Client Control Environments: An Examination of Auditors' Perceptions.

ABSTRACT: The professional auditing literature identifies the need to evaluate a client's control environment prior to the auditor's design of compliance tests. This study seeks to: (1) identify client attributes that adequately describe a client's control environment; (2) investigate auditors' perceptions of the importance of these attributes on actual engagements; (3) highlight the contextual factors that condition the importance ratings of the attributes; and (4) ascertain the audit team member responsible for evaluating the various attributes. This study identified 48 client attributes that appear to serve as cues for auditors' control environment evaluations. The reported levels of importance for certain attributes differed across auditors. It was found that audit firm affiliation, auditor rank, audit office specialization, the client's management structure, and the client's total assets exhibited significant associations with auditors' ratings. In addition, it was found that seniors were responsible for evaluating most of the control environment attributes.