Internal auditors perform work that is relevant to their host entities' financial reporting processes; yet, little research attention has focused on the effects of internal auditing on companies' external financial reporting. Using a unique and previously unavailable data set, we investigate the relation between internal audit function (IAF) quality and earnings management. We measure IAF quality using a composite measure comprising six individual components of IAF quality based on SAS No. 65, which guides external auditors in assessing the quality of an IAF with respect to its role in financial reporting. Earnings management is measured using two separate proxies: (1) abnormal accruals and (2) the propensity to meet or barely beat analysts' earnings forecasts. We find evidence that IAF quality is associated with a moderation in the level of earnings management as measured by both proxies.

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SUMMARY: This summary is based on a paper by Glover and Prawitt (2013) that was commissioned and published by the Standards Working Group of the Global Public Policy Committee, a working group that comprises the six largest international audit networks. The application of professional skepticism by auditors is important to audit quality. However, various definitions of, and perspectives on, professional skepticism exist in the auditing literature. We propose a ''professional skepticism continuum'' that acknowledges that the appropriate application of professional skepticism will depend on the risk characteristics of the account and assertion. We also lay out the different structural levels where professional skepticism is applied and where threats to its appropriate application can arise. We argue that regulation can actually threaten the appropriate application of auditor skepticism if regulation and/or inspection focus is not properly aligned with relevant audit risks. Finally, we provide some ideas and recommendations on how the application of professional skepticism might be enhanced on the part of auditors, as well as how other key stakeholders can contribute to its effective application.Steven M. Glover and Douglas F. Prawitt are both Professors at Brigham Young University.We thank the CAQ and the Standards Working Group of the GPPC for their ideas and input through the process of preparing and revising. We also thank J. Gregory Jenkins and Dorsey Baskin (CIIA editors) for their insights and helpful comments in the review process. We gratefully acknowledge the assistance of Landon Bodily and Tyler Campbell in the preparation of the original 2013 monograph by Professors Glover and Prawitt titled Enhancing Auditor Professional Skepticism (http://www.thecaq.org/docs/research/skepticismreport.pdf ) and the assistance of Brian Lowe in preparing this summary. Professors Glover and Prawitt gratefully acknowledge funding from the GPPC and from the Skousen and Glen Ardis endowed professorships, respectively, at Brigham Young University.

This paper presents a descriptive analysis of the publication records of faculty promoted from 1995 to 2003 at the top 75 accounting research programs (as ranked by Trieschmann et al. 2000). The presentation and analyses of these data are designed to be useful to faculty and evaluation committees from a benchmarking and decision-making perspective. From a benchmarking perspective, the results will be useful in helping schools as they develop or refine relevant policies and research expectations. The results may be particularly useful in view of the fact that average accounting faculty publication records differ from the average publication records of faculty in other disciplines. We present results in different ways to help faculty and evaluation committees understand faculty publication records at the time accounting faculty are promoted to associate and full professor at various sets, or portfolios, of universities. Not surprisingly, the results indicate significant differences in publication records across the accounting programs included in the study. While differences are expected, given the varied missions and emphases of different schools, we believe the data will be useful to policy makers, evaluation committees, and faculty as they set standards, evaluate performance, and plan scholarship activities in conjunction with other expected activities, such as teaching and service.

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