تاثیر خطر دادخواهی و منبع حسابرسی داخلی بر روی اعتماد به تصمیمات

External auditor reliance on the work of internal auditors in an integrated audit of the financial statements and internal control is an important audit planning procedure that can impact audit efficiency and effectiveness. The purpose of this study is to examine how perceived auditor litigation risk and internal audit source affect external auditors' reliance decisions in an integrated audit environment under varying levels of risk of material misstatement. In an experimental study using 89 practicing Big 4 auditors, this study finds that auditors who perceive low litigation risk from placing reliance on the work of internal auditors will rely more on outsourced internal auditors than in-house internal auditors. The results also show that auditors' reliance decisions are sensitive to the level of account risk consistent with the risk-based approach to the integrated audit encouraged by the PCAOB.

The Public Company Accounting Oversight Board (PCAOB) explicitly encourages external auditors in Auditing Standard 5 (AS 5)1 to rely on the work of internal auditors especially in areas of low risk to increase the efficiency and effectiveness of an integrated audit (PCAOB, 2007). Despite this encouragement, external auditors have been reluctant to place reliance on the work of internal auditors perhaps due to their fear of litigation in the case of audit failure. The former chairman of the PCAOB, William McDonough, acknowledged the dilemma facing auditors, “Auditors have to use judgment. They have a great deal of leeway. But in a litigious society, there's no question that some auditors may be protecting themselves by doing work that all of us might think objectively is excessive” (Business Week Staff Writer, 2005). The current liability regime facing auditors concerned the U.S. Treasury Department enough to commission an Advisory Committee on the Auditing Profession to explore and make recommendations regarding the sustainability of the audit profession (Advisory Committee on the Auditing Profession, 2008). The concern over litigation costs may lead auditors to consider the need to be able to defend their actions in court which may lead them to choose to do the work themselves rather than rely on the work of others such as internal auditors. The purpose of this study is to investigate how voluntary reliance on the work of internal auditors is influenced by concerns of perceived litigation risk. Despite unambiguous encouragement from the PCAOB, auditors have been hesitant to rely on the work of internal auditors and instead perform the work themselves resulting in increased audit fees (Leffall, 2007). While research has examined the influence of litigation risk on the voluntary decision to rely on the results of a decision aid (Boatsman, Moeckel, & Pei, 1997), the impact of litigation risk on the decision to rely on the work of internal auditors has not yet been examined. Identifying possible sources of auditors' reluctance to rely on the work of internal auditors will help inform the auditors' planning process and improve audit efficiency. Perceived litigation risk may also influence other determinants of the reliance decision. Prior research has shown that the auditor reliance decision is influenced by characteristics of the internal auditor like competence, objectivity and quality of work2 (Gramling, Maletta, Schneider, & Church, 2004). However, research has not yet examined whether perceived litigation risk is an important determinant of the reliance decision and if it influences any of the other determinants. One such determinant which has been identified in prior research is the internal audit sourcing arrangement (Glover, Prawitt, & Wood, 2008). In the integrated audit environment, the internal audit department has an increased role in corporate governance matters and in producing credible financial reporting especially related to internal control matters (PCAOB, 2007). In fact, the New York Stock Exchange standards require all listed companies to maintain an internal audit function (SEC, 2003). The internal audit function does not, however, have to be performed by an in-house internal audit department. In fact, many companies outsource the activity to Big 4 audit firms other than their external auditor in hopes of reducing costs while still receiving comparable or superior service (Deloitte and Touche, 2005 and PriceWaterhouseCoopers (PwC), 2005).3 Even the Institute of Internal Auditors (IIA) recognizes that companies may outsource the internal audit function when it states: “The IIA believes that a fully resourced and professionally competent staff that is an integral part of the organization, whether insourced or outsourced, best performs the internal audit activity” (IIA, 2005).4 Prior research suggests that internal audit source affects the reliance decision as auditors rely more on the work of outsourced internal auditors when inherent risk is high in a financial statement audit (Glover et al., 2008). The purpose of this study is to extend this research to determine if internal audit source affects the reliance decision in an integrated audit of financial statements and internal control and to determine the impact of perceived auditor litigation risk on the relationship. In addition, because the PCAOB encourages external auditors to take a risk-based approach to the integrated audit and rely more on the work of internal auditors in areas of low risk (PCAOB, 2007), the above relationships are examined under varying levels of risk of material misstatement. To examine these questions, an experimental case was administered to 89 external auditors from one of the Big 4 public accounting firms. Participants were provided with information on a hypothetical audit client in which the internal audit source and account risk levels were manipulated while the participants' perceived auditor litigation risk was measured. The results indicate that auditors' perceived litigation risk and internal audit source interact to influence auditors' reliance decisions. Auditors who perceive lower litigation risk are more willing to rely on the work of outsourced internal auditors but there is no difference in reliance for those auditors that perceive higher litigation risk. In addition, the findings show that the external auditors' approach was consistent with the PCAOB's risk-based approach as they placed more reliance on the work of internal auditors (regardless of source or perceived litigation risk) for the low risk account than for the high-risk account, although the extent of reliance seems low. The next section reviews relevant prior research and develops the hypotheses. Section 3 describes the research method and Section 4 explains the results. The final section summarizes and discusses the findings including potential limitations and avenues for future research.

The hypotheses were tested using an ordinary least-squares regression model that included variables for internal audit source (in-house = 0, outsourced = 1), perceived litigation risk, account risk of material misstatement and an interaction term between internal audit source and perceived litigation risk.18 The dependent measure is participants' planned reliance on the work of internal auditors.