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Article

Bridging the Distance: Spatial and Social Factors Influencing Audit Quality and Auditor Independence in Small and Medium-Sized Enterprises

by
Jomjai Sampet
1,
Naruanard Sarapaivanich
1,* and
Jiradacha Wanchuplow
2
1
Department of Accounting, Faculty of Business Administration, Chiang Mai University, Chiang Mai 50200, Thailand
2
Department of Accountancy, Faculty of Management Sciences, Chiangmai Rajabhat University, Chiang Mai 50300, Thailand
*
Author to whom correspondence should be addressed.
J. Risk Financial Manag. 2025, 18(7), 374; https://doi.org/10.3390/jrfm18070374
Submission received: 31 May 2025 / Revised: 25 June 2025 / Accepted: 3 July 2025 / Published: 6 July 2025
(This article belongs to the Special Issue Entrepreneurship in Emerging Economies)
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Abstract

Audit quality is crucial, particularly for small and medium-sized enterprises (SMEs), due to their significant economic role. This study examined how spatial distance (physical separation) and social distance (perceived dissimilarity) between auditors and SME clients influence audit quality, focusing on technical quality (the tangible outputs of auditing) and process quality (the manner of service delivery). Using data from 449 SME executives across Thailand, the study investigated the mediating role of auditor independence within these relationships. The results from structural equation modeling revealed that spatial distance has no direct impact on audit quality but a negative effect on perceived auditor independence, which, in turn, diminishes audit quality indirectly. Conversely, social distance negatively impacts both technical and process quality directly and indirectly through auditor independence. The findings suggest that despite technological advancements facilitating remote auditing, maintaining some physical interaction remains vital for preserving client trust. Additionally, aligning auditor–client social similarities significantly enhances audit quality perceptions. This study provides practical implications for audit firms in managing client interactions effectively, particularly within SMEs.

1. Introduction

Audit quality is crucial for stakeholders relying on financial statements to make informed decisions. For small and medium-sized enterprises (SMEs), reliable audits are particularly significant, as these firms substantially contribute to economic growth by generating employment and effectively using regional resources (Knapp & Kemp, 2004; McMahon, 1999). Despite mandatory annual audits, SME owners often perceive auditing merely as a regulatory obligation rather than as an intrinsically valuable service. Consequently, audit firms must strategically enhance client perceptions of audit quality to foster loyalty and maintain ongoing revenue streams (Pavlova et al., 2018; Peštović et al., 2021; Sarapaivanich & Patterson, 2015; Sarapaivanich et al., 2024).
Traditionally, audit quality has been narrowly conceptualized, focusing predominantly on auditors’ competence and independence, with less emphasis on auditing as a comprehensive service process (e.g., V. L. Brown et al., 2016; Christensen et al., 2015; Octavia & Widodo, 2015). Recognizing this limitation, contemporary research has highlighted two dimensions—technical quality (the tangible outputs of auditing, such as audit reports) and process quality (the manner in which auditing services are delivered) (Boon et al., 2008; Butcher et al., 2013; Duff, 2009; Ismail et al., 2006; Mohamed & Ismail, 2022; Sarapaivanich & Patterson, 2015). This broader perspective acknowledges that clients’ direct experiences with auditors significantly shape their overall perceptions of audit quality.
Recent developments, notably technological advancements and remote auditing practices accelerated by the COVID-19 pandemic, have introduced new complexities into auditor–client relationships. In particular, these practices have increased spatial distance—the physical separation between auditors and their clients—and social distance—the degree of perceived dissimilarity in beliefs, values, and interests.
Construal Level Theory (CLT) of psychological distance explains how individuals form abstract mental representations (construals) to interpret objects or events that are perceived as distant. According to CLT, psychological distance is an egocentric and subjective experience, with the self in the “here and now” serving as the reference point. This perceived distance influences whether information is processed abstractly or concretely, thereby affecting decision-making, planning, and interpersonal relationships (Liberman & Trope, 2008; Trope & Liberman, 2010). CLT suggests that increased spatial and social distances can hinder effective communication and reduce relational trust, ultimately leading to lower perceptions of audit quality and auditor independence.
Although existing studies have examined the impact of psychological distance and service quality across various domains and in the context of listed companies, research that integrates the relationships among psychological distance, auditor independence, and service quality within the audit profession—particularly in the SME context—remains limited. Therefore, it is worthwhile to explore these associations specifically within the context of SME auditing.
This study aims to examine how spatial and social distances between auditors and SME clients influence perceived audit quality through both technical and process dimensions. Additionally, it explores the mediating role of auditor independence within these relationships. By investigating these factors within the Thai SME context, this study provides insights and practical implications for audit firms seeking to enhance audit quality and strengthen client relationships in an evolving professional environment, thus contributing to a deeper understanding of audit quality evaluation in emerging economies.
The remainder of the article is organized as follows. First, we present the literature review and hypothesis development, followed by a conceptual model and a discussion of the research methodology. Next, we provide the study’s results in relation to the existing literature and discuss the key findings. Thereafter, we elaborate on the findings, offer potential implications, present the limitations of the study, and suggest directions for future research.

