C ustom er Service In An Auditor-A uditee Relationship

E.G. Kitindi and

M. Gunda

G aborone, Botswana

A bstract

study was

u n d e r t a k e n t o d e t e r m i n e w h e t h e r a u d i t o r s in B o t s w a n a have positioned themselves to provide the best customer

s e r v i c e t o t h e i r c l i e n t s . A u d i t o r s in B o t s w a n a a r e f o u n d t o

be concerned about customer service and retention, and have instituted measures that are expected to enable them provide

adherence to

professional and statory requirements, auditors provide some other services beyond auditing. The study finds out however that auditor and their clients have different perceptions on auditors responsibilities. Suggestions are given at the end to bridge this perception gap.

customers servicc. customer relationship. Expectation gap.

Introduction and Background Inform ation

Over the past decade organisations of all types and sizes have increasingly recognised the importance of customer service and the need of making customer satisfaction of their key operational goal. Organisations have invested

in a r e a s t h a t m a k e a s t r o n g contribution t customer satisfaction such as quality and customer service. Public sector organisations havedeveloped customer-oriented charters to demonstrate

heavily in

improving performance

their commintment to customer service, and a growing number of mission statements include a phrase that has to do with satisfying customers. The terms

customer satisfation, customer requirements, customer needs and customer expectations are increasingly becoming organisational buzz words.

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2 C u s t o m e r S e r v i c e In A n A u d i t o r - A u d i t e e R e l a t i o n s h i p

a service to other organisations. As auditors, the service they provide is primarily the examination of financial statements for conformity to accounting principles, standards and r e l e v a n t s t a t u t e s , a n d t h e o p i n i o n t h a t is i n c l u d e d in a n a u d i t r e p o r t . T h i s i s t h e service that organisations acquire.

Audit firms

The Companies Act of Botswana (Cap 42: 01) details out regulations on the conduct of an audit, the preparation of accounting records on which the auditor will work, the financial statements on which he or she will report, and the auditors' relationship with the company being audited. This Act applies to any organisation that has been created on its basis, and does not compel those organisations

This implies that any organisation not statutory required by this or any other Act to have an audit will

not governed

be audited.

b e p u r c h a s i n g a u d i t s e r v i c e s o n t h e p r e s u m p t i o n t h a t it is a c q u i r i n g a s e r v i c e worth the money.

Like any other service-providing organisation, audit firms (hereafter auditors) should look upon customer service and customer satisfaction as a

c e n t r a l a s p e c t in p r o v i d i n g a u d i t s e r v i c e s . A u d i t w o r k o n f i n a n c i a l s t a t e m e n t s o f o r g a n i s a t i o n s r e q u i r e s a d h e r e n c e t o n u m e r o u s s t a n d a r d s a n d r e g u l a t i o n s . In addition to the Companies Act (Cap 42:01), there are standards that prescribe the basic principles and practices which auditors are expected to follow in the conduct of an audit (Carmichael and Benis 1996). The Statement on Quality Control Standards No. 2 issued by the Association of Chartered Certified Accountants

(ACCA) further requires auditors to establish policies and procedures for obtaining an understanding of the services to be provided by them with the intention of minimising the risk of misunderstandings with their clients. However, despite these policies and procedures, auditors apparently still

f a i l t o a c h i e v e t o t a l c u s t o m e r s a t i s f a c t i o n in o n e w a y o r a n o t h e r . O n e m a y wonder if auditors do comply with policies and procedures, and other statutory r e q u i r e m e n t s w i t h t h e i n t e n t i o n o f a c q u i r i n g t h e b e s t c u s t o m e r s e r v i c e . It appears that a number of service-providing organisations fail to appreciate their

c u s t o m e r s . T h e q u e s t i o n is , w h a t a b o u t a u d i t o r s ? D o t h e y a p p r e c i a t e t h e i r customers and achieve total customer satisfaction? Do their customers know their rights?

It is v e r y p o s s i b l e t h a t a u d i t o r s f a i l t o d e s i g n a r a n g e o f a c t i v i t i e s t h a t strengthen

from their services. Complaints by customers for audit services (hereafter referred to as auditees) mas not be handled accordingly. On the other hand, auditees may not know

their rights as customers. Some customers fail to predict good relationships with

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organisations and cannot tell whether the services they are provided with are good or not.

