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Abstract. Few studies have examined auditors' decisions to use intemal auditors as assistants. In addition, those that have investigated this issue have primarily concentrated on the three internal audit factors: objectivity, competence, and work performed. This study expands the research in this area by investigating the impact of inherent risk on auditors' decisions to use intemal auditors as assistants. Specifically, the study examines the effect of inherent risk on (1) the extent to which auditors consider factors related to the intemal audit function in making decisions to use internal auditors as assistants and (2) the complexity of auditors' decision processes in making such judgments. The results indicate that inherent risk impacts the extent to which internal audit objectivity and work performed affect auditors' decisions to use intemal auditors as assistants. In high inherent risk conditions, the results suggest that auditors use a complex configural decision process to evaluate the objectivity and work performed of the internal auditors. Specifically, in the high inherent risk condition, the effect of the work performed by the internal auditors on auditors' decisions to use intemal auditors as assistants is contingent upon the level of intemal audit objectivity. When objectivity is high, differences in the nature of the work performed by the intema! auditors have a significant effect on auditor judgments. However, when objectivity is low, auditors do not appear to consider the work performed by the inter7jal auditors. In the low inherent risk condition, no interactions exist between intema! audit objectivity and work performed as auditors appear to use a less complex decision process in evaluating these variables.Resumd. Peu de chercheurs se sont penches sur les decisions des verificateurs de faire appel aux verificatetjrs internes k titre d'assistants. En outre, ccux qui se sont int^resses a cette question se sont concentres avant tout sur des facteurs propres a la fonction de verification iriteme, notamment I'objectivit^ du service de verification inteme, sa competence et le travail qu'il accomplit. L'auteur elargit les perspectives dans ce domaine en analysant I'incidence du risque inherent sur les d^isions des verificateurs relatives au service de verification interne. II examine plus precis^ment I'incidence du risque inherent sur 1) la mesure dan.s laquelle les verificateurs tiennent eompte des facteurs lies a la fonction de verification inteme dans leur dfeision de faire appel aux verificateurs internes a titre d'assistants et 2) la complexite du jmicessus d&isionnel qu'utilisent les verificateurs dans la formulation de ces jugements. I^s resuitats indiquent que le risque inherent a des repercussions sur la mesure * The author thanks Brenda Anderson, Tom Kida, Arnie Wright, and the anonymous reviewers for their invaluable assistance on this project.

This paper investigates how external auditor provision of significant nonaudit services and client pressure to use the work of internal audit influence external auditors' use of internal auditors' work. More specifically, we study how external audit evidence gathering choices are influenced by nonaudit fees and client pressure. Our research is motivated by an observation that the magnitude of nonaudit services provided to audit clients introduces the risk that client management may leverage its position with the external auditor and potentially affect the audit process. We address this issue by extending prior research and focusing on the importance of various explanatory variables, including nonaudit service revenues, client pressure, internal audit quality, and coordination, to the external auditor's decision to rely on the work of internal audit. We use data primarily obtained through surveys completed by internal and external auditors. The survey responses represent 74 separate audit engagements. Our findings reveal that when significant nonaudit services are not provided to a client, internal audit quality and the level of internal‐external auditor coordination positively affect auditors' internal audit reliance decisions. However, when the auditor provides significant nonaudit services to the client, internal audit quality and the extent of internal ‐ external auditor coordination do not significantly affect auditors' reliance decisions. Furthermore, when significant nonaudit services are provided, client pressure significantly increases the extent of internal audit reliance. Thus, external auditors appear to be more affected by client pressure and less concerned about internal audit quality and coordination when making internal audit reliance decisions at clients for whom significant nonaudit services are also provided.

Accounting decisions often involve similar types of judgments regarding different clients, projects, or employees. These tasks may use similar information items and be performed within the same work session. While independent consideration of the information for each respective decision may be desired, psychology research on contrast effects suggests that the information from a previous decision may be retained and compared to the information provided for a current judgment. Such contrast effects are potentially critical to accounting judgments because they suggest that the information associated with a given decision task will be evaluated differently depending on the nature of the prior contextual information. Using a multi-client audit context, we find that auditors are susceptible to contrast effects such that their judgments on a current client are influenced by their exposure to similar judgment information on a prior client. We also extend prior psychology and accounting research by examining and finding that for a current client, the magnitude of the contrast effect from an initial judgment task cascades to influence indirectly related subsequent judgment tasks for which no information from the prior client is available for comparison. We also find auditors' documentations of evidence are systematically affected by the contrast and cascading of contrast effects. Thus, our results provide support for contrast effects and, most important, the cascading of contrast effects to subsequent decisions.

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.