The Contribution of Internal Audit as a Determinant of External Audit Fees and Factors Influencing this Contribution

28 Pages Posted: 26 Sep 2001

See all articles by William L. Felix

William L. Felix

University of Arizona - Department of Accounting

Audrey A. Gramling

Oklahoma State University - Stillwater - School of Accounting

Mario J. Maletta

Northeastern University - Accounting Group

Multiple version iconThere are 2 versions of this paper

Date Written: February 2001

Abstract

Despite extensive research on the determinants of external audit fees, there is little empirical evidence on the effect of internal audit contribution on the external audit fee. Using a cross-sectional regression model based on prior audit fee research, this study provides evidence that internal audit contribution is a significant determinant of the external audit fee. Further, a second model that provides evidence on the determinants of internal audit contribution is developed and tested. This second model indicates that internal audit contribution is influenced by internal audit quality and, conditional on the level of inherent risk, the availability of internal audit and the extent of coordination between internal and external auditors. These results are based on a unique data-set comprised of publicly available data matched with survey responses from internal and external auditors affiliated with 70 non-financial services Fortune 1000 firms. The sample includes all of the former "Big 6" international accounting firms and clients from twenty-nine different industries.

Keywords: Audit fees; Internal audit; SAS No. 65

JEL Classification: M41, M49

Suggested Citation

Felix, William L. and Gramling, Audrey A. and Maletta, Mario J., The Contribution of Internal Audit as a Determinant of External Audit Fees and Factors Influencing this Contribution (February 2001). Available at SSRN: https://ssrn.com/abstract=284197 or http://dx.doi.org/10.2139/ssrn.284197

William L. Felix

University of Arizona - Department of Accounting ( email )

Tucson, AZ 85721
United States
520-621-2443 (Phone)
520-621-3742 (Fax)

Audrey A. Gramling (Contact Author)

Oklahoma State University - Stillwater - School of Accounting ( email )

College of Business Administration
345 Business Building
Stillwater, OK 74078
United States

Mario J. Maletta

Northeastern University - Accounting Group ( email )

360 Huntington Ave.
Boston, MA 02115
United States
617-373-8374 (Phone)
617-373-8814 (Fax)

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