Date of Award
Summer 8-12-2014
Degree Type
Dissertation
Degree Name
Doctor of Philosophy (PhD)
Department
Accountancy
First Advisor
Dr. Jennifer Joe
Second Advisor
Dr. Nerissa Brown
Third Advisor
Dr. Richard Hatfield
Fourth Advisor
Dr. Benjamin Luippold
Fifth Advisor
Dr. Detmar Straub
Abstract
This study examines how reliance on the client’s internal audit function (IAF) affects auditors’ ability to persuade management to accept material weakness assessments of detected internal control deficiencies. I further investigate whether auditors’ ability to persuade management to accept material weakness assessments depends on the subjectivity the control deficiency assessment to varied interpretations (ambiguity). I apply group affiliation and persuasion theories to hypothesize that management will have higher group identification with the IAF than with the auditors. I predict that management’s group affiliation will lead them to be more accepting of auditors’ internal control assessments when the auditors rely on the client’s IAF than when auditors do not. Further, I hypothesize that the greater the ambiguity in the internal control deficiency assessment, the more persuaded management will be to accept the auditors’ control assessment in situations where the auditors rely on the IAF than when the auditors do not. I conduct an experiment using a 2 X 2 between-subjects design in which I manipulate auditors’ reliance on the client’s IAF during tests of the client’s internal controls (rely or not rely) and the level of ambiguity in the internal control deficiency assessment (less ambiguous or more ambiguous) in a SOX 404 Internal Controls Over Financial Reporting (ICFR) audit setting. The study’s findings provide evidence that relying on the client’s IAF can improve auditors’ likelihood of persuading the client when control assessments are more open to varied interpretations. This study sheds light on a previously ignored benefit of using the client’s IAF – as a persuasion tactic. Thus, my research contributes to two literature streams: factors influencing auditor-client negotiations and the effects of using the IAF on audit engagements. These results provide both practical and theoretical insights to academics, practitioners and auditing standard setters.
DOI
https://doi.org/10.57709/5899815
Recommended Citation
Gooden-Sanderson, Kerri-Ann, "The internal audit function as an auditor persuasion tactic." Dissertation, Georgia State University, 2014.
doi: https://doi.org/10.57709/5899815