Use of specialists on audit engagements: A research synthesis and directions for future research

Abstract

This synthesis covers academic research on the use of valuation, tax, information technology (IT), and forensic specialists on audit engagements. The importance and role of specialists on audit engagements have recently increased, and specialist use has garnered significant attention from regulators and academics. Given the PCAOB’s (2017b) recent proposal to revise auditing standards regarding specialists’ involvement, it is important to review the specialist literature as a whole. By integrating research across these four domains, I identify commonalities and differences related to: (1) factors associated with the use of specialists on audit engagements (including the nature, timing, and extent of use); (2) factors impacting auditors’ interactions with specialists (including specialists contracted by the auditor or management); and (3) outcomes associated with the use of specialists. This integrated analysis of the specialist literatures shows variation in the use of specialists, and various factors affecting both if and how they are involved and whether auditors use specialists internal or external to the audit firm. Additionally, research has sometimes (but not always) linked specialist involvement to higher audit quality. The commonalities and areas of variation identified are informative to audit research and practice, particularly as regulators and audit firms look to improve the quality of audits using specialists. Throughout the synthesis, I also provide a number of directions for future research.

External auditors' evaluation of a management's expert's credibility: Evidence from Australia

“…Similarly, previous research has also found evidence that proximity of an ME to the audit client and the sourcing of an ME can influence auditors' judgments and decisions (Griffith, 2015;Weisner & Sutton, 2015). Limited research in the area and continual deficiencies observed by the ASIC in auditors' evaluations of MEs' capabilities makes it necessary to extend the body of existing research and identify other factors that could potentially influence auditors' reliance or trust in MEs or alter their reliance decisions (Hux, 2017). One can infer from these studies that the use of MEs and characteristics of MEs can influence auditors' judgments and decisions.…”

“…One can infer from these studies that the use of MEs and characteristics of MEs can influence auditors' judgments and decisions. Limited research in the area and continual deficiencies observed by the ASIC in auditors' evaluations of MEs' capabilities makes it necessary to extend the body of existing research and identify other factors that could potentially influence auditors' reliance or trust in MEs or alter their reliance decisions (Hux, 2017).…”

One Team or Two? Investigating Relationship Quality between Auditors and IT Specialists: Implications for Audit Team Identity and the Audit Process

“…Specialists in law, valuation, IT, and other areas have been increasingly hired by accounting firms to perform an expanding set of non‐audit services (Malsch and Gendron ). Due to increased complexity in these areas within audit clients' business processes and financial statements, these specialists also now assist auditors extensively in performing the audit (EY 2012; PwC ; Hux ) and typically work in the same office (or at least the same country) as the auditors they assist.…”

“…The limited audit literature on teams focuses on the audit team made up of only auditors (Rich et al 1997;Nelson and Tan 2005); this team is seen as "the basic operating unit that performs audit work" (Rudolph and Welker 1998, 1), with technical specialists seen as firm members outside the audit team (Bobek et al 2012). At best, IT specialists are seen as consultants sometimes and as audit team members at other times (Curtis et al 2009;Boritz et al 2017;Hux 2017). Further, how recent studies view IT (and other) specialists is not much different from how earlier studies do-as individuals outside the audit team whom auditors consult with to obtain information and reduce uncertainty in auditor decisions (Danos et al 1989;Rudolph and Welker 1998).…”

External auditors' reliance on management's experts: The effects of an early‐stage conversation and past auditor–client relationship

“…Despite the growing attention to auditors' use of MEs' work from the regulators, standard setters, professional bodies and researchers, continually observed audit file deficiencies suggest a critical need for further research in relation to auditors' use of the work of MEs. Studies have particularly called for future researchers to identify various expert‐specific, environmental, regulatory or firm‐specific factors (Hux, 2017) that may influence audit planning judgements (Messier, 2010), actual audit evidence decisions (Brown‐Liburd et al, 2014) and the resolution of inconsistent audit evidence (Griffith, 2015).…”