Auditors’ use of in-house specialists

81 Pages Posted: 14 Oct 2020 Last revised: 24 Jul 2021

See all articles by Ally Zimmerman

Ally Zimmerman

Florida State University - Department of Accounting

Dereck Barr-Pulliam

University of Louisville

Joon-Suk Lee

Unaffiliated Authors

Miguel Minutti-Meza

University of Miami - Department of Accounting

Date Written: July 23, 2021

Abstract

We investigate auditors’ use of in-house specialists (employed by auditors) and examine data from PCAOB inspections of global network audit firms from 2006 to 2018, a period in which the use of specialists in audits increased from 50 to 90 percent. We provide descriptive evidence that using specialists is predictably associated with client and audit team characteristics. Next, we find that when specialists are used in audits that involve complex accounting estimates, specialist use is associated with procedural audit quality issues identified by PCAOB inspections. Finally, the use of specialists is associated with increases in audit fees and reductions in engagement profitability, suggesting that involving specialists is costly. Specialists bring expertise to complex issues, but our findings suggest that auditors’ use of specialists does not entirely mitigate financial reporting and audit quality problems linked to companies’ use of complex accounting estimates and fair value measurements.

Keywords: specialists, audits, PCAOB, audit quality, audit costs, experts

JEL Classification: M41, M42

Suggested Citation

Zimmerman, Aleksandra and Barr-Pulliam, Dereck and Lee, Joon-Suk and Minutti-Meza, Miguel, Auditors’ use of in-house specialists (July 23, 2021). University of Miami Legal Studies Research Paper No. 3695738, University of Miami Business School Research Paper No. 3695738, Available at SSRN: https://ssrn.com/abstract=3695738 or http://dx.doi.org/10.2139/ssrn.3695738

Aleksandra Zimmerman (Contact Author)

Florida State University - Department of Accounting ( email )

Rovetta Business Bldg. (RBA)
College of Business
Tallahassee, FL 32306-1110
United States

Dereck Barr-Pulliam

University of Louisville ( email )

110 West Brandeis Avenue
Louisville, KY 40208
United States
502-852-4834 (Phone)

HOME PAGE: http://https://business.louisville.edu/faculty-research/faculty-directory/14229/

Joon-Suk Lee

Unaffiliated Authors ( email )

United States

Miguel Minutti-Meza

University of Miami - Department of Accounting ( email )

Coral Gables, FL 33146-6531
United States
305-284-6287 (Phone)

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