Internal Audit Competency Changes in Response to Financial Reporting Quality Failures

Reville, Melissa; Hoitash, Rani; Hoitash, Udi

doi:10.2139/ssrn.3229966

Cited by 2 publications

(1 citation statement)

References 78 publications

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“…16. Prior evidence validates that most accounting and finance professionals post their resumes on LinkedIn (Jiang et al 2018;Lee et al 2019;Lourie 2019;Reville et al 2021;Hope et al 2021). Indeed, audit firms routinely encourage partners and employees to maintain a presence on popular professional networking websites (Francis et al 2021).…”

Section: Sample and Descriptive Statisticsmentioning

confidence: 91%

Fool Me Once, Shame on You; Fool Me Twice, Shame on Me: The Long‐Term Impact of Arthur Andersen's Demise on Partners' Audit Quality*

Guo

Lisic

Pittman

et al. 2022

Contemporary Accting Res

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Although recent evidence suggests that individual audit partners explain a substantial portion of the variation in audit quality proxies, much less is known about what determines an audit partner's quality. Psychology and behavioral economics theories hold that an individual's experiences can have enduring impacts on subsequent behavior. We examine whether auditors' direct exposure to Arthur Andersen's collapse has a long-term impact on the quality of their audits. Our evidence implies that audit partners who directly experienced Andersen's demise impose stricter monitoring evident in their clients exhibiting a lower propensity for misstatements and small profits, and paying higher audit fees. Importantly, these findings reconcile with research in finance and economics implying that firsthand experiences matter more to subsequent behavior than general economic conditions or secondhand or thirdhand experiences. Collectively, the results shed light on one facet of how partners' audit quality evolves over time. Our findings suggest that major failures associated with the audit firm in which an auditor works can ultimately result in these affected individuals later delivering higher audit quality, which should benefit audit committees in partner selection decisions and audit firms in designing partner assignment policies.

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Section: Sample and Descriptive Statisticsmentioning

confidence: 91%

Fool Me Once, Shame on You; Fool Me Twice, Shame on Me: The Long‐Term Impact of Arthur Andersen's Demise on Partners' Audit Quality*

Guo

Lisic

Pittman

et al. 2022

Contemporary Accting Res

View full text Add to dashboard Cite

show abstract

External and internal auditors’ perceptions on compliance with internal audit standards and practices: Spirit versus letters?

Hegazy

Farghaly

2021

COC

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This paper investigates differences between the external auditors’ (EA) and the internal auditors’ (IA) perceptions of the degree of usage and compliance with the Institute of Internal Auditors (IIA) International Standards for the Professional Practices of Internal Auditing (Standards) by internal audit departments. The research uses survey-based questionnaires sent to IAs and EAs of the listed firms registered in an emerging market and included interviews with individuals involved in the internal auditing function (IAF) and EAs. The survey analyzes issues relating to IAF compliance with IIA standards summarized in the Common Body of Knowledge Database (CBOK). Social identity and stakeholders’ theories are used to explain the development of the research hypotheses in relation to IAF. The research indicates that the rates of conformance for the selected individual standards vary significantly among respondents. The findings provide evidence that there are low levels of interactions between IAs and EAs in emerging markets. This study is considered among the first that surveys the status of the use of the professional IIA standards in listed firms in an emerging economy. It also investigates the importance of ensuring that the “spirit” of the IIA standards is adhered to rather than the mere compliance with their “letters”. The paper emphasizes the gap still existing in practice between IAs and EAs in relation to their interactions, communication, and cooperation to enhance the quality of the IAF activities and related financial reporting. The research study relied on a sample of companies to investigate the level of compliance with IIAs standards and selected a limited number of the IIA standards for usage and compliance assessments.

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Internal Audit Competency Changes in Response to Financial Reporting Quality Failures

Cited by 2 publications

References 78 publications

Fool Me Once, Shame on You; Fool Me Twice, Shame on Me: The Long‐Term Impact of Arthur Andersen's Demise on Partners' Audit Quality*

Fool Me Once, Shame on You; Fool Me Twice, Shame on Me: The Long‐Term Impact of Arthur Andersen's Demise on Partners' Audit Quality*

External and internal auditors’ perceptions on compliance with internal audit standards and practices: Spirit versus letters?

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