Download or read book Internal Audit Sourcing Arrangement and the External Auditor s Reliance Decision written by Steven M. Glover and published by . This book was released on 2007 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the effects of internal audit sourcing arrangement on the external auditor's reliance decision in the presence of different levels of inherent risk and task subjectivity. We posit that external auditors will rely more on outsourced than in-house internal audit functions (IAFs) and that this difference will be more pronounced when inherent risk is high or when the work performed by internal auditors relates to a subjective task. Participants in the study were 127 external auditors from a Big 4 firm who completed an experimental case in which we manipulated internal audit sourcing, inherent risk, and task subjectivity. Results from the experiment indicate an interaction between sourcing and inherent risk such that external auditors rely more on outsourced than in-house internal auditors when the level of inherent risk is high but do not differentiate based on sourcing arrangement when inherent risk is low. While we find that reliance is lower for subjective than for objective tasks, we do not find an interaction between sourcing arrangement and the subjectivity of the work performed. We do find a marginally significant interaction between inherent risk and subjectivity of work performed: external auditors are less willing to rely on subjective work performed by internal auditors when inherent risk is high but do not differentiate based on task subjectivity when inherent risk is low. Additional analyses indicate that sourcing arrangement affects the reliance decision both directly and indirectly. The indirect effect appears to be mediated through external auditors' perceptions of internal auditor objectivity.

Download or read book An Empirical Study of External Auditor Reliance on Internal Auditors written by Loren Louis Margheim and published by . This book was released on 1984 with total page 144 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book External Auditor s Reliance on Work Performed by Internal Auditors written by Denirah M. Balentina and published by . This book was released on 2015 with total page 206 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Pivotal Change in US Public Policy written by Murphy Smith and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Accounting regulation is one aspect of the government's role in protecting the investing public's interest. The Sarbanes-Oxley Act of 2002 (SOX) was an effort by the U.S. Congress to remedy negative effects of earlier major accounting failures. Requirements of SOX highlight the critical role of internal control as a component of accurate and reliable financial reporting. This new emphasis on effective internal controls places internal auditors of public companies at center stage. Internal audit departments are asked to identify, evaluate, and test the effectiveness of internal controls over financial reporting. This study examines the perceived role of the internal audit function in the external audit and financial reporting process. Results indicate that internal audit participation in the external audit process is perceived to be important by both internal and external auditors. Internal auditors are performing more work for the external auditors after the passage of SOX. Thus, implicitly, external auditors are placing greater reliance on the work of internal auditors.

Download or read book The Reliance of External Auditors on Internal Audit s Use of Continuous Audit written by Irina Mălăescu and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: As a response to the increased demand for timely and ongoing assurance over the effectiveness of risk management and control systems, companies are moving towards a more automated control environment through the implementation of continuous audit modules. The purpose of this study is to evaluate external auditors' reliance on internal audit's work when advanced audit techniques are introduced by the internal auditor and the impact this reliance has on budgeted audit hours. Prior literature suggests that internal control deficiencies also have an impact on external auditor reliance and the audit budget. The reliance decision of an external auditor has important economic consequences and implications for efficiency and effectiveness of the overall audit. In recent years, the PCAOB has encouraged greater such reliance to improve audit efficiency. An experiment is conducted with 87 experienced external auditors to investigate the theorized effects. Using a 2 x 2 between subjects factorial design, the frequency of the internal audit (traditional vs. continuous audit) and prior year material weakness (absent vs. present) are manipulated. Consistent with predictions, we find that auditors are willing to rely more on internal audit work in a continuous audit environment than in a traditional environment, and this effect is magnified when the prior year audit report on the effectiveness of internal controls indicates that controls are working properly. The presence of a material weakness, however, negatively impacts judgments on the budget for the valuation of a complex account. In addition, both material weakness and continuous audit have an impact on the overall audit budget, which is reduced only when the company has no prior year material weakness and a functioning continuous audit module is put in place. The results show that auditors increase budgeted hours for the engagement at a higher rate when the client uses traditional internal audit procedures.

