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 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 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 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 When the World Isn t Always Flat written by Martin Weisner and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study addresses recent calls for research on the conditions influencing auditor decisions related to PCAOB-encouraged reliance on third-party experts. To this end, the present study explores the effect of psychological distance on external auditors' reliance when induced through physical distance in a telework relationship between an auditee and a specialist. The reliance decision focuses on the auditee's contracting with a computer audit specialist who works remotely through a telework arrangement. The psychological distance associated with this telework arrangement is examined both in the context of variance in the physical distance of the computer audit specialist and the interactive effect of a contextual factor - the historical experience with an auditee's internal audit function. A 2x2 experiment with a total of 121 experienced Big 4 auditors is conducted in which psychological distance (physically proximate or remote specialist) and historical experience with an auditee's internal audit function (presence or absence of a prior year material weakness in internal controls) are manipulated. Consistent with predictions based on construal level theory, we find that psychological distance affects auditors' reliance judgment such that increased distance leads to lower reliance. Furthermore, the historical experience with the auditee's internal audit function creates a halo effect which moderates the effect of psychological distance such that the differential effect of a present vs. absent prior year material weakness on auditors' confidence and associated willingness to reduce budgeted audit hours is larger for a psychologically distant specialist. The results of this study suggest that an auditee's choice of a more proximate specialist may garner greater reliance by the external auditor, particularly when there is a material weakness in the prior year audit that the specialist is intended to help ameliorate.

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.

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 Value to Management of Using the Internal Audit Function as a Management Training Ground written by Joseph V. Carcello and published by . This book was released on 2017 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines how using the internal audit function as a management training ground (MTG) impacts manager's reliance on internal auditor recommendations. While prior research suggests that using internal audit as a MTG can adversely affect financial reporting quality, external audit fees, and internal audit efficiency, many internal audit functions use this practice. We study how this practice influences another important stakeholder--senior management. Based on survey results of 355 chief audit executives (CAEs), we find that CAEs perceive senior management to be more likely to use recommendations from MTG internal auditors than non-MTG internal auditors. To bolster the validity of these findings and provide evidence as to why this is the case, we conduct two experiments with 147 executives (47 MTurk workers) with an average of about 25 (13) years of experience. The experimental results confirm the survey results. We also find that the key reason why managers rely more on MTG than non-MTG recommendations is that MTG internal auditors are perceived to have more natural ability, which is a key driver in manager's reliance decision. Taken together, our research provides the first empirical evidence that there are positive consequences to using the internal audit function as a MTG in contrast to the negative consequences previously reported.

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 Internal Auditing written by Andrew D. Chambers and published by Dartmouth Publishing Company. This book was released on 1996 with total page 720 pages. Available in PDF, EPUB and Kindle. Book excerpt: Control by management is synonymous with internal control in counterdistinction from external control. Internal auditing is the independent appraisal of the effectiveness of internal control. It is internal not because it is necessarily performed by people who are internal to the business but because it is the review of internal control. Market testing of internal auditing provision leading, possibly, to contracting out of internal auditing is becoming more popular. The impetus for outsourcing internal audit provision has often been the introduction of a mandatory internal auditing requirement into institutions and businesses which are quite small and where management considers a full in-house provision cannot be justified: in the UK this has often been seen to apply to hospitals, universities and local government bodies.

Download or read book External Auditors Reliance on Internal Audit Functions written by Zorita Haji Ahmad and published by . This book was released on 1995 with total page 130 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Role of Task Subjectivity and Risk of Material Misstatement on Auditors Configural Processing in Internal Audit Reliance Judgments written by Sudip Bhattacharjee and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a field-based questionnaire administered to practicing auditors, we examine how auditors simultaneously combine the key planning variables, client-level misstatement risk (comprised of inherent risk and control risk) with account-level subjectivity, when utilizing internal audit as a cost management tool. We contend that auditor use of internal audit will reflect a balance between the potential for efficiency gains and the implications regarding audit effectiveness. Prior internal audit research has primarily focused on lower and higher risk conditions with relatively few studies examining the implications of moderate risk scenarios on internal audit use. Data on actual audits from an instrument administered to external auditors reveal significant differences in reliance decisions across lower, moderate, and higher misstatement risk levels. Our results reveal that increases in account-level subjectivity have no effect on auditors' internal audit reliance judgments when risk of material misstatement is at lower levels. However, auditors increase their internal audit reliance when account-level subjectivity increases across moderate misstatement risk. Finally, our results suggest that auditors decrease their internal audit reliance when account subjectivity increases across higher misstatement risk. By examining these risk variables in combination, we provide insight into the complexities associated with external auditors' internal audit usage decisions in the post-SOX era. This research should be of interest to practitioners given PCAOB's limited guidance on how multiple risk factors should be combined when utilizing internal audit.

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 Fundamentals of Auditing written by Basu and published by Pearson Education India. This book was released on 2010-09 with total page 364 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Effect of Inherent Risk Knowledge Spillover and Litigation Risk on External Auditors Reliance on Client s Internal Audit Functions written by Meshari Al-Harshani and published by . This book was released on 2003 with total page 164 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Brink s Modern Internal Auditing written by Robert R. Moeller and published by John Wiley & Sons. This book was released on 2005-01-21 with total page 792 pages. Available in PDF, EPUB and Kindle. Book excerpt: Brink's Modern Internal Auditing, Sixth Edition is a comprehensive resource and reference book on the changing world of internal auditing, including Sarbanes-Oxley compliance issues. * Sixth edition of a very well respectede auditing resource. * Provides an overview of the role and responsibilities of the internal auditor. * Includes discussion of the Sarbanes-Oxley Act and the impact it has on auditing (particualry concerning controls). * Provides expanded coverage of fraud and business ethics. * Includes guidance on reporting results effectively. * Provides in-depth discussion of internal audit and corporate governance.

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: