Jerry R. Strawser

The Effects of Senior Internal Auditor Behaviour on Staff Performance and Satisfaction

Abstract The increasing importance of the internal audit function in the USA is evidenced by the attention focused on this function by professional standard setting bodies (Institute of Internal Auditors, 1989; American Institute of Certified Public Accountants, 1991) and an investigatory commission (National Commission on Fraudulent Financial Reporting, 1987). Previous research in both accounting (Jiambalvo and Pratt, 1982; Pratt and Jiambalvo, 1981) and organisational behaviour (see Yukl, 1989 for a review) has identified specific leader behaviours that result in improved performance and satisfaction. Using a recently developed taxonomy unavailable at the time these previous studies were conducted, this study explores the effect of leader (senior internal auditor) behaviours on subunit (internal audit team) performance and subordinate (internal audit staff) satisfaction. The results of this study indicate that audit efficiency is influenced by both task behaviours (e.g. administering discipline) and rel...

Evidence from Auditors about the Causes of Inaccurate Budgets: Do Clients Cause Budget Overruns?

Summary The goal of this study is to identify primary drivers of audit budget inaccuracy. Our results show a positive association between using the budget for evaluative purposes and favorable (or less unfavorable) budget variances. In addition, despite the fact that our sample is comprised of continuing audit engagements, weak client controls and relatively uncooperative clients have the greatest impact on unfavorable budget variances. Our results suggest audit budgets insufficiently accommodate client-controlled factors.

An investigation of the accuracy of pre-implementation estimates required by SAB 74

The SEC requires registrants to describe the impact of newly issued financial accounting standards not yet implemented (SAB 74). In accounting for post-retirement benefits under FASB Statement No. 106, many corporations complied with the provisions of SAB 74 by disclosing estimates of the accrued obligation. This study investigates the format and accuracy of these estimates, the factors related to estimate inaccuracy, and compares management forecasts with an estimation model based on cash payments and employee turnover. Management estimates took the form of either specific amounts or ranges, with over 70 percent in error by ten percent or more and 70.5 percent underestimating the obligation. The variation between estimated and actual obligations was related to two factors: the size of the corporate benefit plan and the volatility of benefit costs. However, management estimates were, on average, more accurate than estimates generated by an external estimation model from Warshawsky, et al. (1993).

Reliance on Internal Audit Departments

Statement on Auditing Standards No. 9 (SAS 9) discusses the role of a client′s internal audit department (IAD) in the independent auditor′s examination. Despite the benefits of reliance on the client′s IAD to both the auditor and client, evidence indicates that SAS 9 has not been effectively implemented in practice. This article illustrates the use of the Analytic Hierarchy Process to develop a judgement aid for determining the overall reliance to be placed on a client′s IAD. The judgement aid illustrated may represent an initial step towards effectively implementing auditing standards requiring a great deal of subjective judgement in practice.