2. Literature Review and Hypotheses Development

2.1. The SME Context

SMEs significantly contribute to a country’s economy by generating output, creating employment opportunities, and effectively using regional resources. SMEs in Thailand are classified into three categories based on size, according to criteria set by the Thai government: (1) Micro Enterprises, (2) Small Enterprises, and (3) Medium Enterprises, as shown in Table 1 (Office of Small and Medium Enterprises Promotion, 2024).
In Thailand, the term SME (small and medium-sized enterprises) covers a wide range of businesses. All limited companies and partnerships, regardless of size, are required by Thai law to prepare annual financial statements and have these statements audited by a licensed auditor, even if they are not publicly traded (Accounting Act B.E. 2000, 2000; DBD, 2022). Reliable financial statements are essential for managerial decision-making (Chakkham & Tippayawong, 2019; Knapp & Kemp, 2004; McMahon, 1999; Tontiset & Kaiwinit, 2018). Consequently, these SMEs are legally required to undergo annual financial audits to ensure the reliability of their financial reports. However, most SME proprietors typically lack formal accounting training and are often burdened by numerous daily responsibilities (Morrissey & Pittaway, 2006). Additionally, many SME owners may view auditing primarily as a mandatory regulatory requirement rather than a beneficial business practice, perceiving it as an unnecessary bureaucratic process. Nevertheless, audit firms strive to maintain client loyalty and secure ongoing revenue streams by enhancing clients’ perceptions of audit quality (Sarapaivanich & Patterson, 2015).
In SMEs, internal control systems are generally weak due to limited resources, a smaller workforce, and less formalized procedures (Bruwer et al., 2017). Because of these weaknesses, auditors typically cannot rely on internal controls to provide assurance regarding the accuracy of financial statements. Instead, they tend to employ substantive testing as the primary method for gathering audit evidence. By conducting substantive tests, auditors can effectively reduce audit risks—such as the risk of material misstatement—and help ensure the overall quality and reliability of the audit opinion.

2.2. Audit Quality and Perceived Value

The service quality literature has consistently identified two key dimensions of customer-perceived service quality: technical quality (what is delivered) and process quality (how the service is delivered) (Ali et al., 2021; Grönroos, 1984; Murrar et al., 2024; Parasuraman et al., 1985). Audit quality is inherently complex and multifaceted, making it challenging to define precisely. Despite extensive research, no universally accepted definition currently exists. Duff (2009) proposed a comprehensive definition of audit quality from the client’s perspective, emphasizing both service quality (the client’s experience during the audit engagement) and technical quality (the auditor’s competence and degree of independence). Drawing from both service-quality and audit-quality literature, audit quality can thus be seen as comprising two essential dimensions: technical quality (what is delivered) and functional quality (how the service is delivered) (Parasuraman et al., 1985; Sarapaivanich & Patterson, 2015).
For SME clients, the audit report may hold limited perceived value, as it is often seen merely as a tool to meet statutory obligations. In reality, the true value of an audit may only become evident over time—months or even years—as the client’s financial situation unfolds. Therefore, the audit process, which clients can directly observe and experience, plays a critical role in shaping their overall assessment of audit quality. Thus, both technical and process quality directly influence clients’ experiences and heavily determine their overall perception of audit quality. Accordingly, this study examines both dimensions: technical quality and process quality.
Technical quality refers to the actual outcomes clients receive from audit services, such as audit reports and management letters. It encompasses auditors’ adherence to generally accepted auditing standards and the appropriateness of audit findings and recommendations. Technical quality is thus a fundamental indicator of perceived audit quality from a professional and regulatory perspective (Sarapaivanich & Patterson, 2015).
Process quality relates to the manner in which auditing services are provided, including auditors’ responsiveness, flexibility, and interpersonal interactions (Duff, 2004, 2009; Sarapaivanich & Patterson, 2015). Process quality significantly influences client satisfaction by shaping perceptions of auditor professionalism, ethical conduct, and service experience. It directly impacts the perceived value and trustworthiness of the audit process and outcomes (Sarapaivanich & Patterson, 2015).