A n o t h e r p r o b l e m a s s o c i a t e d w i t h t h e p r o v i s i o n o f a u d i t s e r v i c e s is t h e apparent audit expectation gap. The expectations of beneficiaries of audit services, i.e. those who rely on audit reports, about what auditors should do

seems to differ with what auditors are perceived to do. Shareholders usually expect more from an audit than the audit can give. For example, some

s h a r e h o l d e r s m a y w i s h a n d p r o b a b l y e x p e c t t h a t a u d i t o r s a c t i v e l y e n g a g e in t h e s e a r c h f o r , a n d r e p o r t o n a l l i n s t a n c e s o f f r a u d . W h e n c o m p a n i e s f a i l it is

common to hear arguments of audit failure, especially when the most recent

a u d i t r e p o r t s u g g e s t s t h a t t h e f i n a n c i a l s t a t e m e n t s w e r e f a i r l y s t a t e d a n d in

a c c o r d a n c e w i t h G A A P s . C l e a r l y , t h e f u n c t i o n o f a u d i t i n g is n o t t o d e t e c t f r a u d , and the auditor cannot possibly locate all fraud. In addition, the audit does not prov ide any guarantee that the financial statements will be free of errors because

a n a u d i t is b a s e d o n t h e e x a m i n a t i o n o f s a m p l e t r a n s a c t i o n s r a t h e r t h a n a l l transactions and balances. With this misguided perception, how can auditors fully meet the expectations and needs of auditees?

T h i s s t u d y i n t e n d s t o p r o v i d e i n s i g h t s o n t h e e x t e n t t o w h i c h a u d i t o r s in Botswana comply with the standards, procedures and regulations, as well as p r i n c i p l e s i n a c q u i r i n g t h e b e s t c u s t o m e r s e r v i c e . It a l s o o u t l i n e s t h e i m p o r t a n c e o f c u s t o m e r s e r v i c e t o a u d i t o r s , w h a t it m e a n s t o t h e m a n d h o w t o t a l c u s t o m e r satisfaction and appreciation can be achieved. The following questions are specifically addressed:

- Do audit firms have the required policies and procedures that enable

laid down standards, professional rules, guidelines and other statutory regulations to acquire the best customer service?

- What measures and activities have audit firms designed to meet the expectations of auditees and satisfy their needs?

- How can audit firms appreciate auditees as their customers to achieve total customer satisfaction?

- What services do auditees require from audit firms that would meet their expectations and needs?

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L iterature Review

Organisations can be categorised on the basis of what motivates their operations. There are organisations that are motivated by their ability to produce products or services. These product-motivated organisations relish on the product or service originating from them, with little regard to whether or not t h e i r c u s t o m e r s a r e s a t i s f i e d w i t h it. O t h e r o r g a n i s a t i o n s a r e m o t i v a t e d b y p r o f i t . Generally, most manufacturing and retail organisations have as their primary objective the maximisation profits. For these profit-driven organisations the

c u s t o m e r is i m p o r t a n t o n l y t o t h e e x t e n t t h a t t h e y e n a b l e t h e m r e a l i s e m a x i m u m p r o f i t s . S a t i s f y i n g t h e c u s t o m e r s is n o t c r i t i c a l . S o m e o r g a n i s a t i o n s a r e m o r e

c o n c e r n e d w i t h k e e p i n g t h e i r s t a f f e m p l o y e d . It is o n l y t h e c u s t o m e r - o r i e n t e d organisations that have at heart the satisfaction of their customers. These organisations have positioned themselves to provide a 'service' that adds value to their customers.

' S e r v i c e ' is a t e r m c o m m o n l y u s e d in r e f e r e n c e t o t h e a c t o f m a i n t a i n i n g in u s a b l e c o n d i t i o n s o m e f o r m o f m a c h i n e r y . In e c o n o m i c s , it c a n b e u s e d t o refer to a sector of the economy that sells products other than physical goods to

i t s c u s t o m e r s . A c c o r d i n g t o K a t z ( 1 9 8 7 : 8 ) , s e r v i c e is " t h e s p e c t r u m o f a c t i v i t i e s designed to enhance customer expectation and enjoyment of product benefits". S e r v i c e is u s u a l l y a s s o c i a t e d w i t h p r o d u c t b e n e f i t s . T h e i n t e r p r e t a t i o n o f f e r e d by Katz (1987) can be extended to include the intangible 'product', i.e. service. Service thus refers to the activities that are expected to intensify expectation and

