Reassessing loose coupling: management control systems in a Big Four

Purpose We analyze how formal rules and informal routines surrounding management control systems are (mis)aligned in a Big Four audit firm. Moreover, we shed light on the conditions under which such loose coupling is perceived negatively by auditors as well as its consequences. Design/methodology/approach Our paper builds on case studies within the Italian and German member firms of a Big Four. We conducted semi-structured interviews with auditors of all seniorities as well as management accountants and Chief Financial Officers. Findings We find evidence for loose coupling between formal rules and informal routines in several areas, above all in the context of budgeting, performance evaluation and audit fieldwork. Our results underline that loose coupling in an audit environment can result in a lack of guidance, significant ambiguities and perceived unfairness, especially among junior level auditors. We elaborate on how these tensions are perceived by auditors and trace theses perceptions back to the contextual pressures auditors are exposed to. Originality/value Our study contributes to loose coupling theory by pointing toward a more balanced view on both the positive (e.g. flexibility and adaptability) and negative (e.g. lack of guidance, ambiguities and perceived unfairness) outcomes of loose coupling. As the perceptions of loose coupling can impinge on the behavior of auditors – which can ultimately affect audit quality – we elaborate on the conditions under which loose coupling is perceived negatively by auditors as well as on its consequences.