Download or read book An Understanding of the Differences Between Internal and External Auditors in Obtaining and Assessing Information about Internal Control Weaknesses written by Ian Burt and published by . This book was released on 2014 with total page 133 pages. Available in PDF, EPUB and Kindle. Book excerpt: A critical role of the internal auditor is to design and monitor their organization's system of internal controls (COSO, 2004). In addition, they may be expected to objectively assess the quality of internal controls as professional auditors (Gray, 2004). External auditors have expressed concern that an internal auditor's strong identity with their organization will bias any internal control assessments he or she makes of that organization (Schneider, 1984). Even so, accounting regulators believe internal auditors' internal control assessments can be objective, and also maintain that having external auditors rely on these assessments should help to lower audit fees without jeopardizing audit quality (AICPA, 1990 - AS 5). Through two separate experiments, relying on social identity theory, social norms and the organizational silence literature in psychology, I examine whether the “employee” identity the internal auditor assumes as a member of the organization encourages other employees to share more information about internal control weaknesses with the internal auditor than the external auditor. In addition, I explore conditions under which the external auditor may be willing to rely on the internal auditor's internal control assessment even if the internal auditor's organizational identity is strong. Overall, this research will help external auditors, managers and regulators understand conditions under which the internal auditor can maintain their objectivity when performing an internal control assessment. Specifically, this research examines the potential importance of cueing internal auditors through the use of a strong code of ethics, such as the code of ethics enacted by the Institute of Internal Auditors, to the maintenance of the objectivity of all internal auditors. If the internal audit work is objective enough to be relied upon by the external auditor, the client can benefit from an audit of high quality while at the same time potentially lowering overall audit fees.

Download or read book Auditing an Integrated Approach written by Alvin A. Arens and published by . This book was released on 1997 with total page 823 pages. Available in PDF, EPUB and Kindle. Book excerpt: Offering coverage of the entire audit process, this text takes the reader through each audit cycle. It then shows how each step relates to the process as a whole. The book is completely oriented to non-complex computerized accounting systems rather than manual ones.

Download or read book External Auditors Reliance on Internal Auditors Work written by D. Dewey Ward and published by . This book was released on 1979 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book External Auditor Reliance on Internal Auditors written by Perry Glen Moore and published by . This book was released on 1992 with total page 284 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Basics of IT Audit written by Stephen D. Gantz and published by Elsevier. This book was released on 2013-10-31 with total page 271 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Basics of IT Audit: Purposes, Processes, and Practical Information provides you with a thorough, yet concise overview of IT auditing. Packed with specific examples, this book gives insight into the auditing process and explains regulations and standards such as the ISO-27000, series program, CoBIT, ITIL, Sarbanes-Oxley, and HIPPA. IT auditing occurs in some form in virtually every organization, private or public, large or small. The large number and wide variety of laws, regulations, policies, and industry standards that call for IT auditing make it hard for organizations to consistently and effectively prepare for, conduct, and respond to the results of audits, or to comply with audit requirements. This guide provides you with all the necessary information if you're preparing for an IT audit, participating in an IT audit or responding to an IT audit. - Provides a concise treatment of IT auditing, allowing you to prepare for, participate in, and respond to the results - Discusses the pros and cons of doing internal and external IT audits, including the benefits and potential drawbacks of each - Covers the basics of complex regulations and standards, such as Sarbanes-Oxley, SEC (public companies), HIPAA, and FFIEC - Includes most methods and frameworks, including GAAS, COSO, COBIT, ITIL, ISO (27000), and FISCAM

Download or read book Government Auditing Standards 2018 Revision written by United States Government Accountability Office and published by Lulu.com. This book was released on 2019-03-24 with total page 234 pages. Available in PDF, EPUB and Kindle. Book excerpt: Audits provide essential accountability and transparency over government programs. Given the current challenges facing governments and their programs, the oversight provided through auditing is more critical than ever. Government auditing provides the objective analysis and information needed to make the decisions necessary to help create a better future. The professional standards presented in this 2018 revision of Government Auditing Standards (known as the Yellow Book) provide a framework for performing high-quality audit work with competence, integrity, objectivity, and independence to provide accountability and to help improve government operations and services. These standards, commonly referred to as generally accepted government auditing standards (GAGAS), provide the foundation for government auditors to lead by example in the areas of independence, transparency, accountability, and quality through the audit process. This revision contains major changes from, and supersedes, the 2011 revision.

