The Effects of COVID-19 and Continuous Auditing on Employees' Compliance with the Internal Control System: The Moderating Role of Conscientiousness

Abstract

The trend towards continuous auditing of business operations is growing. In economically demanding times, organizations aim to improve compliance with internal controls. Our study investigates whether continuous auditing and a (COVID19) crisis situation interact with the personality trait conscientiousness among auditees to influence compliance with internal controls. We conducted a between-subjects experiment manipulating audit frequency (continuous vs. traditional audit) and the current business situation (business as usual vs. crisis) and received 125 complete responses from sales professionals. We found that the effect of a crisis situation on the likelihood to engage in non-compliance with internal controls is conditional on conscientiousness, while continuous auditing does not seem to interact with the trait of conscientiousness. Specifically, we observe that less conscientious individuals who are operating under a crisis condition and continuously audited are likelier to engage in non-compliance with internal controls. In contrast, individuals with a high level of conscientiousness were more likely to comply with internal controls when continuously audited in the context of a crisis.