The new definition of internal auditing defines the function as an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. The purpose of this paper is to summarize an assessment of this new definition obtained through structured interviews from 11 internal audit directors of large publicly traded companies. The responses from the directors indicate that there are wide differences in viewpoints and objectives; but a definite shift has occurred in the overall scope of internal audit towards operational activities. While most of the interviewees are in conceptual agreement with the new internal audit definition, an underlying warning is vocalized: “Don’t throw out the franchise”. That is, the traditional role of the internal auditor should not be completely abandoned. These, along with other responses pertaining to related issues and suggestions for future research, are summarized throughout the paper.
SYNOPSIS: The increase of Big 4 auditor resignations in the newly regulated auditing environment creates a rich setting to examine the supply-side effects of auditor industry specialization. The authors estimate logistic regressions to examine whether audit firms consider industry specialization at both the local and national levels when deciding on whether to retain or resign from audit clients. The results show a negative relation between auditor industry specialization and auditor resignations when the auditor is a joint specialist (i.e., a specialist at both the national and local levels) and when the auditor is a local specialist only (i.e., a local specialist but not a national specialist). The national specialization alone variable (i.e., the auditor is a national specialist but not a local specialist) is not significant for our primary analysis; however, additional analyses reveal that the significance of this variable varies when incorporating alternative measurements for auditor specialization in the models. Thus, the overall evidence of the national specialization effect on the auditor’s resignation decision is mixed and inconclusive at this point. Based on the additional analyses, the joint and the local specialization effects generally appear to be robust. As such, we conclude that auditors perceive their firms’ industry expertise, particularly at the local level, as reducing both clientele mismatch and litigation risks, and hence improving audit quality.
PurposeThe purpose of this paper is to examine organizational commitment within the context of important antecedents, correlates, and consequences for auditors in public accounting. Specifically, to explore the relationships among the constructs of experience, role ambiguity, organizational commitment (affective and continuance), job satisfaction, and turnover intentions.Design/methodology/approachAn integrated model is developed and tested using structural equation modeling techniques. A sample of 334 auditors working for international and regional public accounting firms in a major metropolitan area of the USA is used to test the model.FindingsThe findings support nearly all of the hypothesized relationships. Auditors with more experience have less role ambiguity, have more affection for their organization, and are less inclined to leave their organization. Continuance commitment plays a less important role in the integrated model. However, the study lends support to the notion that the two dimensions of continuance commitment, high sacrifice and low alternatives, are distinct and have different patterns of relationships with other important variables.Research limitations/implicationsThe sample was taken from one geographic area of the US and may not be representative of all auditors. Auditors from the regional public accounting firms may not be representative of other regional firms.Practical implicationsDespite the fact that auditors with higher levels of affective organizational commitment and job satisfaction are less likely to leave their organizations, the findings also indicate a direct link with more experience and the desire to leave the firm. Role ambiguity and continuance commitment do not have direct links to turnover intentions, but deserve consideration for their indirect influence on important job outcomes.Originality/valueThis study contributes to the study of organizational commitment by using auditors from all job levels and from public accounting firms from varying sizes. Few studies have examined the sub‐dimensions of continuance commitment for auditors.
Purpose -This paper seeks to discuss the effect that the Sarbanes-Oxley Act (SOA) had on both the nature of the external audit function and overall audit quality. Additionally, it aims to discuss how audit firms maneuvered through the newly regulated environment, and what their strategic actions are for the future. Design/methodology/approach -This discussion is based on interviews conducted with auditors from nine public accounting firms located in Northeast Ohio, United States of America. The sample consisted of five national and four regional firms, and the interviewees included mostly partners and a few senior managers. Findings -The increased oversight and workload resulting from the SOA requirements has changed the nature of the external audit function to more compliance type work, and the environment has created much anxiety for the auditors. The new reform has significantly impacted the audit environment in terms of: scope of services; client assessment procedures; management and audit committee relationships with the external auditor; audit firm personnel management; and the long-term outlook of the profession. The details of these impacts are discussed throughout the paper. Research limitations/implications -This paper provides detailed insight as to how the SOA impacted the audit profession. Hopefully, such an understanding will benefit future research in measuring the costs and benefits of the new reform. Lastly, a future research showed further examine the effect that the SOA has had on overall audit quality. Originality/value -This paper summarizes the insightful comments obtained in structured interviews with several leading audit professionals. The sample was judged to be highly knowledgeable of the changing audit environment caused by the SOA. With an improved understanding of its impacts, regulators, practitioners, and academics can better assess the effectiveness of the SOA.
This study explores the notion that the recently heightened regulation over United States public company reporting limits the amount of professional judgment required by internal auditors, and in the long run may reduce the overall value and professionalism of the internal audit group. Our assessment is based on face-to-face interviews conducted with Chief Audit Executives (CAEs) from 17 publicly listed companies located in Northeast Ohio, United States, and is in general agreement with the extant literature on the topic. We find that despite several short-term benefits from the Section 404 work for the individual auditor (e.g., increased pay and job security), the compliance work may indeed be a threat to the long-term reputation of the internal audit profession. Based on the existing literature and the CAEs' responses, the Section 404 work does appear to be driving the internal audit profession down a new path.
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