Management control in professional service firms - A control package in audit companies

University essay from Lunds universitet/Företagsekonomiska institutionen

Abstract: Management control in professional service organizations is fundamentally different from the control in classical industrial and producing corporations. This is mainly due to the special context a professional service firm has to face, as the value creation is knowledge intensive, demands a high level of education, and the professional employees have different expectations concerning their work. Hence, customized control tools have to be applied in professional service firms. Malmi and Brown (2008) provide a general management control package, which shall be applied to the context of professional service firms and auditing in particular. The aim of this master thesis is a detailed analysis of the management control package in audit firms. The data collection was done via a two-step approach, which comprised a questionnaire as one part, while interviews were also accomplished. The final sample consists of five office managers or senior auditors within large audit firms in the region of Skåne in Southern Sweden. Additionally, a former CEO of a big4 company is contacted in order to gain detailed information about auditing from a top-management point of view. Concerning the findings, it can be stated that the most important tools within the control package in audit firms are ‘organizational structure and procedures’, ‘budgeting’, ‘performance evaluation’, and ‘cultural control’. In contrast to previous literature which argued for an increasing use of ‘cultural control’, this study reports the maintained importance of ‘cybernetic controls’. This includes budgeting as a main tool for the management control package in audit firms, while ‘cultural tools’ are important but still of a supportive function.

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