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Gary F. Peters - One of the best experts on this subject based on the ideXlab platform.

  • Internal Audit quality and financial reporting quality the joint importance of independence and competence
    Journal of Accounting Research, 2016
    Co-Authors: Lawrence J. Abbott, Susan Parker, Brian Daugherty, Gary F. Peters
    Abstract:

    In light of the growing importance of Internal Audit functions (IAF) and the limited archival evidence on Internal Audit quality, we examine an interactive model of IAF quality (comprised of competence and independence) to better understand the determinants of IAF effectiveness as a financial reporting monitor. Our tests support the hypothesis that the joint presence of competence and independence is a necessary antecedent to effective IAF financial reporting monitoring. In sum, our results show that, the answer to “what is the effect of Internal Audit competence (independence) on financial reporting quality?” is “it depends on the independence (competence) of the Internal Auditor.” Our study extends the understanding of IAF quality determinants in the realm of financial reporting as it relates to ongoing discussions by researchers, standard setters, regulators, and practitioners.

  • Internal Audit Assistance and External Audit Timeliness
    Auditing-a Journal of Practice & Theory, 2012
    Co-Authors: Lawrence J. Abbott, Susan Parker, Gary F. Peters
    Abstract:

    SUMMARY:  Professional standards guide external Auditors to consider the effect of the client's Internal Audit work and opportunities to utilize the direct assistance of the Internal Audit function when planning and conducting Audits. We examine the effect of Internal Audit assistance on external Audit timeliness via the extent of external Audit delay. We hypothesize and find that Internal Audit assistance is negatively associated with external Audit delay. We also document moderating relationships between Internal Audit assistance and other Internal Audit environment characteristics, such as the extent of Internal control reliance, coordination with the external Auditor, and the investment in Internal Audit quality. Overall, our findings have implications for firms and external Auditors who are evaluating the role and use of Internal Audit functions. Namely, our findings suggest that Internal Audit assistance may not only result in Audit cost savings, but also in greater Audit efficiencies. These finding...

  • Internal Audit Assistance and External Audit Timeliness
    Social Science Research Network, 2012
    Co-Authors: Lawrence J. Abbott, Susan Parker, Gary F. Peters
    Abstract:

    Professional standards guide external Auditors to consider the effect of the client’s Internal Audit work and opportunities to utilize the direct assistance of the Internal Audit function when planning and conducting Audits. We examine the effect of Internal Audit assistance on external Audit timeliness via the extent of external Audit delay. We hypothesize and find that Internal Audit assistance is negatively associated with external Audit delay. We also document moderating relationships between Internal Audit assistance and other Internal Audit environment characteristics, such as the extent of Internal control reliance, coordination with the external Auditor, and the investment in Internal Audit quality. Overall, our findings have implications for firms and external Auditors who are evaluating the role and use of Internal Audit functions. Namely, our findings suggest that Internal Audit assistance may not only result in Audit cost savings, but also in greater Audit efficiencies. These findings are particularly germane given the challenges faced by external Auditors in the form of greater Audit requirements, shorter regulatory filing deadlines, resource constraints, and Audit fee pressures.

  • Audit Fee Reductions from Internal Audit-Provided Assistance: The Incremental Impact of Internal Audit Characteristics
    Contemporary Accounting Research, 2011
    Co-Authors: Lawrence J. Abbott, Susan Parker, Gary F. Peters
    Abstract:

    We question whether Audit committee oversight, resource commitments, and the sourcing of Internal Audit functions have value implications for external Audit reliance on Internal Audit assistance. When evaluating the quality of Internal Audit, professional standards guide external Auditors to consider the oversight of, and resource commitment to, the Internal Audit function. Alternatively, to promote higher quality, some organizations outsource Internal Audit services to independent outside Auditors. However, oversight roles, resource commitments, and outsourcing strategies are not costless alternatives for strengthening Internal Audit functions. Despite the findings of prior research that Internal Audit quality and consequent external Audit reliance on Internal Audit assistance are functions of these dimensions, little is known about the separable influence of these characteristics on the value of assistance provided. We introduce new measures of Internal Audit assistance, oversight influence, resource commitments, and their distinct impact on external Audit fee reductions resulting from reliance on Internal Audit assistance. Our results are consistent with external Auditors using Internal Auditors for higher value tasks (not just more tasks) when the Audit committee oversight and/or resource commitments to Internal Audit functions increase. Although we find economic advantages for outsourced Internal Audit assistance, these advantages are mitigated by increases in Audit committee oversight and resource commitments to in-house Internal Audit functions. Moreover, our results suggest that, to enhance the organizational status of Internal Audit, organizations should not only consider the official placement of the Internal Audit function, but also informal influences from the organization’s oversight functions, including the executive suite and the Audit committee.