2.3. Direct Impact of Spatial Distance on Technical Quality and Process Quality

Due to the recent pandemic and advancements in technology, auditors have increasingly adopted alternative virtual audit procedures (e.g., remote virtual inventory observations and real-time video-streamed meetings) (Bauer et al., 2022; Lowe et al., 2018). These changes have resulted in auditors and clients meeting less frequently in person, reducing opportunities for auditors to learn, share information, and effectively collaborate on audit work (Choi et al., 2012). These practices create spatial distance, defined by CLT as the perceived physical separation between the auditor and client locations (Trope & Liberman, 2010; Wu, 2007).
CLT posits that increased spatial distance leads to more abstract and generalized perceptions, which can negatively impact the detailed and context-specific interactions crucial for effective auditing. Frequent face-to-face interactions are critical for perceived audit quality because they facilitate detailed understanding, effective communication, and the development of auditor–client relationships (Bennett & Hatfield, 2018; Choi et al., 2012).
Increased spatial distance negatively affects technical audit quality by limiting auditors’ ability to comprehensively understand client-specific operations, which reduces the thoroughness and accuracy of audit procedures. Auditors operating remotely may struggle to capture nuanced information and real-time data, impairing their capacity for effective and precise evaluations of client financial reporting processes (Bennett & Hatfield, 2018; Brazel et al., 2004; Gong et al., 2022).
Similarly, process audit quality, which reflects clients’ perceptions of the overall service experience, also deteriorates with increased spatial distance. Reduced face-to-face interactions hinder auditors’ ability to convey empathy, responsiveness, and personalized attention, negatively impacting clients’ perceptions of auditors’ service quality (Bennett & Hatfield, 2018). Citera et al. (2005) highlighted that greater spatial distance diminishes perceived credibility and trust, which are essential components of favorable client assessments of service experiences.
Therefore, increased spatial distance between auditors and clients adversely impacts both technical and process dimensions of perceived audit quality by hindering detailed information exchange, reducing effective communication, and diminishing relational trust. Based on these arguments, we propose the following hypotheses:
Hypothesis 1a.
Spatial distance negatively influences technical quality.
Hypothesis 1b.
Spatial distance negatively influences process quality.
The conceptual model is depicted in Figure 1.

2.4. Direct Impact of Social Distance on Technical Quality and Process Quality

According to CLT, social distance refers to the degree of dissimilarity between an auditor’s self and a client’s self, encompassing differences in attitudes, feelings, thoughts, preferences, and tastes (Fujita et al., 2006). CLT posits that increased social distance between individuals generates perceptions of difference or unfamiliarity, leading to abstract rather than concrete evaluations (Liberman & Trope, 2008; Trope & Liberman, 2010). In the context of the auditor–client relationship, increased social distance negatively influences client perceptions of audit quality due to reduced interpersonal connection and trust (Sarapaivanich et al., 2024).
Empirical studies have shown that perceived similarity (low social distance) enhances relational trust and effective communication, thereby positively impacting perceived service quality (Carhuapomachacon et al., 2025; Coulter & Coulter, 2002; Sampet et al., 2024; Sarapaivanich et al., 2024). Conversely, greater social distance can create communication barriers, limit mutual understanding, and weaken interpersonal relationships between auditors and clients. Such barriers restrict the effectiveness of knowledge exchange, clarity of communication, and shared understanding of audit procedures, ultimately negatively impacting perceived audit quality (Sarapaivanich et al., 2024).
In particular, technical audit quality may decline when increased social distance leads to heightened anxiety and weakened social bonds. Perceived dissimilarity with an auditor can create uncertainty regarding the auditor’s ability to deliver expected service outcomes (Sarapaivanich et al., 2024). Similarly, process audit quality, which captures the client’s overall service experience, may suffer as clients perceive auditors as less empathetic, responsive, and attentive due to perceived dissimilarities or distance (Sampet et al., 2024; Sarapaivanich & Patterson, 2015).
Therefore, clients who perceive high levels of social distance with auditors are likely to assess both technical and process dimensions of audit quality less favorably than in situations involving low social distance. Based on these arguments, we propose the following hypotheses:
Hypothesis 2a.
Social distance negatively influences technical quality.
Hypothesis 2b.
Social distance negatively influences process quality.

2.5. Direct Impact of Spatial Distance on Auditor Independence

Spatial distance, as explained by CLT, refers to the perceived physical distance between auditors and their clients (Henderson et al., 2011). Traditionally, auditors conduct audit fieldwork on-site at clients’ locations for extended periods (e.g., one week, two weeks, or one month), depending on workload, to efficiently and effectively gather audit evidence. However, advancements in technology and changes in audit practices due to the recent pandemic have increasingly shifted audit processes to remote or virtual settings, reducing physical interactions between auditors and clients (Bauer et al., 2022; Gong et al., 2022). This shift has implications for client perceptions of auditor independence.
Auditor independence refers to an auditor’s capacity to carry out audit responsibilities with integrity and impartiality (Tepalagul & Lin, 2015). The specific impact of spatial separation on auditor independence remains underexplored. Most existing studies, many of which emerged during and after the COVID-19 pandemic, have focused on the relationship between spatial distance and audit quality and suggested mixed findings (e.g., Annelin & Che, 2023; Beck et al., 2019; Francis et al., 2022; Gong et al., 2022; Li et al., 2023). With respect to auditor independence, two opposing perspectives can be considered. On one hand, spatial distance may enhance auditors’ professional skepticism, an essential component of auditor independence, by limiting informal interactions, which then reduce exposure to interpersonal pressures and relational obligations. Physical separation can enable auditors to maintain objectivity and critical judgment, thereby minimizing undue client influence.
However, on the other hand, CLT suggests that increased spatial distance fosters abstract thinking while reducing concrete, experiential interactions (Fujita et al., 2006). Accordingly, when auditors operate remotely and rely on virtual rather than face-to-face communication, clients’ perceptions of auditor credibility may decline due to reduced transparency and interpersonal trust (Citera et al., 2005). Social presence theory further explains that face-to-face interactions provide tangible cues that enhance trust and credibility by enabling clients to directly observe auditors’ behavior, processes, and demonstrations of professional skepticism (Bennett & Hatfield, 2018). Bennett and Hatfield (2018) found that increased physical presence and in-person interaction significantly improve auditors’ questioning, skepticism, and communication effectiveness. Similarly, Brazel et al. (2004) noted that reduced face-to-face interaction undermines auditors’ effectiveness, judgment quality, and accountability—core elements essential for maintaining auditor independence. Consequently, clients may perceive a decline in auditor independence when these foundational elements are compromised due to spatial distance.
Therefore, increased spatial distance, facilitated by remote audit practices, can negatively impact auditor independence by weakening perceived credibility and reducing direct observational interactions essential for maintaining trust and transparency. Based on these arguments, we propose the following hypothesis:
Hypothesis 3.
Spatial distance negatively impacts auditor independence.