enjoyment of both tangible goods and services. Katz (1987) considers service to

b e a v a r i a b l e t h a t is c o n t r o l l e d b y m a n a g e m e n t , a l o n g w i t h p r o d u c t , p l a c e , p r i c e

a n d p r o m o t i o n s , a n d a r g u e s t h a t t h e s e r v i c e f u n c t i o n n e e d s t o b e t r e a t e d in t h e same way tangible products are. This means that services need to be researched, packaged, and promoted before they are sold to customers.

The concept 'customer service' associates service more specifically to the customer. According to Peel (1987:26) companies have primary and secondary activities. For production companies, primary activities include the p r o d u c t i o n a n d s a l e o f a p r o d u c t . I f t h i s a r g u m e n t i s u s e d in r e f e r e n c e t o t h e

c o n n e c t i o n w i t h t h a t s a l e . T h e f a m o u s a d a g e ' a f t e r s a l e s s e r v i c e ’ is in f a c t a reference to those activities. Peel (1987:26) suggests that these non-primary

a c t i v i t i e s a r e i n t e n d e d t o " m a x i m i s e c u s t o m e r s a t i s f a c t i o n " in t h e p r o d u c t o r service the customer has purchased.

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becoming critical for continued customer retention. The prov ision of effective customer service by an o r g a n i s a t i o n r e s u l t s in e x c e l l e n t c u s t o m e r r e l a t i o n s . It a l s o h e l p s a c o m p a n y reduce, if not eliminate, the costs associated with poor customer service. These

Effective customer

c o s t s i n c l u d e c o m p l a i n t - h a n d l i n g c o s t s , l o s t s a l e s , a n d in e x t r e m e c a s e s c o s t s associated with legal action by customers. They are eliminated by attaining excellent customer service. Achieving excellent customer relations entails efficiency, care, reliability, courteousness and professionalism on the part of a company's employees. Baba and Joel (2000) indicate that customer service can

be improved by adding value to a service. This also differentiates a company from the competition and improves the standard of customer service. As Smith ( 1 9 9 7 ) s u g g e s t s , b y a n a l y s i n g t h e s e r v i c e s in i t 's r a n g e , a c o m p a n y c a n a d d value and improve customers' perception of the company.

C u s t o m e r s a t i s f a c t i o n is a n o t h e r c o n c e p t t h a t is r e c e i v i n g i n c r e a s e d

a t t e n t i o n . T h i s is t h e " s t a t e o f m i n d t h a t c u s t o m e r s h a v e a b o u t a c o m p a n y w h e n their expectations have been met or exceeded over the lifetime of the product or service" (Anton and Perkins 1997). Customer satisfaction has become important

with increased competition for a falling number of customers. This has led to

c o m p a n i e s f i n d i n g it m o r e i m p o r t a n t t o r e t a i n t h e c u s t o m e r s t h e y h a v e a l r e a d y by providing excellent customer service rather than attempting to secure more customers. Bienstock and Kahn (1993) established a link between achieving

c u s t o m e r s a t i s f a c t i o n a n d s u c c e s s in t h e m a r k e t . T h e y f o u n d t h a t m a r k e t l e a d e r s are separated from others by designing factors aimed at achieving customer satisfaction.

W h e r e t h e r e is n o c u s t o m e r s a t i s f a c t i o n , c u s t o m e r c o m p l a i n t s a b o u n d

a n d p r o d u c t i v i t y a n d p r o f i t a b i l i t y a r e a t a l o w e r l e v e l . In a s t u d y o n c u s t o m e r complaint handling. Tax et al. (1998) found that the majority of complaining customers

complaint handling experiences. The most recent complaint was cited because customers tend to recall quickly their most recent encounter with a supplier. This shows that the manner in which customer complaints are handled should connote care and concern. Generally, the way complaints are handled says a lot about the attitude towards customers. If customers become dissatisfied with a company's service, they would move to other suppliers.

