Auditor IT Experience and Client Benefits

• In Event: IT Control Weaknesses, Auditor IT Experience and IT Governance
  In IS Paper Session: IT Control Weaknesses, Auditor IT Experience, and IT Governance

Abstract

Auditing Standard No. 12 from the Public Company Accounting Oversight Board (PCAOB) states that auditors “should obtain an understanding of how IT affects the company’s flow of transactions” (PCAOB 2010). We identify a measure of audit firm Information Technology (IT) experience. We examine the impact of IT experience audits, specifically related to IT but also to general aspects of the audit. We argue that greater audit firm IT experience should promote improved internal controls for their clients, especially those that are IT related. Additionally, we expect this to improve other aspects of the audit as well. We find that clients that switch to auditors with greater IT experience report faster material weakness remediation and shorter audit delays. In addition, audit firm IT experience is negatively associated with non-IT material weaknesses and misstatements. Finally, audit firm IT experience is associated with lower levels of discretionary accruals.

Authors

• Jacob Zachary Haislip, University of Arkansas

• Gary Peters, University of Arkansas

• Vernon J Richardson, University of Arkansas