2.6. Direct Impact of Social Distance on Auditor Independence

Social distance reflects differences in beliefs, values, norms, and perceptions between auditors and their clients (Trope & Liberman, 2010). According to similarity-attraction theory (Byrne, 1971), individuals tend to form stronger relationships and prefer interactions with those who share similarities, as it enhances self-esteem and supports congruity in self-identity. Consequently, when clients perceive high similarity (low social distance) with auditors, they are likely to have a more positive attitude and feel emotionally or socially closer to the auditors (Sampet et al., 2024; Sarapaivanich et al., 2024). When auditors and clients share strong similarities or social closeness, clients’ perceptions of auditor independence tend to be influenced by these relationships.
Independence serves as the cornerstone of auditors’ ability to carry out their responsibilities objectively (Tepalagul & Lin, 2015). Concerns about auditor independence often arise when auditors and clients share strong social similarities or maintain close personal relationships, as these connections can introduce interpersonal biases into audit judgments. Reduced social distance may weaken professional skepticism and increase susceptibility to relational influence, ultimately compromising auditor independence. DeFond et al. (2024) and Pittman and Wu (2025) emphasize that close auditor–client ties can threaten independence, while Martins and Casais (2024) point out that such similarities may create conflicts of interest that impair the auditor’s objectivity.
According to similarity-attraction theory, individuals are naturally drawn to others who share similar characteristics, as this reinforces their self-esteem and promotes congruence with their self-identity (Byrne, 1971). Prior research suggests that when clients perceive similarities with their auditors, relational trust is strengthened, leading to more favorable assessments of the auditors’ competence (Coulter & Coulter, 2002; Sampet et al., 2024). This, in turn, enhances clients’ perceptions of auditor independence. In contrast, perceived dissimilarities in personality, interests, or values—reflecting high social distance—may undermine clients’ confidence in auditor independence. Based on this rationale, we propose the following hypothesis:
Hypothesis 4.
Social distance negatively impacts auditor independence.

2.7. Direct Impact of Auditor Independence on Technical Quality and Process Quality

Independence is defined as “compliance with relevant ethical requirements, including those pertaining to independence, relating to financial statement audit engagements” (IAASB, 2016, p. 86). Auditor independence is critical to audit quality because it ensures that auditors maintain objectivity and professional skepticism when performing audit tasks (Tepalagul & Lin, 2015). DeAngelo (1981) emphasized that audit quality is the likelihood of detecting and independently reporting breaches. Therefore, auditors who lack independence are less likely to report significant issues, negatively impacting audit quality.
The positive relationship between auditor independence and audit quality is widely supported by academic literature (Frankel et al., 2002; Lam et al., 2024; Srinidhi & Gul, 2007; Tepalagul & Lin, 2015; Yakubu & Williams, 2020). Independence contributes to higher technical audit quality, as independent auditors are more likely to apply rigorous professional skepticism and thoroughness, increasing the likelihood of detecting errors, misstatements, and potential fraud. Moreover, independent auditors are better positioned to interpret and assess audit evidence objectively, free from biases stemming from personal relationships or client pressures (Tepalagul & Lin, 2015). This objectivity enables auditors to provide an opinion on the truth and fairness of the audited financial statements, reduces the risk of material misstatement, and enhances users’ confidence in financial reports prepared by management.
Process audit quality, which includes clients’ perceptions of auditors’ interpersonal interactions and service experiences, is enhanced by auditor independence. Clients perceive independent auditors as more credible, trustworthy, and professional—which, in turn, improves their satisfaction with the audit service experience (Sampet et al., 2019). When auditors exhibit clear independence, clients gain greater confidence in the integrity of audit processes and outcomes, positively influencing their overall perception of process quality.
Consequently, auditor independence is positively related to both the technical and process dimensions of audit quality. Based on these arguments and empirical findings, the following hypotheses are proposed:
Hypothesis 5a.
Auditor independence positively impacts technical quality.
Hypothesis 5b.
Auditor independence positively impacts process quality.

