanding of the client’s business and its environment, leading to quality findings. As with the previous example this root cause can also occur simultaneously with or cause other root causes. For example, when a client does not prioritize the audit of the financial statements and keeps failing to meet commitments to the audit team (Client matters), team members might not want to work for this specific client. In these cases, the team members might request to be scheduled for a different audit, increasing the turnover of this client’s team.

Root causes in this category refer to the various aspects related to human behavior and interactions within the audit teams. Within this category, we have identified several root causes that can be responsible for the occurrence of audit quality findings. We provide a discussion on the root causes collaboration and psychological safety.

Collaboration can refer to issues arising from inadequate teamwork, coordination, or cooperation among individuals or departments. For example, within the context of hybrid working with international team members with distinct cultural backgrounds and time zones, teams might struggle more to achieve sufficient engagement, coaching and sense of goal alignment. On the other hand, appropriate collaboration results in better coaching, reviewing and thus improves audit quality. As such, audit teams might need to adapt their communication strategies and provide the necessary support and guidance to ensure successful collaboration in these dynamic environments.

The second root cause, psychological safety, refers to the “sense of being able to show and employ self without fear of negative consequences to self-image, status, or career” (Kahn 1990, p. 705). Psychological safety influences the extent to which auditors are motivated to express their opinions during the audit process, such as during fraud brainstorming sessions (Gissel and Johnstone 2017). When team members observe a culture where questioning a manager’s judgment or pointing out potential errors is implicitly discouraged or even punished, they come to understand that it is not safe to speak up. As a result, they may withhold valuable observations or questions during team discussions or file reviews, potentially decreasing audit quality. Over time, this dynamic could even create a culture of silence and compliance, where team members focus more on avoiding conflict than on exercising professional skepticism.

Root causes in this category refer to the matters that reside on the client’s side, such as client’s knowledge (e.g., accounting standards), prioritization, availability of resources, and the relationship between the client and auditor. Even though these client matters are largely beyond the auditor’s control, it might still reveal opportunities for areas to address. For example, root causes regarding client matters might give rise to more selectiveness in accepting and continuing clients and engagements, pressing the client for improvements (e.g. through management letters), or taking additional quality measures in the audit process. In this section we briefly illustrate an example of the root causes prioritization and availability.

The root cause of the client’s prioritization might occur in the case of subsidiaries of foreign group companies. These subsidiaries are required to publish statutory financial statements but might not prioritize the preparation of the statutory accounts due to a focus on their group reporting requirements. As the priority is somewhere else for the client, the statutory audit might not get the attention required to get the necessary information and documentation.

The lack of priority might also be related to the availability of the client, as the client’s resources are allocated elsewhere. Due to this lack, deliverables might be delayed, and the quality of the information and underlying documentation might turn out impaired. The insufficient information and untimely documentation complicates the audit, and decreases they being delivered by the client. Issues regarding availability might then spill over to the audit quality.