were dissatisfied

A s a l l u d e d e a r l i e r in t h i s s t u d y , a n u m b e r o f r u l e s a n d g u i d e l i n e s g o v e r n t h e p r o v i s i o n o f a u d i t s e r v i c e s . T h e s e a r e e m b o d i e d m o s t l y in t h e a u d i t i n g standards

professional institutions. According to Millichamp (1998), professions must be led by an ethical code and rules

of conduct. Millichamp

argues

further that professional

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6 Customer Service In An Auditor-Auditee Relationship

independence is extremely important to auditors. Being seen to be independent is a n i m p o r t a n t c o m p o n e n t o f t h e s e r v i c e p r o v i d e d b y a u d i t o r s . A u d i t e e s w i l l

usually be more satisfied if they perceive the auditor to be independent. Approaching their work with integrity and objectivity also helps avoid conflicts between auditors and auditees. This would particularly be the case of there was

a clear understanding on the part of auditees as to what to expect from an audit.

The inclusion of other services in addition to auditing, for example tax negotiations, secretarial services, financial advice and others, has brought confusion to the users of financial statements and the public alike on what the r e s p o n s i b i l i t i e s o f a u d i t o r s a r e . T h i s is a p o t e n t i a l s o u r c e o f c o n f l i c t a m o n g auditees and financial statements users on the one hand, and auditors on the other Arens and Loebbecke (1997) argue that most auditors believe that the

c o n d u c t o f t h e a u d i t in a c c o r d a n c e w i t h g e n e r a l l y a c c e p t e d a u d i t i n g s t a n d a r d s ( G A A S ) is a l l t h a t c a n b e e x p e c t e d o f a u d i t o r s . A p p a r e n t l y , t h e r e s t i l l e x i s t u s e r s of financial statements who believe that auditors have the duty to guarantee the accuracy of financial statements, and some who believe that the auditor guarantees the financial viability of the business. This generally suggests that people expect more from auditors than what auditors can deliver.

need to build strong relationships with them and understand their needs and expectations even before the engagement commences. The engagement letter is an attempt at ensuring auditees understand the nature of the engagement and helping them shape their expectations, thereby minimising misunderstandings between them and the auditors. In addition to the engagement letter, auditors are required to obtain a letter from the auditees confirming any oral representations given by the management to the auditor (IFAC 1994: ISA 580, APB 1995: SAS 440).

To keep customers

It is n o t c l e a r w h e t h e r t h e s e a r e s u f f i c i e n t m e a s u r e s t o e n s u r e a u d i t o r s provide excellent customer service and achieve customer satisfaction. Auditors are expected to have a sharp customer orientation to meet their needs and expectations so as to be able to satisfy them and maintain the best customer s e r v i c e , w h i c h w i l l l e a d t o q u a l i t y s e r v i c e a n d a n i n c r e a s e in p r o f i t a b i l i t y . It is apparent that, to improve and strengthen the relationship between auditors and auditees, auditors should always provide auditees with quality service and, above all, adhere to the laid down professional rules, guidelines, procedures and statutory regulations. Empirical evidence concerning auditors' adherence to t h e s e a n d a n y o t h e r m e a s u r e t o e n s u r e c u s t o m e r s a t i s f a c t i o n is l a c k i n g . T h i s s t u d y e m b a r k s t o f i l l t h e g a p in t h e c a s e o f B o t s w a n a .

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Research Method

Sampling

T o a n s w e r t h e q u e s t i o n s in t h i s s t u d y , w e s o u g h t t o o b t a i n t h e v i e w s o f both auditors and auditees. A list of audit firms registered with the Botswana Institute of Accountants (BIA) provided the frame for sampling purposes. Seventeen firms were listed, being the firms authorised to conduct statutory

audit of financial statements in Botswana. We selected all seventeen firms for the study because the number was small. However, out of the seventeen firms, neither the physical nor the postal address could be obtained for four firms. One other firm had closed after the owner left the country. This left us with twelve audit firms to whom the questionnaire was administered.

A list of registered companies was obtained from the Ministry of Trade, Industry, Wildlife and Tourism. The list had more than 3000 companies

a p p e a r i n g o n it. W e c h o s e t o r e s t r i c t o u r s t u d y o n l a r g e c o m p a n i e s , a s d e f i n e d in the Small. Medium and Micro Enterprises Task Force Report (Government of Botswana 1998). On the basis of that definition, 150 companies were identified, and from these a random sample of 80 companies was chosen. Our choice of large companies was influenced by the fact that, by virtue of their size, large companies are required by law to have an audit. Also, large companies are more likely to attach greater importance to an audit than small companies due to the inherent agency problems associated with the diversified ownership.