  • serving two masters the association between Audit committee Internal Audit oversight and Internal Audit activities
    Accounting Horizons, 2010
    Co-Authors: Lawrence J. Abbott, Susan Parker, Gary F. Peters
    Abstract:

    SYNOPSIS: In this paper, we investigate the association between the Audit committee’s oversight of the Internal Audit function (IAF) and the nature of IAF activities. The importance of Internal controls and of the roles of both the Audit committee and the Internal Audit function in monitoring control activities have grown in recent years. Despite the importance of these topics, relatively little regulatory or best practices guidance addresses the distribution of IAF activities and amount of Audit committee involvement with the IAF. We hypothesize that when the balance of oversight over the IAF lies with the Audit committee (vis-a`-vis management), the committee will steer the IAF toward a more Internal-controls-oriented focus. Our hypothesis is based on the existing practice guidance in this area and the relative incentives of management and the Audit committee. To test our hypothesis, we survey 134 chief Internal Auditors from Fortune 1000 firms regarding the amount of Internal Audit resources allocated ...

Lawrence J. Abbott - One of the best experts on this subject based on the ideXlab platform.

  • Internal Audit quality and financial reporting quality the joint importance of independence and competence
    Journal of Accounting Research, 2016
    Co-Authors: Lawrence J. Abbott, Susan Parker, Brian Daugherty, Gary F. Peters
    Abstract:

    In light of the growing importance of Internal Audit functions (IAF) and the limited archival evidence on Internal Audit quality, we examine an interactive model of IAF quality (comprised of competence and independence) to better understand the determinants of IAF effectiveness as a financial reporting monitor. Our tests support the hypothesis that the joint presence of competence and independence is a necessary antecedent to effective IAF financial reporting monitoring. In sum, our results show that, the answer to “what is the effect of Internal Audit competence (independence) on financial reporting quality?” is “it depends on the independence (competence) of the Internal Auditor.” Our study extends the understanding of IAF quality determinants in the realm of financial reporting as it relates to ongoing discussions by researchers, standard setters, regulators, and practitioners.

  • Internal Audit Assistance and External Audit Timeliness
    Auditing-a Journal of Practice & Theory, 2012
    Co-Authors: Lawrence J. Abbott, Susan Parker, Gary F. Peters
    Abstract:

    SUMMARY:  Professional standards guide external Auditors to consider the effect of the client's Internal Audit work and opportunities to utilize the direct assistance of the Internal Audit function when planning and conducting Audits. We examine the effect of Internal Audit assistance on external Audit timeliness via the extent of external Audit delay. We hypothesize and find that Internal Audit assistance is negatively associated with external Audit delay. We also document moderating relationships between Internal Audit assistance and other Internal Audit environment characteristics, such as the extent of Internal control reliance, coordination with the external Auditor, and the investment in Internal Audit quality. Overall, our findings have implications for firms and external Auditors who are evaluating the role and use of Internal Audit functions. Namely, our findings suggest that Internal Audit assistance may not only result in Audit cost savings, but also in greater Audit efficiencies. These finding...

  • Internal Audit Assistance and External Audit Timeliness
    Social Science Research Network, 2012
    Co-Authors: Lawrence J. Abbott, Susan Parker, Gary F. Peters
    Abstract:

    Professional standards guide external Auditors to consider the effect of the client’s Internal Audit work and opportunities to utilize the direct assistance of the Internal Audit function when planning and conducting Audits. We examine the effect of Internal Audit assistance on external Audit timeliness via the extent of external Audit delay. We hypothesize and find that Internal Audit assistance is negatively associated with external Audit delay. We also document moderating relationships between Internal Audit assistance and other Internal Audit environment characteristics, such as the extent of Internal control reliance, coordination with the external Auditor, and the investment in Internal Audit quality. Overall, our findings have implications for firms and external Auditors who are evaluating the role and use of Internal Audit functions. Namely, our findings suggest that Internal Audit assistance may not only result in Audit cost savings, but also in greater Audit efficiencies. These findings are particularly germane given the challenges faced by external Auditors in the form of greater Audit requirements, shorter regulatory filing deadlines, resource constraints, and Audit fee pressures.

