The Effect of Using the Internal Audit Function as a Management Training Ground on the External Auditor's Reliance Decision

• 成果类型: Article
• 署名作者: Messier, William F., Jr.; Reynolds, J. Kenneth; Simon, Chad A.; Wood, David A.
• 署名单位: Nevada System of Higher Education (NSHE); University of Nevada Las Vegas; Norwegian School of Economics (NHH); State University System of Florida; Florida State University; Brigham Young University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-10136
• 发表日期: 2011
• 页码: 2131-2154
• 关键词: committee quality; fees; association; SUSPICION; COMPENSATION; LEVEL

摘要

This study examines how using the internal audit function (IAF) as a management training ground (MTG) affects external audit fees and the external auditors' perceptions of the IAF. Over half of all companies that have an IAF specifically hire internal auditors with the purpose of rotating them into management positions (or cycle current employees into the IAF for a short stint before promoting them into management positions). Using archival data, we find that external auditors charge higher fees to companies that use the IAF as a MTG. Using an experiment, we provide evidence as to why fees are higher. Specifically, we find that external auditors perceive internal auditors employed in an IAF used as a MTG to be less objective but not less competent than internal auditors employed in an IAF not used as a MTG. These results have important implications for the many companies that use their IAF as a MTG.