Data Collection and analysis

Primary data was collected by means of two structured questionnaires, one for the auditors and the other for auditees, both with closed and open-ended questions. The questionnaires were administered mostly in person for the auditors and auditees in Gaborone, and were administered through the post, enclosed with self-addressed stamped envelopes, to those outside Gaborone.

Secondary data formed the basis of the literature review, and this was obtained mainly from published sources. Secondary data sources included newspaper reports and discussions with various people on the issue under study.

Both qualitative and quantitative methods were used to analyse the data.

Simple analysis was performed on the data, which was manipulated to obtain frequencies and percentages, and weghing the responses on the basis of a five-point Likert scale used in the questionnaire.

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8 Customer Service In An Auditor-Auditee Relationship

R esults

Questionnaires from ten audit firms were collected. The two firms that

d i d n o t c o m p l e t e t h e q u e s t i o n n a i r e a t t r i b u t e d it t o l a c k o f t i m e d u e t o p r e s s i n g engagements.

were collected from auditees. No explanation was obtained from the auditees that did not complete the questionnaire. Table 1 below illustrates the response and non-response rates for questionnaires administered to both audit firms and auditees.

No. Percent Respondents (all useable)

R espondent C haracteristics

Of the ten questionnaires from audit firms 6 (60%) were completed by managers, 2 (20%) by directors, 1 (10%) by an audit supervisor, while the other

1 (10%) was by a senior partner. Twenty-four questionnaires collected from auditees (50%) were completed by finance

16 (33%) by accountants, 6 (13%) by administrative managers, 1 (2%) by the accounting service manager, and 1 (2%) by the credit manager.

managers,

Responses

Four research questions guided this study. Following are responses obtained. Whether auditors are suitably positioned to acquire the best customer service. This will be the case if they have policies and procedures as required by SQCS No. 2, and if they comply with the auditing standards, procedures and statutory regulations to acquire the best customer service. Policies, procedures, statutory regulations and standards are expected to guide auditors to minimise the risk of misunderstandings with their customers. Table 2 below presents a summary of the responses to that question.

Table 2: Audit firms that are suitably positioned to acquire the best customer service

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Descriptions No. Percentage Audit

9 90 required by SQCS No. 2 Audit firms which do not have policies and procedures

firms which

1 10 required by SQCS No. 2 Total

10 100 Audit firms which use statutory regulations from the

4 40 Companies Act of Botswana (Cap 42:01) to acquire the best customer service Audit firms that do not use statutory regulations from

6 60 the Companies Act of Botswana (Cap 42:01) to acquire the best customer service Total

10 100 Audit firms that follow' basic principles and practices

9 90 stipulated by Auditing Standards and Procedures in the conduct of audits

1 10 practices

Audit firms that do not follow basic principles and

Procedures Total

The results show that 90% of auditors have policies and procedures required by SQCS No. 2 issued by ACCA. The same percentage of auditors adhere to the basic principles and practices stipulated by Auditing Standards

a n d P r o c e d u r e s in t h e c o n d u c t o f a u d i t s .

Q u a l i t y c o n t r o l p r o c e d u r e s t h a t a u d i t o r s i n B o t s w a n a h a v e p u t in p l a c e include following the professional requirements, skills and competence of staff, assignment of work in staff, delegation of duties and acceptance and retention of clients. Review of work, direction in audit, consultation with audit manager and supervision by a CPA are also part of the quality control procedures. One

auditor neither has policies and procedures required by SQCS No. 2 nor adheres to the basic principles and practices stipulated by Auditing Standards and

Procedures in the conduct of audits. The Companies Act of Botswana (Cap 42:01) appears not to be a good guidance for quality audits as only 40% of the auditors indicated using the statutory regulations. A major reason could be the fact that the same are obtained in the International Auditing Standards and Procedures.

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10 Customer Service In An Auditor-Auditee Relationship

These findings clearly indicate that auditors in Botswana have the required policies, procedures and follow the basic principles and practices although not from the Companies Act of Botswana (Cap 42:01). This means that, on the basis of their responses to this question, auditors in Botswana have suitably positioned themselves to acquire the best customer service.