3. Methodology

3.1. Sample

In this study, audit clients were represented by SME executives from various metropolitan cities across Thailand, including Bangkok, Chiang Mai, Khon Kaen, Chonburi, and Phuket. These locations were chosen to ensure geographic diversity and to capture a range of economic environments within Thailand. We employed the key informant method to obtain reliable and insightful responses. A key informant in each SME was identified as an executive-level individual, such as an owner, chief executive officer (CEO), general manager, accounting manager, or senior accountant. These informants were specifically chosen based on their direct involvement in auditing procedures and auditor selection processes, ensuring that their insights accurately reflected organizational perceptions and experiences regarding audit quality and auditor–client relationships.
We employed convenience sampling to accommodate practical constraints related to time and resource availability. After removing incomplete questionnaires, the final sample comprised 449 valid responses, representing a response rate of 83.8%. Detailed characteristics of the sample are presented in Table 2, Table 3 and Table 4.

3.2. Questionnaire and Operationalization of Constructs

We collected data using a structured questionnaire developed through a multistage approach. Initially, questionnaire items were adapted from validated scales available in the existing literature. To ensure relevance and contextual suitability, we conducted semi-structured interviews with four SME accounting managers and four auditors across three metropolitan cities in Thailand. Feedback from these interviews prompted minor adjustments in wording to better align the questionnaire items with the current auditing context.
Since the original measures from existing literature were in English, we carefully translated the questionnaire into Thai using a forward-translation method (Hambleton, 1993). In particular, two bilingual assistants, both native Thai speakers proficient in English, conducted the initial translation. Subsequently, two different bilingual translators, both native English speakers proficient in Thai, independently performed back-translation to ensure accuracy and consistency of meaning (Brislin et al., 1973).
To establish face validity and ensure the comprehensibility and relevance of the questionnaire items, instructions, and constructs, a pre-test was conducted with 25 respondents. These respondents included accounting practitioners, accounting academics, and SME business owners (Sharma & Patterson, 1999). Feedback from this pre-test phase was systematically reviewed, and questionnaire items were further refined for clarity and precision. Additionally, validity and reliability assessments were conducted thoroughly to finalize the questionnaire prior to distribution.
The participants were asked to evaluate their experiences and perceptions regarding interactions with auditors during their most recent audit engagement within the COVID-19 pandemic period. In particular, questionnaire items measuring perceived audit quality were adapted from well-established sources, including Cohen et al. (2007), Sampet et al. (2019), Sarapaivanich et al. (2024), and Sarapaivanich and Patterson (2015). Measures assessing perceived auditor independence were modified from previous studies by Behn et al. (1997), Carcello et al. (1992), Hurtt (2010), and Janssen et al. (2021). Finally, spatial and social distance constructs were adapted from scales developed by Darke et al. (2016) and Jones et al. (1966).
Responses to most questionnaire items were collected using a seven-point Likert scale, ranging from “strongly disagree” to “strongly agree,” to accurately capture nuanced client perceptions.

3.3. Scale Evaluations

The multi-item constructs underwent scale purification using confirmatory factor analysis (CFA), with none of the standardized residual covariances exceeding ±2.58. The tests for convergent and discriminant validity involved the inclusion of each scale simultaneously in the model, which was analyzed using AMOS software (IBM SPSS Amos 25 Graphics). After eliminating eight items with extremely low factor loadings (see details in Table 5), the CFA model yielded χ²/df = 3.364, p = 0.000, confirmatory fit index [CFI] = 0.950, root mean square error of approximation [RMSEA] = 0.073, and Tucker–Lewis index [TLI] = 0.941. All indices indicated a good fit (Bagozzi & Yi, 2012).
Table 5 presents the standardized factor loadings, Cronbach’s alphas, composite reliabilities (CRs), and average variances extracted (AVE) for the multiple-item scales. All these scales demonstrated construct reliability, as all Cronbach alphas exceeded 0.70 (Nunnally & Bernstein, 1994). Additionally, all CRs were above 0.60, and all AVEs were above 0.50, indicating scale reliability (Bagozzi & Yi, 2012). Convergent validity was also established, as all items loaded significantly onto their corresponding constructs (p < 0.000) (Diamantopoulos & Siguaw, 2000). The standardized factor loadings of all items ranged from 0.706 to 0.979 and were highly significant (p < 0.000), indicating strong relationships between the items and their corresponding constructs.
To assess discriminant validity, we examined the correlations among the constructs. As shown in Table 6, all correlations are below the r = 0.85 cutoff suggested by T. A. Brown (2006), and the square roots of all AVEs are higher than their corresponding correlations with other constructs in the study. Although some constructs exhibit moderately high correlations, adequate discriminant validity is demonstrated.

3.4. Analytical Technique

We used structural equation modeling (SEM) as our primary analytical technique, as it effectively allows the simultaneous analysis of multiple dependent relationships among observed and latent variables, aligning well with our study’s conceptual framework and hypotheses. SEM is particularly suitable for testing complex relationships, including direct and indirect (mediating) effects, which are central to our research model.

3.5. Control Variables

To test the hypotheses more robustly, client involvement in the decision to select the auditor or audit firm (measured on a seven-point Likert scale from 0 [no involvement] to 7 [full involvement]) was included as a control variable. The length of audit tenure with an audit firm was measured by the number of years the client had been using the incumbent audit firm. Audit firm size was represented by a dummy-coded variable indicating whether the audit firm is a Big 4 or non-Big 4 firm.

