Abstract

http://ssrn.com/abstract=2035087
 
 

Citations (1)



 


 



A Summary of Research on External Auditor Reliance on the Internal Audit Function


Charles Bame-Aldred


Washington State University; Northeastern University - Accounting Group

Duane M. Brandon


Auburn University

William F. Messier Jr.


University of Nevada, Las Vegas - Department of Accounting; Norwegian School of Economics (NHH) - Department of Accounting, Auditing and Law

Larry Rittenberg


University of Wisconsin - Madison - Department of Accounting and Information Systems

Chad M. Stefaniak


Central Michigan University

April 1, 2012

Auditing: A Journal of Practice & Theory, Forthcoming
Northeastern U. D’Amore-McKim School of Business Research Paper No. 2013-11

Abstract:     
PCAOB Auditing Standard No. 5 (AS5) allows external auditors (EAs) to rely on the internal audit function (IAF) when the internal audit activities meet certain criteria and the EAs would find efficiencies in relying on their work (PCAOB 2007). This paper reviews the extant literature on the EAs’ reliance on IAF, identifies gaps in the literature, and proposes a series of research questions aimed at closing these gaps. We focus our review on research pertaining to how environmental factors and IAF-specific factors influence initial EAs reliance decisions, the nature and extent of EAs reliance on IAF, and the observable outcomes as a result of EAs’ reliance decisions. Our review finds that the environment in which EAs must make a reliance decision is complex – involving several factors that must be considered simultaneously. Moreover, an evolving set of auditing standards introduces several necessary intermediary judgments that the EAs must process before, and during, reliance on the IAF. In addition, our review indicates that we continue to know very little about how, and to what extent, EAs are currently evaluating IAFs’ quality factors. Similarly, while we find that the nature and extent of EAs reliance on IAF is influenced by account risk, inherent risk, and IAF sourcing, how the EAs chooses task environments (e.g., revenue recognition versus payroll) and the types of tests to be relied upon within these task environments is not completely understood. Finally, we find that there is a paucity of research concerning the effects of EAs’ reliance on IAF in terms of external audit quality.

Number of Pages in PDF File: 57

Keywords: External Audit, Internal Audit, Reliance

Accepted Paper Series


Download This Paper

Date posted: April 5, 2012 ; Last revised: June 13, 2013

Suggested Citation

Bame-Aldred, Charles and Brandon, Duane M. and Messier, William F. and Rittenberg, Larry and Stefaniak, Chad M., A Summary of Research on External Auditor Reliance on the Internal Audit Function (April 1, 2012). Auditing: A Journal of Practice & Theory, Forthcoming; Northeastern U. D’Amore-McKim School of Business Research Paper No. 2013-11. Available at SSRN: http://ssrn.com/abstract=2035087 or http://dx.doi.org/10.2139/ssrn.2035087

Contact Information

Charles Bame-Aldred
Washington State University ( email )
College of Business & Economics
Pullman, WA 99164-4729
United States
509-335-2421 (Phone)
509-335-4075 (Fax)
HOME PAGE: www.cbe.wsu.edu/~cbamealdred
Northeastern University - Accounting Group ( email )
360 Huntington Ave.
Boston, MA 02115
United States

Duane M. Brandon
Auburn University ( email )
415 West Magnolia Avenue
Auburn, AL 36849
United States
William F. Messier Jr.
University of Nevada, Las Vegas - Department of Accounting ( email )
College of Business & Economics
4505 Maryland Parkway
Las Vegas, NV 89154-6003
United States
702-895-9306 (Phone)
702-895-4306 (Fax)
Norwegian School of Economics (NHH) - Department of Accounting, Auditing and Law ( email )
Helleveien 30
N-5045 Bergen
Norway
Larry Rittenberg
University of Wisconsin - Madison - Department of Accounting and Information Systems ( email )
School of Business
975 University Avenue
Madison, WI 53706
United States
Chad M. Stefaniak (Contact Author)
Central Michigan University ( email )
312 Grawn Hall
Central Michigan University
Mt. Pleasant, MI 48858
United States
989-774-2353 (Phone)
Feedback to SSRN


Paper statistics
Abstract Views: 4,080
Downloads: 1,012
Download Rank: 10,923
Citations:  1

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.312 seconds