Measures and activities that auditors design to meet the expectations of auditees and satisfy their needs

The objective of this question was to find out if auditors make any effort to meet expectations of their clients and thereby reducing customer complaints and achieving total customer satisfaction. Table 3 below presents a summary of the responses to that question.

Table 3: Audit firms that attempt to meet auditees' expectations

Measure or activity used No. Percentage Letter of engagement

10 100 Technical advice

10 100 Firm's newsletter

6 60 Follow up customer contact

6 60 Customer service department

1 10 Customer help telephone line

0 0 Service user clubs

The table shows that all auditors that responded use the letter of engagement and technical advice to meet their clients' expectations and satisfy their needs.

60% of the auditors use follow up customer contacts and newsletters while

1 auditor (10%) has a fully-fledged customer service department.

The letter

of engagement

is

a standard issue on all new

e n g a g e m e n t s . It is r e q u i r e d b y t h e a u d i t i n g s t a n d a r d s , a n d t h e r e f o r e , r a t h e r t h a n

b e i n g l o o k e d a t a s a v o l u n t a r y m e a s u r e b y a u d i t o r s , it i s a c o m p u l s o r y requirement, save for certain repeat engagements where the circumstances facing the client and the auditor have not changed. Technical advice can be r e g a r d e d a s p u r e a d d e d v a l u e , a l t h o u g h it m a y b e a r g u e d t h a t i t i s a p l o y b y auditors to increase their revenue base. No auditor has neither a service user club nor a dedicated customer help telephone line. Service clubs may not be preferred because they may affect the auditors' independence and integrity. The same may be argued, to some extent, with regard to help lines, although the

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effect may not be as severe. On this basis it appears that auditors in Botswana have designed measures and activities such as technical advice, follow up customer contacts, and newsletters and use the engagement letter to meet their clients' expectations and satisfy their needs.

The auditees were asked to indicate how these measures and activities by auditors enhanced their expectations and enjoyment of the audit service benefits. Table 4 presents a summary of the responses to the question.

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12 Customer Service In An Auditor-Auditee Relationship

Fable 4: Ranking of measures and activities that enhance auditees' expectations

Activity/measure Weight score Technical advice

208 Letter of engagement

200 Follow up customer contact

168 Customer service department

152 Management letter

152 Customer help telephone line

136 Newsletter

128 Service user clubs

The table shows that expectations of the majority auditees from the sample are highly enhanced the most by technical advice and least by service u s e r c l u b s . T h e r a n k i n g o f t h e f i r s t t h r e e m e a s u r e s t i e s n e a t l y w i t h t h e o r d e r in which auditors used the measures as means of achieving total customer s a t i s f a c t i o n . T h i s is a g o o d i n d i c a t i o n t h a t a u d i t o r s h a v e g o o d i d e a o f w h a t t h e i r clients want most. There are some mismatches though. For example, auditors produce newsletters with the hope that they can communicate with their clients through them, but the clients do not appreciate newsletters that much. Auditees would prefer dealing with customer service departments in the audit firms, but s u c h d e p a r t m e n t s a p p e a r n o t t o b e p r e f e r r e d m u c h b y a u d i t o r s . O n t h e f a c e o f it, it a p p e a r s l i k e a u d i t o r s w a n t t o m i n i m i s e c o n t a c t s w i t h t h e i r c l i e n t s o u t s i d e t h e ,

e n g a g e m e n t . H o w e v e r , t h i s is n o t a t o t a l l y p l a u s i b l e e x p l a n a t i o n b e c a u s e t h e a c t of auditors providing other services beyond auditing actually increases auditor- auditee contact. User clubs are incompatible w ith the nature of audit work and auditees appear to recognise this.

T h e m e a s u r e s a n d a c t i v i t i e s l i s t e d in T a b l e s 3 a n d 4 a b o v e h e l p r e d u c e complaints from clients and strengthen auditor-auditee relationships.

It is therefore apparent that auditors strive to meet the expectations of their clients and to satisfy their needs.

How auditors can appreciate auditees (as their customers) to achieve total customer satisfaction The aim of the question was to find ways through w h i c h a u d i t o r s c a n a p p r e c i a t e t h e i r c l i e n t s in o r d e r t o a c h i e v e t o t a l c u s t o m e r satisfaction, and to find out if auditors have some means of showing their clients that they value and appreciate them. Table 5

below summarises responses to this question.

Vol. 12, No. 1 July 2004 © Centre for Indonesian Accounting and Management Research

Postgraduate Program, Brawijaya University

The International Journal o f A ccounting a n d B usiness S ociety

Table 5: Summary of auditors' customer appreciation to achieve total customer satisfaction

Description No. Percentage Audit firms that agree that customer appreciation

12 100 has been one of the key aspects in quality customer service Audit

firms that do

a p p r e c i a t i o n h a s b e e n o n e o f t h e k e y a s p e c t s in quality customer service Total

12 100 Audit firms that show their clients that they value

9 75 them Audit firms that do not show their clients that they

3 25 value them Total

The table shows that all audit firms agree that customer appreciation has been one of the key aspects in quality customer service. Out of this total, 75% have established some means through which they show their clients that

they value them while 25% have not. The 75% that show their clients that they value them do so by:

- Conducting courses for staff and clients on current issues. -

Rapidly responding to clients' requirements and needs. -

M e n t i o n i n g in t h e m a n a g e m e n t l e t t e r t h e a r e a s w h e r e t h e c l i e n t is working extremely well and suggest improvements where

there are weaknesses. -

a means of appreciating the opportunity they are given to provide audit and other services.

Using

a personalised

service

approach as

- Treating their clients equally (no preferential treatment).

It c a n t h u s b e c o n c l u d e d t h a t a u d i t f i r m s u n d e r s t a n d a n d k n o w t h e importance of customer appreciation and are making an effort in appreciating their clients to achieve total customer satisfaction.

Services that auditees nee4 from auditors that would meet their requirements and expectations. The objective of this question was to find out the types of services offered by auditors that auditees are pleased with, and those services that auditees do not get from auditors but would like to get for

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Postgraduate Program, Brawijaya University

14 Customer Service In An Auditor-Auditee Relationship

them to meet their expectations and requirements. Table 6 below provides insights on the services that auditees are pleased with.

Table 6: Services that auditees are pleased with

Service No. of Auditees Percentage Audit of internal control systems

32 67 Accounting services

16 33 Tax advice/computations

16 33 Audit services

8 17 Preparation of financial statements

8 17 Secretarial services

The results show that about 67% of auditees are pleased by the audit of internal control systems, about 33.3% by accounting services and tax advice, while some 17% are pleased by the audit services, preparation of financial

statements, and secretarial services. Auditees appear to be satisfied more with the audit of their internal control systems. Accounting and tax services are not as pleasing. Audit services appear to be among the least pleasing to auditees. For large companies, an audit is important because of the agency problem. The

f a c t t h a t t h e s e r v i c e is n o t p l e a s i n g c o u l d b e e x p l a i n e d i n p a r t b y t h e i n d i c a t i o n t h a t a n a u d i t o f i n t e r n a l c o n t r o l is p r e f e r r e d r a t h e r t h a n a f u l l a u d i t . B u t it c o u l d

also be an indication of the existence of misunderstandings between auditors and auditees with regard to this service, either because of poor service on the part of the auditors, or the expectation gap referred to earlier in this study.

It is c l e a r t h e n t h a t m o s t a u d i t e e s a r e n o t p l e a s e d b y o t h e r s e r v i c e s a s m u c h a s t h e y a r e b y t h e a u d i t o f i n t e r n a l c o n t r o l s . It d o e s n o t i m p l y t h a t t h e o t h e T s e r v i c e s a r e n o t d e s i r e d . I t is p e r h a p s t h e d e g r e e o f p l e a s u r e d e r i v e d t h a t

a c c o u n t s f o r t h e d i f f e r e n c e in p r e f e r e n c e . F o r s o m e , it a p p e a r s t h e r e a s o n b e h i n d the displeasure with audit services stems from perceived high fees, and the

c o n s t a n t l y c h a n g i n g a u d i t t e a m s . T h e l a t t e r is c o n s i d e r e d t o b e a n n o y i n g t o auditees especially when the new team members are not familiar with the auditees' natures of operations, which would require auditees to waste valuable time explaining more or less the same things to different people each year.