4. Results

4.1. Direct Impact of Spatial Distance and Social Distance on Technical Quality and Process Quality

The estimates of the conceptual model relied on structural equation modeling. The fit indices indicated that the model fit the data well (χ2/df = 3.536, p = 0.000, CFI = 0.931, RMSEA = 0.075, TLI = 0.917). Regarding the results presented in Figure 2 and Table 7, the standardized path coefficients for spatial distance to technical quality (β = −0.016, p = 0.603) and process quality (β = 0.050, p = 0.098) were not significant. Thus, Hypotheses 1a and 1b, which stated that spatial distance negatively influences technical quality and process quality, respectively, were not supported. Hypotheses 2a and 2b, respectively, proposed that social distance negatively influences technical quality and process quality. The results indicated negative and significant standardized path coefficients for social distance to technical quality (β = −0.181, p < 0.001) and social distance to process quality (β = −0.215, p < 0.001), thus supporting Hypotheses 2a and 2b, respectively. These results suggest that social distance has a negative direct effect on technical quality and process quality, while spatial distance does not.

4.2. Mediating Role of Auditor Independence

Hypotheses 3 and 4 posited that spatial distance and social distance, respectively, negatively impact auditor independence. The results presented negative and significant standardized path coefficients for spatial distance to auditor independence (β = −0.098, p < 0.05) and social distance to auditor independence (β = −0.296, p < 0.001), thus supporting Hypotheses 3 and 4. According to Hypotheses 5a and 5b, auditor independence positively impacts technical quality and process quality, respectively. Since the auditor independence–technical quality and auditor independence–process quality paths were positive and significant (β = 0.813, p < 0.001 for the auditor independence–technical quality path and β = 0.808, p < 0.001 for the auditor independence–process quality path), both Hypotheses 5a and 5b are supported.
The findings of Hypotheses 1a, 1b, 3, 5a, and 5b together indicate that auditor independence serves as a full mediator in the relationships between spatial distance and both technical and process quality. Integrating the results of Hypotheses 1b, 4, 5a, and 5b, we conclude that auditor independence partially mediates the relationships between social distance and technical quality, as well as between social distance and process quality. In other words, social distance has both direct and indirect influences on technical quality and process quality.

5. Conclusions and Implications

As acquiring new clients becomes increasingly challenging, professional service organizations, particularly financial auditing firms, strategically emphasize client loyalty and retention. Audit quality remains the most critical factor in both attracting new clients and retaining existing ones. Consequently, audit firms continuously strive to enhance client perceptions of audit quality. This focus has spurred numerous studies exploring the factors influencing clients’ perceptions, particularly psychological factors. The present study contributes to the auditing literature by clarifying how spatial and social distances impact audit quality in both technical and process dimensions, specifically within the context of SMEs. Moreover, this study investigates how perceived auditor independence mediates these relationships.
Regarding spatial distance, our findings indicate no direct effect on either technical or process audit quality, contradicting both our initial hypotheses and previous studies that suggest negative relationships (Bennett & Hatfield, 2018; Brazel et al., 2004; Choi et al., 2012; Citera et al., 2005; Gong et al., 2022). A possible explanation lies in the rapid advancement and widespread adoption of technology that facilitates remote auditing processes. In the post-pandemic era, auditors and clients alike have become proficient in leveraging technology, effectively bridging physical barriers that were previously detrimental to audit quality. This shift is especially significant within SMEs, where financial transactions tend to be less complex and less voluminous. Consequently, spatial distance alone no longer significantly impacts audit quality. However, despite the absence of a direct link, our results reveal that perceived auditor independence mediates the relationship between spatial distance and audit quality. Increased spatial distance diminishes clients’ perceptions of auditor independence, indirectly lowering their perceptions of audit quality. The finding of a negative relationship between spatial distance and clients’ perceptions of auditor independence is consistent with prior research suggesting that remote auditing can weaken client trust (Bennett & Hatfield, 2018; Citera et al., 2005). When audits are conducted remotely, clients may question whether auditors are acting objectively and adhering to generally accepted accounting principles, leading to less favorable perceptions of auditor independence.
In terms of social distance, our results demonstrate both direct and indirect influences—mediated through perceived auditor independence—on technical and process audit quality. These outcomes align with our initial hypotheses, underscoring the substantial role social similarity between auditor and client plays in determining perceptions of audit quality. Our results are consistent with prior studies that suggest that when auditors and clients share social similarities—such as gender or background—it enhances mutual understanding, empathy, and effective communication (Carhuapomachacon et al., 2025; Coulter & Coulter, 2002; Sampet et al., 2024; Sarapaivanich & Patterson, 2015; Sarapaivanich et al., 2024). This alignment consequently leads clients to perceive auditors as more competent, reliable, and trustworthy, ultimately improving their perceptions of audit quality.
These findings have several practical implications for auditors and auditing firms. First, although spatial distance does not directly affect audit quality, its indirect negative impact through perceived auditor independence emphasizes the continued importance of physical interactions. Despite technological advancements enabling remote audits, physical presence remains essential to maintain client trust and confidence. Reduced face-to-face interactions can inadvertently foster misunderstandings or skepticism regarding auditor transparency and independence. Auditors, therefore, should prioritize conducting key audit tasks at client sites, particularly during the execution phase involving document auditing. Removing client documents from the client’s premises might inadvertently raise concerns regarding auditor independence. Nevertheless, auditors must carefully manage these interactions to prevent perceptions of being overly dependent on client assistance, potentially undermining perceived professionalism (Sampet et al., 2024).
Second, social distance significantly influences client perceptions of audit quality both directly and indirectly through auditor independence. Auditors who share interests, values, and perspectives with their clients are perceived as providing higher quality audits due to enhanced trust and perceived independence. These findings suggest that audit firms would benefit from thoroughly understanding their clients’ psychological profiles before assigning audit teams. By leveraging the concept of homophily (Smith, 1998), firms can strategically pair auditors and clients based on similarities to optimize trust and satisfaction. Moreover, the total effects of social distance on technical and process quality exceed those of spatial distance, highlighting the critical role of psychological alignment in client–auditor relationships.
Overall, this study underscores the nuanced roles that spatial and social distances play in shaping clients’ perceptions of audit quality. Future research could further explore other psychological dimensions influencing these relationships across different organizational contexts or larger client bases.

