Laboratory experiment examines how compliance errors influence auditor evaluations of internal controls, indicating significant implications for auditing practices.
This study examines the impact of the qualitative characteristics of compliance errors on the auditor's evaluation of internal accounting control. Using a sample of 121 staff-level auditors, a laboratory experiment was undertaken to investigate the relationship between two qualitative aspects of compliance errors (intentionality and monetary impact) and internal control assessments. The findings indicated that the perceived qualitative characteristics of compliance errors did affect the auditor's assessment of internal accounting control (i.e., attitude formation). In addition, the auditor's decision regarding substantive testing (i.e., behavioral intent) was also found to be influenced by the qualitative characteristics investigated.
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Ferris et al. (1984) studied this question.
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