The results suggest that auditors are generally making efforts to provide quality service to their clients, although certain types of services are not appreciated that much

be due to a misconception on the part of auditors as to what customer service implies. The

by the auditees. Perhaps this could

Vol. 12, No. 1 July 2004 © Centre for Indonesian Accounting and Management Research Postgraduate Program, Brawijaya University

The International Journal o f A ccounting a n d B usiness S ociety

auditors were asked to point out what they considered customer service to entail. Excerpts of their responses are summarised in Box 1 below:

B o x 1: S u m m a r y a u d i t o r s ' i n t e r p r e t a t i o n o f t h e t e r m ' C u s t o m e r S e r v i c e '

Adding value to the clients business and behaving professionally when dealing with clients at all times Meeting all the requirements of the customers, keeping them satisfied and meeting all the statutory regulations

Meeting clients' needs and expectations; anticipating those needs and pro­ actively providing solutions to customers Understanding your clients' business and being able to attend to client queries at call times. To serve the client with any type of service requirement within any firm's profile

Services provided by the firm in return for cash or cash equivalent. Various types of services offered to clients.

The interpretations of 'customer service' by the auditors suggest that are aware of the importance of offering the best service to clients. Indeed, all responding auditors indicated that customer service was important to them. Most

to demonstrate their commitment to customer service by including a reference to satisfying or increasingly delighting their customers in their mission statements.

of them have

Further results

Auditors' responsibilities and the expectation gap.

It is m e n t i o n e d a b o v e t h a t t h e e x p e c t a t i o n g a p e x i s t s b e c a u s e t h e p u b l i c and the business community in general are not clear about the responsibilities of auditors.

Both auditors and auditees were asked to indicate what they considered to be the responsibility of auditors. Box 2 below summarises responses from auditors.

Box 2: Summary perceptions of Auditors on what their responsibilities are

To perform value added audits that are supported by a management letter. The letter details all the weaknesses discovered during the audit and the risks associated with them and also some recommendations as to how to rectify the weaknesses.

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16 C u s t o m e r S e r v i c e In A n A u d i t o r - A u d i t e e R e l a t i o n s h i p

To report on the true and fairness view of the financial statements, to report on the weaknesses of the controls and systems and any other service that the clients

would want them to do. To express an independent opinion on whether the financial statements give true

and fair views of the status of the organisations' affairs. To obtain reasonable assurance about whether financial statements prepared are

free of material misstatements, assess the significant estimates made by management and evaluate overall financial statement presentation.. To report on the true and fair view of the financial statements, report on the strength and weaknesses of the company based on the observation and express an opinion about the financial statements to the shareholders. To report to the members, give an opinion on the financial statements, to report whether proper books of accounts have been kept by the company, whether the balance sheet and income statement are in agreement with the books of accounts and whether auditors have received all information and explanations.

It c o m e s o u t v e r y c l e a r l y t h a t a u d i t o r s b e l i e v e t h a t t h e i r r e s p o n s i b i l i t y ends with examining financial statements and accompanying records and r e p o r t i n g t h e r e s u l t s o f t h e e x a m i n a t i o n . It d o e s n o t g o f u r t h e r t h a n t h a t . T h e r e s p o n s e s f r o m a u d i t e e s a r e s u m m a r i s e d in B o x 3 b e l o w :

Box 3: Summary perceptions of Auditees on what the responsibilities of Auditors are

T o e n s u r e t h a t t h e c o n t r o l s in p l a c e a r e e f f e c t i v e e n o u g h t o m i t i g a t e a l l t h e threats and risks.

To ensure accountability and corporate governance, suggest changes in systems, advice best accounting practices and provide credibility to users of financial statements.

Responsibility towards the shareholders to look at the financial position of the company from an objective point of view.

To serve the client independently to provide other services apart from audit as l o n g a s it d o c s n o t c o m p r o m i s e t h e i r i n d e p e n d e n c e .

To provide credibility to users of financial statements, and ensure financial statements and control systems are adequate.

To keep/not disclosing any information to third parties without the consent of the clients, and duty to audit clients' financial statements as per the letter of engagement.

Responses by auditees indicate mixed perceptions on what the responsibilities of auditors are. The general impression is that auditees expect more from

Vol. 12, No. 1 July 2004 © Centre for Indonesian Accounting and Management Research

Postgraduate Program, Brawijaya University