Download or read book The Influence of Non Audit Service Revenues and Client Pressure on External Auditors Decisions to Rely on Internal Audit written by William L. Felix and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates how external auditor provision of significant non-audit services and client pressure to use the work of internal audit influence external auditors' use of internal auditors' work. More specifically, we study how external audit evidence gathering choices are influenced by non-audit fees and client pressure. Our research is motivated by an observation that the magnitude of non-audit services provided to audit clients introduces the risk that client management may leverage its position with the external auditor and potentially affect the audit process. We address this issue by extending prior research and focusing on the importance of various explanatory variables, including non-audit service revenues, client pressure, internal audit quality, and coordination, to the external auditor's decision to rely on the work of internal audit. We use data primarily obtained through surveys completed by internal and external auditors. The survey responses represent 74 separate audit engagements. Our findings reveal that when significant non-audit services are not provided to a client, internal audit quality and the level of internal/external auditor coordination positively affect auditors' internal audit reliance decisions. However, when the auditor provides significant non-audit services to the client, internal audit quality and the extent of internal/external auditor coordination do not significantly affect auditors' reliance decisions. Furthermore, when significant non-audit services are provided, client pressure significantly increases the extent of internal audit reliance. Thus, external auditors appear to be more affected by client pressure and less concerned about internal audit quality and coordination when making internal audit reliance decisions at clients for whom significant non-audit services are also provided.

Download or read book The Executive S Guide to Internal Auditing written by Eugene A. Razzetti and published by AuthorHouse. This book was released on 2014-06-02 with total page 293 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is an annotated compendium of articles and checklists I wrote on the subject of Internal Auditing and to help internal auditors to identify, correct, and track nonconformities in their organizations. It is based on work I have done as an auditor and management consultant in the U.S. and in Central America and as a Military analyst for the Center for Naval Analyses, research of some very fine books, and the 27 years of military service that preceded it. The premise of this book and my reason for creating it is simple: 1. Our organizations (large and small public and private) can audit themselves more effectively than outside consultants or registrars. The news in recent years has proven that reliance on outside auditors to the exclusion or minimization of internal audits is both perilous and unforgiveable. 2. It is not enough that organizations reach states of profitability and self-sustainment; they must develop a corporate character that identifies it as a good neighbor and responsible member of society. This corporate character must include Corporate Responsibility, employee safety and quality of life, and environmental compliance. 3. Our organizations, and, in fact, our lives are in danger from both physical and cyber-attacks, because we remain incredibly uneducated, unstructured, and vulnerable, when it comes to these modern-day, fact-of-life, threats. Organizational Security can be upgraded profoundly through a well-developed program of internal audits. 4. Organizations can combine resources synergistically. That is, the whole of the effort will be greater than the sum of its parts. I have kept this work as compact as possible, so as to minimize reading time and maximize productivity. I write for no-nonsense managers with big responsibilities and limited resources. I refer often to excellent ISO International Standards.

Download or read book The Relationship Between External and Internal Auditors written by Cecilia Young and published by . This book was released on 1989 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: The primary purpose of this study was to survey the accounting and auditing literature concerning the relationship between the internal and independent auditors and how they can work together. Statement on Auditing Standards (SAS) No. 9 states that independent auditors must evaluate internal auditors on competence, objectivity, and performance of work, but only provides very general and ambiguous guidelines. Two studies were examined to further define the characteristics stated in SAS No. 9. Competence was found to be related to the internal auditors' experience, education, and supervision. Objectivity required independence of internal auditors, adequate scope of departmental audits, and a high reporting level within the organization. Performance of work was based on quantity and quality of supervision within the internal audit department and the support from top management. The secondary purpose was to develop guidelines for reliance on internal auditors by external auditors. Four areas were found where reliance can be expanded. These areas are: testing of internal controls, preparation of workpapers, EDP auditing, and audit follow-up. The testing of internal controls can include more direct assistance in compliance testing of the system. Internal auditors may prepare workpapers prior to the financial audit. Internal auditors may also assist with EDP auditing because of their familiarity with the system. Finally, the role of internal auditor may be expanded to include audit follow-up.

