Internal Audit Characteristics and Managerial Discretion in Financial Reporting

Journal of Accounting, Ethics and Public Policy 22(4) : 571-601 (2021)

31 Pages Posted: 10 Feb 2022

Date Written: November 24, 2021

Abstract

This paper replicates and extends Barr-Pulliam’s (2019) study that examines whether the perceived objectivity of the internal audit function (IAF) moderates the effect of internal audit assurance that is more frequent — namely continuous auditing — on the perceived likelihood of earnings management. Rather than the functional separation of the IAF’s dual role, this replication manipulates whether the IAF is used as a management training ground. The results of this replication are consistent with those reported in the original study. That is, the results show an interactive effect whereby the perceived likelihood of earnings management is lower when the IAF is not a management training ground (more objective), and the IAF uses continuous relative to periodic auditing. The results suggest that reported results are robust and extend to an alternative measure of internal auditors’ perceived objectivity.

Keywords: continuous auditing, internal audit, management training ground, replication

JEL Classification: G34, M12, M40, M41

Suggested Citation

Barr-Pulliam, Dereck, Internal Audit Characteristics and Managerial Discretion in Financial Reporting (November 24, 2021). Journal of Accounting, Ethics and Public Policy 22(4) : 571-601 (2021), Available at SSRN: https://ssrn.com/abstract=3970939

Dereck Barr-Pulliam (Contact Author)

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/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
88
Abstract Views
479
Rank
530,983
PlumX Metrics