Integration of Internal Control and Financial Statement Audits: Are Two Audits Better than One?

• 成果类型: Article
• 署名作者: Bhaskar, Lori Shefchik; Schroeder, Joseph H.; Shepardson, Marcy L.
• 署名单位: Indiana University System; Indiana University Bloomington
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-52197
• 发表日期: 2019
• 页码: 53-81
• 关键词: control deficiencies; earnings management; office size; risk model; QUALITY; accruals; CONSEQUENCES; determinants; involvement; weaknesses

摘要

The quality of financial statement (FS) audits integrated with audits of internal controls over financial reporting (ICFR) depends upon the quality of ICFR information used in, and its integration into, FS audits. Recent research and PCAOB inspections find auditors underreport existing ICFR weaknesses and perform insufficient testing to address identified risks, suggesting integrated audits-in which substantial ICFR testing is required-may result in lower FS audit quality than FS-only audits. We compare a 2007-2013 sample of small U.S. public company firm-years receiving integrated audits (accelerated filers) to firm-years receiving FS-only audits (non-accelerated filers) and find integrated audits are associated with higher likelihood of material misstatements and discretionary accruals, consistent with lower FS audit quality. We also find evidence of (1) auditor judgment-based integration issues, and (2) low-quality ICFR audits harming FS audit quality. Overall, results suggest an important potential consequence of integrated audits is lower FS audit quality.