Download or read book A Multistage Approach to External Auditor s Evaluation of the Internal Audit Function written by Ganesh Krishnamoorthy and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: External auditors are continually facing intense pressure to be more efficient in conducting audits without compromising quality and effectiveness. Optimal utilization of internal audit work can improve both the efficiency and the effectiveness of external audits and can enhance the value of internal auditors to the client organization. The objective of this study is to understand how the three factors (objectivity, work performance, and competence of the internal auditors) identified by auditing standards and by prior research interact in determining the strength of the internal audit function' Most prior studies have attempted to understand external auditors? rank ordering of the importance of the three factors, without an explicit attempt to model the interactions among the factors. The results from these studies are mixed and inconclusive. Hence, prior studies have not produced a consensus about how external auditors seem to weight and combine these factors in order to make assessments relating to the strength of the internal audit function. This study employs analytical methods based on Bayesian probability to model external auditors? evaluation of the internal audit function. Specifically, models based on multistage (cascaded) inference theory are developed and analyzed using numerical sensitivity analysis. The modeling contribution is significant in the sense that it is the only study that provides a theoretical model for the decision process. Results reveal that the importance of the three factors varies with the type of evidence (convergent or conflicting) observed and is contingent on the interrelationships among the three factors. A major conclusion of this study is that in the Bayesian context, it is futile to attempt a ranking of the factors since no single factor will dominate under all conditions. The study also provides avenues for future research and for improving the guidance provided by professional auditing standards that relate to the evaluation of internal audit work.

Download or read book The External Auditor s Reliance Decision on the Internal Audit Function written by Tina Youngblood Mills and published by . This book was released on 19?? with total page 186 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Conceptualising Balanced Reliance on Internal Audit Work by External Auditors written by Marianne Van Staden and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Reliance refers to the incorporation of internal audit work into audit evidence during statutory external audits. Inappropriate reliance undermines audit effectiveness and quality while fair reliance enhances audit efficiency. Reliance is complex, implementation problems are common and academic knowledge gaps prevail. Consequently, the research question of this study is formulated as follows: How can reliance on internal audit work by external auditors be conceptually explained, considering the reciprocal influences of the roles, interpretations, interests and practices of management, the audit committee and internal and external auditors? Responding to the research question, the major contribution of this study is the substantive theory of balanced reliance, explaining how management, the audit committee and internal and external auditors overcome disconnect between their reciprocal influences on reliance to achieve mutual agreement that reliance is appropriate and fair, balanced, whatever the reliance decision. The study is based on the classic grounded theory methodology of Glaser and Strauss (1967) and was implemented in three phases: Phase 1: Theoretical sampling included 32 interviews. Five key data sets (22 initial and three follow-up interviews) represented five diverse South African listed companies. Each data set comprised data from the key audit stakeholder groups of the company, namely, the chief financial officer, audit committee chair, chief audit executive and external audit engagement partner. A further data set of seven interviews involved other knowledgeable audit professionals. Joint data collection, open coding and analysis identified the main concern aÌ2Ë60́9 the disconnect between the stakeholder groupsaÌ22́Ơ4́Ø reciprocal influences on reliance aÌ2Ë60́9 and the core category (achieving mutual agreement that reliance is appropriate and fair (balanced), whatever the reliance decision. Phase 2: Joint theoretical sampling, selective and theoretical coding and analysis saturated the substantive categoriesaÌ22́Ơ4́Ø properties and relationships. Phase 3: Theoretical sorting and writing delimited the substantive categories into theoretical constructs, explaining the substantive theory. Comparisons indicated how the substantive theory broadened and transcended extant knowledge. The substantive theory of balanced reliance developed in this study explains how the stakeholder groupsaÌ22́Ơ4́Ø willing reciprocal synchronisation resolves disconnect between the stakeholder groupsaÌ22́Ơ4́Ø roles, interpretations, interests and practices influencing reliance. This, in turn, renders viable their mutual agreement that reliance is appropriate and fair (balanced), whatever the reliance decision. With reciprocal synchronisation as a foundation, a voluntarily formed team mindset is the predominant mediator of habitual integration and fair alignment of internal and external audit work. These co-variant conditions change stakeholder groupsaÌ22́Ơ4́Ø mutual agreement from being viable to practicable, as the disconnect between internal and external audits is resolved. Stakeholder groupsaÌ22́Ơ4́Ø participation in facilitative communication and a strong audit committeeaÌ22́Ơ4́Øs balancing oversight create the context for sustaining stakeholder groupsaÌ22́Ơ4́Ø mutual agreement that reliance is appropriate and fair (balanced), whatever the reliance decision.