  • Audit Fee Reductions from Internal Audit-Provided Assistance: The Incremental Impact of Internal Audit Characteristics
    Contemporary Accounting Research, 2011
    Co-Authors: Lawrence J. Abbott, Susan Parker, Gary F. Peters
    Abstract:

    We question whether Audit committee oversight, resource commitments, and the sourcing of Internal Audit functions have value implications for external Audit reliance on Internal Audit assistance. When evaluating the quality of Internal Audit, professional standards guide external Auditors to consider the oversight of, and resource commitment to, the Internal Audit function. Alternatively, to promote higher quality, some organizations outsource Internal Audit services to independent outside Auditors. However, oversight roles, resource commitments, and outsourcing strategies are not costless alternatives for strengthening Internal Audit functions. Despite the findings of prior research that Internal Audit quality and consequent external Audit reliance on Internal Audit assistance are functions of these dimensions, little is known about the separable influence of these characteristics on the value of assistance provided. We introduce new measures of Internal Audit assistance, oversight influence, resource commitments, and their distinct impact on external Audit fee reductions resulting from reliance on Internal Audit assistance. Our results are consistent with external Auditors using Internal Auditors for higher value tasks (not just more tasks) when the Audit committee oversight and/or resource commitments to Internal Audit functions increase. Although we find economic advantages for outsourced Internal Audit assistance, these advantages are mitigated by increases in Audit committee oversight and resource commitments to in-house Internal Audit functions. Moreover, our results suggest that, to enhance the organizational status of Internal Audit, organizations should not only consider the official placement of the Internal Audit function, but also informal influences from the organization’s oversight functions, including the executive suite and the Audit committee.

  • serving two masters the association between Audit committee Internal Audit oversight and Internal Audit activities
    Accounting Horizons, 2010
    Co-Authors: Lawrence J. Abbott, Susan Parker, Gary F. Peters
    Abstract:

    SYNOPSIS: In this paper, we investigate the association between the Audit committee’s oversight of the Internal Audit function (IAF) and the nature of IAF activities. The importance of Internal controls and of the roles of both the Audit committee and the Internal Audit function in monitoring control activities have grown in recent years. Despite the importance of these topics, relatively little regulatory or best practices guidance addresses the distribution of IAF activities and amount of Audit committee involvement with the IAF. We hypothesize that when the balance of oversight over the IAF lies with the Audit committee (vis-a`-vis management), the committee will steer the IAF toward a more Internal-controls-oriented focus. Our hypothesis is based on the existing practice guidance in this area and the relative incentives of management and the Audit committee. To test our hypothesis, we survey 134 chief Internal Auditors from Fortune 1000 firms regarding the amount of Internal Audit resources allocated ...

Susan Parker - One of the best experts on this subject based on the ideXlab platform.

  • Internal Audit quality and financial reporting quality the joint importance of independence and competence
    Journal of Accounting Research, 2016
    Co-Authors: Lawrence J. Abbott, Susan Parker, Brian Daugherty, Gary F. Peters
    Abstract:

    In light of the growing importance of Internal Audit functions (IAF) and the limited archival evidence on Internal Audit quality, we examine an interactive model of IAF quality (comprised of competence and independence) to better understand the determinants of IAF effectiveness as a financial reporting monitor. Our tests support the hypothesis that the joint presence of competence and independence is a necessary antecedent to effective IAF financial reporting monitoring. In sum, our results show that, the answer to “what is the effect of Internal Audit competence (independence) on financial reporting quality?” is “it depends on the independence (competence) of the Internal Auditor.” Our study extends the understanding of IAF quality determinants in the realm of financial reporting as it relates to ongoing discussions by researchers, standard setters, regulators, and practitioners.

  • Internal Audit Assistance and External Audit Timeliness
    Auditing-a Journal of Practice & Theory, 2012
    Co-Authors: Lawrence J. Abbott, Susan Parker, Gary F. Peters
    Abstract:

    SUMMARY:  Professional standards guide external Auditors to consider the effect of the client's Internal Audit work and opportunities to utilize the direct assistance of the Internal Audit function when planning and conducting Audits. We examine the effect of Internal Audit assistance on external Audit timeliness via the extent of external Audit delay. We hypothesize and find that Internal Audit assistance is negatively associated with external Audit delay. We also document moderating relationships between Internal Audit assistance and other Internal Audit environment characteristics, such as the extent of Internal control reliance, coordination with the external Auditor, and the investment in Internal Audit quality. Overall, our findings have implications for firms and external Auditors who are evaluating the role and use of Internal Audit functions. Namely, our findings suggest that Internal Audit assistance may not only result in Audit cost savings, but also in greater Audit efficiencies. These finding...