6. Research Limitations and Future Perspectives

This study has several limitations, which also present opportunities for future research. First, this research was conducted exclusively in the context of SMEs in Thailand. Cultural and regional characteristics specific to Thailand might influence the perceptions and outcomes regarding auditor–client relationships. Future studies could explore similar constructs across different cultural contexts or countries to validate the generalizability of the findings.
Second, the study relied on cross-sectional data, restricting the ability to infer causality. Future research should adopt longitudinal or experimental designs to provide stronger evidence regarding causal relationships among spatial distance, social distance, auditor independence, and audit quality.
Lastly, technological advancements continuously evolve, potentially reshaping the dynamics of auditor–client interactions. Future research could further investigate how ongoing and future technological changes specifically influence auditor independence, audit processes, and audit outcomes across different organizational sizes and industries.

Author Contributions

Conceptualization, J.S., N.S. and J.W.; methodology, J.S., N.S. and J.W.; formal analysis, J.S. and N.S., writing—review and editing, J.S. and N.S. All authors have read and agreed to the published version of the manuscript.

Funding

This research received no external funding.

Institutional Review Board Statement

The study was conducted in accordance with the Declaration of Helsinki, and approved by Chiang Mai University Research Ethics Committee of Chiang Mai University (13 September 2023/COA No. 111/66, CMUREC No. 66-182).

Informed Consent Statement

Informed consent was obtained from all subjects involved in the study. The online questionnaire included an introductory section outlining the purpose of the study, voluntary participation, anonymity, and data confidentiality. Participants indicated their consent by continuing with the survey.

Data Availability Statement

The data that support the findings of this study are available from the authors upon reasonable request.

Conflicts of Interest

The authors declare no conflicts of interest.

