The Impact of Management Alumni Affiliation and Persuasion Tactics on Auditors’ Internal Control Judgments

• In Event: Professional Skepticism

Abstract

During management inquiry, auditors may interact with a client manager who is also an alumnus of the audit firm. Such affiliations may influence auditor judgments due to greater social identification with the client, especially when a client manager employs persuasion tactics. This study examines whether a client manager’s prior alumni affiliation impedes auditors’ professional skepticism, and how prior affiliation influences internal control judgments when management uses a persuasion tactic. In an experiment, absent any persuasion tactics, auditors evaluate an internal control issue more favorably when a client manager is an alumnus of the firm than when the manager has identical experience but is unaffiliated with the audit firm. We also find that a management persuasion tactic conveying non-diagnostic information results in more favorable internal control evaluations when the manager is unaffiliated with the audit firm but “backfires” (i.e., leads to more severe internal control evaluations) when used by a firm alumnus. Implications for audit efficiency and firm policies are discussed.

Authors

• Sudip Bhattacharjee, Virginia Polytechnic Institute and State University

• J. Owen Brown, Baylor University