  • Internal Audit Assistance and External Audit Timeliness
    Social Science Research Network, 2012
    Co-Authors: Lawrence J. Abbott, Susan Parker, Gary F. Peters
    Abstract:

    Professional standards guide external Auditors to consider the effect of the client’s Internal Audit work and opportunities to utilize the direct assistance of the Internal Audit function when planning and conducting Audits. We examine the effect of Internal Audit assistance on external Audit timeliness via the extent of external Audit delay. We hypothesize and find that Internal Audit assistance is negatively associated with external Audit delay. We also document moderating relationships between Internal Audit assistance and other Internal Audit environment characteristics, such as the extent of Internal control reliance, coordination with the external Auditor, and the investment in Internal Audit quality. Overall, our findings have implications for firms and external Auditors who are evaluating the role and use of Internal Audit functions. Namely, our findings suggest that Internal Audit assistance may not only result in Audit cost savings, but also in greater Audit efficiencies. These findings are particularly germane given the challenges faced by external Auditors in the form of greater Audit requirements, shorter regulatory filing deadlines, resource constraints, and Audit fee pressures.

  • Audit Fee Reductions from Internal Audit-Provided Assistance: The Incremental Impact of Internal Audit Characteristics
    Contemporary Accounting Research, 2011
    Co-Authors: Lawrence J. Abbott, Susan Parker, Gary F. Peters
    Abstract:

    We question whether Audit committee oversight, resource commitments, and the sourcing of Internal Audit functions have value implications for external Audit reliance on Internal Audit assistance. When evaluating the quality of Internal Audit, professional standards guide external Auditors to consider the oversight of, and resource commitment to, the Internal Audit function. Alternatively, to promote higher quality, some organizations outsource Internal Audit services to independent outside Auditors. However, oversight roles, resource commitments, and outsourcing strategies are not costless alternatives for strengthening Internal Audit functions. Despite the findings of prior research that Internal Audit quality and consequent external Audit reliance on Internal Audit assistance are functions of these dimensions, little is known about the separable influence of these characteristics on the value of assistance provided. We introduce new measures of Internal Audit assistance, oversight influence, resource commitments, and their distinct impact on external Audit fee reductions resulting from reliance on Internal Audit assistance. Our results are consistent with external Auditors using Internal Auditors for higher value tasks (not just more tasks) when the Audit committee oversight and/or resource commitments to Internal Audit functions increase. Although we find economic advantages for outsourced Internal Audit assistance, these advantages are mitigated by increases in Audit committee oversight and resource commitments to in-house Internal Audit functions. Moreover, our results suggest that, to enhance the organizational status of Internal Audit, organizations should not only consider the official placement of the Internal Audit function, but also informal influences from the organization’s oversight functions, including the executive suite and the Audit committee.

  • serving two masters the association between Audit committee Internal Audit oversight and Internal Audit activities
    Accounting Horizons, 2010
    Co-Authors: Lawrence J. Abbott, Susan Parker, Gary F. Peters
    Abstract:

    SYNOPSIS: In this paper, we investigate the association between the Audit committee’s oversight of the Internal Audit function (IAF) and the nature of IAF activities. The importance of Internal controls and of the roles of both the Audit committee and the Internal Audit function in monitoring control activities have grown in recent years. Despite the importance of these topics, relatively little regulatory or best practices guidance addresses the distribution of IAF activities and amount of Audit committee involvement with the IAF. We hypothesize that when the balance of oversight over the IAF lies with the Audit committee (vis-a`-vis management), the committee will steer the IAF toward a more Internal-controls-oriented focus. Our hypothesis is based on the existing practice guidance in this area and the relative incentives of management and the Audit committee. To test our hypothesis, we survey 134 chief Internal Auditors from Fortune 1000 firms regarding the amount of Internal Audit resources allocated ...

Dasaratha V Rama - One of the best experts on this subject based on the ideXlab platform.

