This paper examines how external auditors' reliance decisions on the internal audit function (IAF) are affected by two Public Company Accounting Oversight Board (PCAOB) regulatory actions (the risk-based audit approach required by auditing standards and a change in the focus of the PCAOB...

PCAOB Auditing Standard No. 5 (AS5) allows external auditors (EAs) to rely on the internal audit function (IAF) when the internal audit activities meet certain criteria and the EAs would find efficiencies in relying on their work (PCAOB 2007). This paper reviews the extant literature on the EAs'...

This research note examines whether auditors “link” their entity-level risk assessments to their core business process risk assessments. For auditors who performed a business process analysis of the core business process, there is a positive association between the identification of...

Engagement quality review is an integral part of the audit process. It is designed to be a quality control mechanism for assessing the quality of an audit engagement. Since the 1990s, the SEC has increased sanctions against partners serving as engagement quality reviewers. Recently, the PCAOB...

The amount of estimation uncertainty contained in financial statement items may be obscured from investors, given that all estimates, regardless of their imprecision, are reported as precise figures on the face of the financial statements. Our study examines two disclosures expected to help...

This paper investigates the potential of using a frequency response mode to reduce the dilution effect of non-diagnostic evidence on auditors' fraud risk judgments. In two experiments, we test one hypothesis and examine a research question related to the dilution effect where response mode...

The amount of estimation uncertainty contained in financial statement items may be obscured from investors, given that all estimates, regardless of their imprecision, are reported as precise figures on the face of the financial statements. Our study examines two disclosures expected to help...

This paper reports on the first experimental study to examine how materiality and client pressure affects auditors' judgments of two detected misstatements that have offsetting effects on the client's income. One hundred and forty-three experienced German auditors completed a case that varied...

This research experimentally investigates how auditors make combined auditee risk judgments during the planning of the audit of an account balance in a client's financial statements. If auditors fail to assimilate risk factors according to normative criteria, inefficient or ineffective audits...

Engagement quality review (EQR) is designed to be a quality control mechanism for improving the quality of audit engagements. This paper updates the findings of Messier, Kozloski and Kochetova-Kozloski (2010) on enforcement actions against engagement quality (EQ) reviewers, especially in light...