Group Audit Risk and Component Auditor Use: A Difference-in-Differences Analysis

Katherine A. Gunny, Juan Mao, Jing Zhang
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Abstract

This study examines the association between group audit risk and component auditor use. The audit risk model defines audit risk as a function of the risk of material misstatement and detection risk. We use the revelation of an internal control material weakness (ICMW) as an event that increases the risk of material misstatement. Since higher risk of material misstatement requires the lead auditor to reduce detection risk, component auditor use could change after an ICMW. We find that the likelihood of starting component auditor use significantly increases after an ICMW. We also find an increase in the number of large component auditors used after an ICMW and such increase is concentrated in more pervasive entity-level ICMWs and higher-quality component auditors. Our evidence indicates that lead auditors perceive component auditor use as decreasing group audit risk. Our findings should inform the debate on the costs and benefits of component auditor use.
集团审计风险与组件审计师的使用:差异分析
本研究探讨了集团审计风险与审计师使用之间的关联。审计风险模型将审计风险定义为重大错报风险和发现风险的函数。我们将揭示内部控制重大缺陷(ICMW)作为增加重大错报风险的事件。由于较高的重大错报风险要求主审审计师降低检测风险,因此在 ICMW 事件发生后,审计师的使用可能会发生变化。我们发现,在 ICMW 之后,开始使用组件审计师的可能性显著增加。我们还发现,在 ICMW 之后,使用大型组件审计师的数量有所增加,而且这种增加主要集中在更普遍的实体层面 ICMW 和更高质量的组件审计师。我们的证据表明,主要审计师认为使用组成部分审计师会降低集团审计风险。我们的研究结果应为有关使用组件审计师的成本与收益的讨论提供参考。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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