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Jrfm 18 00374 g001
Figure 1. Conceptual model.
Figure 1. Conceptual model.
Jrfm 18 00374 g001
Jrfm 18 00374 g002
Figure 2. Results. *** = p < 0.001, ** = p < 0.01.
Figure 2. Results. *** = p < 0.001, ** = p < 0.01.
Jrfm 18 00374 g002
Table 1. Classification of SME sizes in Thailand.
Table 1. Classification of SME sizes in Thailand.
Enterprise CategoryMicro EnterpriseSmall EnterpriseMedium Enterprise
Staff
Headcount
(Persons)		Annual
Revenue
(Million Baht)		Staff
Headcount
(Persons)		Annual
Revenue
(Million Baht)		Staff
Headcount
(Persons)		Annual
Revenue
(Million Baht)
Manufacturing Not more
than 5		Not more
than 1.8		Not more
than 50		Not more
than 100		Not more
than 200		Not more
than 500
Services,
Wholesale,
and Retail 		Not more
than 5		Not more
than 1.8		Not more
than 30		Not more
than 50		Not more
than 100		Not more
than 300
Table 2. Position in organization.
Table 2. Position in organization.
Positionn%
Owner10924.3
CEO81.8
General manager357.8
Accounting manager15133.6
Senior accountant8218.3
Other6414.3
449100.0
Table 3. Firm size (number of employees).
Table 3. Firm size (number of employees).
Number of Employeesn%
Not greater than 3029966.6
31–507616.9
51–1006614.7
101–20051.1
Greater than 20030.7
449100
Table 4. Client auditing experience (number of years involved in the audit process).
Table 4. Client auditing experience (number of years involved in the audit process).
Number of Yearsn%
1–524454.3
6–1014632.5
11–15245.3
16–20204.5
21–2551.1
26–3061.3
More than 3040.9
449100
Table 5. Composite reliabilities and AVE of latent variables.
Table 5. Composite reliabilities and AVE of latent variables.
VariablesStandardized
Loading		Cronbach’s
Alphas		CRAVE
Spatial distance (SPD) 0.8810.7560.511
SPD1Your company’s location is physically close to the auditor’s firm (reverse-scored) *
SPD2The auditor frequently audits at your company (reverse-scored) *
SPD3 You have fewer physical (face-to-face) interactions with the auditor0.706
SPD4 The auditor mostly audits at their locations, e.g., taking audit documents out of your company 0.891
SPD5 You and the auditor have frequent interactions via communication technology (instead of face-to-face interactions), such as Zoom, LINE, email, phone calls, etc. 0.939
Social distance (SD) 0.9350.8520.658
SD1What level of dissimilarity in characteristic, attitude, and idea do you feel between you and the auditor who you mainly deal with? *
SD2 You would like to be a member of the same group as the auditor (reverse-scored)0.873
SD3 You would like to spend time with the auditor apart from working hours (reverse-scored)0.980
SD4 The auditor and you have similar common interests (reverse-scored)0.882
Auditor independence (AI) 0.9080.9300.817
IND1 The auditor conducts the audit honestly0.840
IND2 The auditor performs his/her work freely and in an objective manner 0.923
IND3The auditor performs his/her work freely and in an objective manner *
IND4 The auditor understands and conducts the audit according to the generally accepted accounting principles0.875
Technical quality (TQ) 0.9180.9250.673
TQ1The audit report states an appropriate opinion0.801
TQ2The audit report gives the management team confidence in the accuracy of your financial statements *
TQ3The audit report gives others (such as banks and creditors) confidence in your financial statements0.797
TQ4The management letter identifies deficiencies in your internal control0.818
TQ5The management letter provides useful information for improving your accounting practice0.857
TQ6The management letter provides useful information for improving your business practice0.793
TQ7The management letter is beneficial and applicable to your business *
TQ8The management letter is easily understood0.806
Process quality (PQ) 0.9380.9400.724
PQ1The auditor finishes work within the time agreed *
PQ2The auditor keeps you informed of progress *
PQ3The auditor lets you know any auditing issues of concern in advance0.841
PQ4The auditor always informs you in advance of what documents are required 0.822
PQ5The auditor has a very good plan for how he/she approaches the audit0.828
PQ6The auditor always exercises due care in providing his/her services0.885
PQ7The auditor provides prompt services0.831
PQ8The auditor shows genuine interest in your company problems0.848
Note: * Item excluded after validity and reliability check.
Table 6. Correlation matrix.
Table 6. Correlation matrix.
CRAVESPDSDAITQPQ
SPD0.7560.5110.715
SD0.8520.6580.0700.811
AI0.9300.817−0.146 **−0.317 **0.904
TQ0.9250.673−0.142 **−0.427 **0.780 **0.820
PQ0.9400.724−0.090−0.435 **0.783 **0.804 **0.851
Note: Numbers in bold on the diagonal elements represent the square root of the average variance extracted (AVE). ** = p < 0.01.
Table 7. Parameter estimates.
Table 7. Parameter estimates.
HypothesesPathPredicted SignStandardized Path Coefficients
1aSpatial distance→Technical quality-−0.016
1bSpatial distance→Process quality-0.050
2aSocial distance→Technical quality-−0.181 ***
2bSocial distance→Process quality-−0.215 ***
3Spatial distance→Auditor independence-−0.098 **
4Social distance→Auditor independence-−0.296 ***
5aAuditor independence→Technical quality+0.813 ***
5bAuditor independence→Process quality+0.808 ***
Client involvement→Technical quality 0.039
Client involvement→Process quality −0.003
Audit tenure→Technical quality 0.016
Audit tenure→Process quality 0.011
Audit firm size→Technical quality −0.036
Audit firm size→Process quality −0.014
Note: *** = p < 0.001, ** = p < 0.01.
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MDPI and ACS Style

Sampet, J.; Sarapaivanich, N.; Wanchuplow, J. Bridging the Distance: Spatial and Social Factors Influencing Audit Quality and Auditor Independence in Small and Medium-Sized Enterprises. J. Risk Financial Manag. 2025, 18, 374. https://doi.org/10.3390/jrfm18070374

AMA Style

Sampet J, Sarapaivanich N, Wanchuplow J. Bridging the Distance: Spatial and Social Factors Influencing Audit Quality and Auditor Independence in Small and Medium-Sized Enterprises. Journal of Risk and Financial Management. 2025; 18(7):374. https://doi.org/10.3390/jrfm18070374

Chicago/Turabian Style

Sampet, Jomjai, Naruanard Sarapaivanich, and Jiradacha Wanchuplow. 2025. "Bridging the Distance: Spatial and Social Factors Influencing Audit Quality and Auditor Independence in Small and Medium-Sized Enterprises" Journal of Risk and Financial Management 18, no. 7: 374. https://doi.org/10.3390/jrfm18070374

APA Style

Sampet, J., Sarapaivanich, N., & Wanchuplow, J. (2025). Bridging the Distance: Spatial and Social Factors Influencing Audit Quality and Auditor Independence in Small and Medium-Sized Enterprises. Journal of Risk and Financial Management, 18(7), 374. https://doi.org/10.3390/jrfm18070374

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