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
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
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