External Auditors’ Reliance on Internal Audit: The Impact of Sourcing Arrangements and Consulting Activities

17 Pages Posted: 4 Jun 2010

See all articles by Lois Munro

Lois Munro

Queensland University of Technology - QUT Business School

Jenny Stewart

Griffith University - Griffith Business School

Abstract

This study examines the impact of internal audit outsourcing and involvement in consulting on external auditors’ reliance on the work of internal audit. We test whether these factors influence reliance on internal audit work already undertaken and the use of internal auditors as assistants, distinguishing between control evaluation and substantive testing. Involvement in consulting impacts reliance on work undertaken and the use of internal auditors as assistants for control evaluation. External auditors make greater use of internal auditors as assistants for substantive testing when internal audit is provided in-house. Overall, external auditors use internal audit more for control evaluation tasks.

Suggested Citation

Munro, Lois and Stewart, Jenny, External Auditors’ Reliance on Internal Audit: The Impact of Sourcing Arrangements and Consulting Activities. Accounting & Finance, Vol. 50, No. 2, pp. 371-387, June 2010, Available at SSRN: https://ssrn.com/abstract=1615750 or http://dx.doi.org/10.1111/j.1467-629X.2009.00322.x

Lois Munro (Contact Author)

Queensland University of Technology - QUT Business School ( email )

GPO Box 2434
Brisbane, Queensland 4001
Australia

Jenny Stewart

Griffith University - Griffith Business School ( email )

Brisbane, Queensland 4111
Australia

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