The effect of team member proximity and assignment length on audit staff reliance on a supervisor's preferences

Abstract

With advances in technology (e.g., secure cloud storage and video conferencing), audit firms have increasingly been using geographically distributed auditors to staff engagements to improve resource utilization. However, such benefits may come at a cost if geographically distributed teams underperform co-located teams. To explore factors that could influence the relative effectiveness of distributed and co-located teams, we conduct an experiment to examine how team member proximity (distributed versus co-located) and assignment length (temporary versus continuing) jointly affect auditor judgment when subordinate auditors are given client-favorable guidance from their supervisor. Relying on the impression management and persuasion literatures, we predict and find that distributed auditors are less influenced by their supervisor’s directional preferences than co-located auditors when they are on temporary assignments. As such, despite concerns about the effectiveness of distributed teams, we identify a setting in which it can be beneficial to utilize distributed auditors over co-located auditors. However, we also predict and find that distributed auditors tend to react more like co-located auditors when on continuing assignments. Further, we find that while distributed auditors on continuing assignment are more influenced by their supervisor’s directional guidance than distributed auditors on temporary assignment, the opposite is true of co-located auditors.

Keywords: Distributed Teams; Co-located Teams; Auditor Judgments; Directional Goals; Assignment Length; Impression Management

JEL Classification: M40; M41; M42