Internal Audit Assistance and External Audit Timeliness

Lawrence J. Abbott, Susan W. Parker, Gary F. Peters

Auditing A Journal of Practice & Theory · 2012 · 186 citations · 25 references

Concepts

TL;DR

Professional standards require external auditors to consider internal audit work and its assistance, especially amid increasing audit demands, tighter filing deadlines, resource constraints, and fee pressures. The study examines how internal audit assistance affects external audit timeliness, measured by audit delay. The authors analyze audit delay and identify moderating effects of internal control reliance, coordination with the external auditor, and investment in internal audit quality. The study finds that internal audit assistance reduces external audit delay, leading to cost savings and greater audit efficiencies, and offers implications for firms and auditors evaluating internal audit functions.

Abstract

SUMMARY Professional standards guide external auditors to consider the effect of the client's internal audit work and opportunities to utilize the direct assistance of the internal audit function when planning and conducting audits. We examine the effect of internal audit assistance on external audit timeliness via the extent of external audit delay. We hypothesize and find that internal audit assistance is negatively associated with external audit delay. We also document moderating relationships between internal audit assistance and other internal audit environment characteristics, such as the extent of internal control reliance, coordination with the external auditor, and the investment in internal audit quality. Overall, our findings have implications for firms and external auditors who are evaluating the role and use of internal audit functions. Namely, our findings suggest that internal audit assistance may not only result in audit cost savings, but also in greater audit efficiencies. These findings are particularly germane given the challenges faced by external auditors in the form of greater audit requirements, shorter regulatory filing deadlines, resource constraints, and audit fee pressures.

References

25