Date of Award

Spring 5-22-2010

Degree Type


Degree Name

Doctor of Philosophy (PhD)



First Advisor

William F. Messier, Jr.

Second Advisor

Galen Sevcik

Third Advisor

Jennifer Joe

Fourth Advisor

Detmar Straub


With the passage of Sarbanes-Oxley in 2002, external auditors face a new regulatory inspection process in addition to an increase in litigation (or engagement) pressure. It has been communicated that this new inspection process will place an increased emphasis on the efficiency of integrated audits while maintaining the same level of effectiveness. In an experiment, I explore how external auditors’ reliance decisions on the internal audit function will be affected by different inspection focuses, varying levels of engagement risk, and the level of risk associated with the audit test or procedure. While I expect that there will be significant main effects for inspection focus, engagement risk and the riskiness of the audit test, I explore the potential presence of a three-way interaction between these three factors. My findings suggest that the auditor reliance decisions are impacted by differing levels of engagement risk, the focus of the inspection process, and the riskiness of the audit tests. In general, as engagement risk increased, auditors’ reliance decreased. Also, as the riskiness of the audit test increased, auditors placed less reliance on the internal audit function. However, when the focus of the inspection changed, these factors interacted with one another. Specifically, when auditors faced a focus of both effectiveness and efficiency, their reliance decisions increased as engagement risk and riskiness of the test decreased, but when auditors faced a focus of effectiveness only, their reliance decisions were not impacted by the engagement risk when the riskiness of the test was high. Thus, the impact of engagement risk on auditors’ reliance decisions depends on the focus of the inspection process and the riskiness of the tests.


Included in

Accounting Commons