The Effect of Client Integrity, Litigation, and Culture on European Materiality Estimates

Arnold, D.F., Bernardi, R.A., & Neidermeyer, P.E. The Effect of Client Integrity, Litigation, and Culture on European Materiality Estimates, The International Journal of Accounting, 36, 459-483, 2001

Posted: 11 Apr 2013

See all articles by Donald F. Arnold

Donald F. Arnold

Union Graduate College - School of Management

Richard A. Bernardi

Roger Williams University - Gabelli School of Business; Roger Williams University

Presha E. Neidermeyer

West Virginia University - Department of Accounting and Management Information Systems

Date Written: April 10, 2013

Abstract

The research examines the differences in materiality estimates for a sample of 181 experienced auditors from Big-Six firms located in Denmark, Ireland, Italy, Spain, Sweden, the Netherlands, and the United Kingdom. We asked each auditor to estimate materiality for a client whose integrity his/her firm rated as either high or low (Bernardi and Arnold, 1994). The research found that low client integrity ratings resulted in lower materiality estimates for the European auditors. The research also indicates that as the cultural construct of uncertainty avoidance (Hofstede, 1980) increased, materiality estimates also increased. Although one might have anticipated that materiality would decrease with the level of litigation, it in fact increased. We also compared the data from the western European countries with the estimates from a group of 83 auditors from the same Big-Six firms located in the United States.

Keywords: European Materiality Estimates

Suggested Citation

Arnold, Donald F. and Bernardi, Richard A. and Neidermeyer, Presha E., The Effect of Client Integrity, Litigation, and Culture on European Materiality Estimates (April 10, 2013). Arnold, D.F., Bernardi, R.A., & Neidermeyer, P.E. The Effect of Client Integrity, Litigation, and Culture on European Materiality Estimates, The International Journal of Accounting, 36, 459-483, 2001 , Available at SSRN: https://ssrn.com/abstract=2248217

Donald F. Arnold

Union Graduate College - School of Management ( email )

80 Nott Terrace
Schenectady, NY
United States

Richard A. Bernardi (Contact Author)

Roger Williams University - Gabelli School of Business ( email )

Bristol, RI 02809
United States

Roger Williams University ( email )

Bristol, RI 02809
United States

Presha E. Neidermeyer

West Virginia University - Department of Accounting and Management Information Systems ( email )

Morgantown, WV 26506
United States

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