The Role of Accounting Standards Setting Approaches on the Psychological Characteristics of Auditors

In business environment, accounting standard is one of the main factors that affect different zones such as accounting and auditing profession. In this study, using structural equation modeling approach, the role of accounting standards setting approaches (rule-based and principle-based standards) on the psychological characteristics of the auditors is investigated. To collect data, a scenario was used that in terms of accounting standards manipulated at two levels: rule-based and principle-based. The results show that principle-based standards compared to rule-based standards lead to higher levels of epistemic motivation and process accountability of auditors. Also, results indicate that accounting standards type has no significant effect on the level of evidence requested by auditors but, principle-based standards indirectly through mediation of process accountability increases the level of auditor evidence requested. Other findings showed that process accountability directly affect the level of evidence requested. However, the results indicate that epistemic motivation has no significant effect on the level of evidence requested by auditors. Overall, findings showed the positive impact of principle-based accounting standards on the process accountability and epistemic motivation of auditors. This conclusion confirms that a principle-based approach should be more considered by standard-setters and policy makers in the field of accounting and auditing.