  • corporate governance Audit quality and the sarbanes oxley act evidence from Internal Audit outsourcing
    The Accounting Review, 2007
    Co-Authors: Lawrence J. Abbott, Susan Parker, Gary F. Peters, Dasaratha V Rama
    Abstract:

    This study extends current literature related to nonAudit services by investigating Internal Audit outsourcing to the external Auditor. We posit that certain types of Internal Audit outsourcing (i.e., those which are nonroutine, and thus tend to be nonrecurring in nature) are unlikely to lead to economic bonding, while offering significant potential for improvements in Audit coverage and scope when provided by the external Auditor. Alternatively, outsourcing routine Internal Audit tasks is more likely to lead to economic bonding, as well as potentially threatening Internal Auditor independence. Our results are consistent with firms with independent, active, and expert Audit committees being less likely to outsource routine Internal Auditing activities to the external Auditor. However, the outsourcing of nonroutine Internal Audit activities such as special projects and EDP consulting are not negatively related to effective Audit committees. Additionally, outsourcing of either type of Internal Audit activit...

  • corporate governance Audit quality and the sarbanes oxley act evidence from Internal Audit outsourcing
    Social Science Research Network, 2005
    Co-Authors: Lawrence J. Abbott, Susan Parker, Gary F. Peters, Dasaratha V Rama
    Abstract:

    The objective of this study is to extend the current literature related to non-Audit services by investigating the area of Internal Audit outsourcing to the external Auditor. We posit that certain types of Internal Audit outsourcing (i.e. those which are non-routine, and thus tend to be non-recurring in nature) are unlikely to lead to economic bonding, while offering significant potential for improvements in Audit coverage and scope when provided by the external Auditor. Alternatively, outsourcing routine Internal Audit tasks is more likely to lead to economic bonding, as well as creating disincentives for Internal Auditor independence. We obtain data from a survey of 219 Chief Internal Auditors and from relevant proxy statements in the year 2000, prior to the Sarbanes-Oxley Act. Our results are consistent with firms with strong Audit committee governance being less likely to outsource routine Internal Auditing activities to the external Auditor. The Audit committee's authority to dismiss the chief Internal Auditor enhances this effect. However, the outsourcing of non-routine Internal Audit activities such as special projects and EDP consulting are not negatively related to Audit committee effectiveness. Additionally, outsourcing of either type of Internal Audit activity to an outside service provider other than the external Auditor is not related to Audit committee effectiveness. Collectively, we interpret these findings as supportive of an effective Audit committee's ability to monitor the sourcing of the firm's total (i.e. Internal and external) Audit coverage, while simultaneously exhibiting concern for external Auditor independence. Our findings call into question the need for the existing restrictions on some types of Internal Audit outsourcing to the external Auditor, particularly in light of other corporate reporting environment changes enacted by the SOX.

Eugene G Chewning - One of the best experts on this subject based on the ideXlab platform.

  • the effect of Internal Audit outsourcing on financial analysts perceptions of external Auditor independence
    Ear and Hearing, 2001
    Co-Authors: Susan L Swanger, Eugene G Chewning
    Abstract:

    The practice of outsourcing the Internal Audit function to the external Audit firm has raised fears by many parties such as the SEC of possible independence impairment. The fear stems from the increased economic bond that exists when additional services are provided to an Audit client, as well as the long‐held view that Internal Auditing is a management function and, as such, is incompatible with the external Audit function. This paper reports the results of a two‐phase study of the perceptions of financial analysts regarding external Auditor independence when a CPA firm performs both external and Internal Auditing services. In phase 1, analysts' perceptions of Auditor independence are greater when the client employs its own Internal Audit staff or outsources to a different CPA firm than when the external Auditor also performs Internal Audit functions. Phase 2 results show that analysts' perceptions of Auditor independence are higher when the Internal Audit services are provided by the staff of a differen...

  • the effect of Internal Audit outsourcing on financial analysts perceptions of external Auditor independence
    2001
    Co-Authors: Susan L Swanger, Eugene G Chewning
    Abstract:

    The practice of outsourcing the Internal Audit function to the external Audit firm has raised fears by many parties such as the SEC of possible independence impairment. The fear stems from the increased economic bond that exists when additional services are provided to an Audit client, as well as the long-held view that Internal Auditing is a management function and, as such, is incompatible with the external Audit function. This paper reports the results of a two-phase study of the perceptions of financial analysts regarding external Auditor independence when a CPA firm performs both external and Internal Auditing services. In phase one, analysts' perceptions of Auditor independence are greater when the client employs its own Internal Audit staff or outsources to a different CPA firm than when the external Auditor also performs Internal Audit functions. Phase two results show that analysts' perceptions of Auditor independence are higher when the Internal Audit services are provided by the staff of a different division of the CPA firm compared to a no staff separation treatment. Perceptions do not differ between full and partial outsourcing treatments, which conflicts with the recent SEC rule limiting the extent of outsourcing arrangements.

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