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This study aims to examine the extent to which external auditors (EAs) use the work of the internal audit function (IAF) based on the purpose of its primary activities. The authors rely on attribution theory, which suggests that individuals search for meaning when an event occurs. In this setting, the authors explore how the overall (assurance vs advisory) or specific (e.g. risk management and evaluating internal controls) focus of IAF activities influences perceived EA reliance on the IAF’s work.

The authors first explore the research question with data extracted from a broad, longitudinal survey conducted triennially by the national chapters of the Institute of Internal Auditors in Austria, Germany and Switzerland. The data includes responses from 2014, 2017 and 2020 administrations of the survey. The authors conduct a parallel survey with practicing EAs attending two training sessions of a European office of a global network firm. Hypotheses were tested using ordered logistic regression.

Among the chief audit executive (CAE) participants, the authors observe that a balanced or primarily assurance-related purpose of the IAF, relative to a primarily advisory-related purpose, is associated with higher perceived EA reliance. The authors observe similar perceptions of the extent of reliance among the EA participants.

With a unique data set of practicing internal auditors from three countries, coupled with a sample of EAs, to the best of the authors’ knowledge, this study is the first to examine differences in EA reliance across the IAF’s primary roles. The study relies on data from three European countries, which differs from prior EA reliance literature with a largely North American focus. Further, comparison between perceptions of EAs and CAEs is a novel approach and this paper’s findings suggest that perceptions of CAEs could be a reliable proxy for EA-intended behavior.

We examine how auditors' use of limited liability agreements (LLAs) impact perceptions of private company creditworthiness in a 2 × 2 between-subjects experiment. Ninety-three United States-based bank loan officers evaluate whether LLA clauses and the size of the company's external auditor impact lending decisions. We use signaling theory to predict, and we find that LLAs decrease perceived creditworthiness, mainly when the company engages a Non-Big4 auditor. We find no difference in perceived creditworthiness when the company employs a Big4 firm, irrespective of including an LLA clause. Supplemental analyses show that lenders perceive that LLA clauses signal higher credit risk and, in turn, decrease perceived creditworthiness. We offer insights into how lenders integrate information about privately held companies into their decisions, which could impact the cost of capital for private companies. Our study should be of interest to preparers and the varied users of financial statements and regulators.

This study aims to empirically investigate the impact of adopting big data and data analytics (BD&A) on audit quality (AQ).

A questionnaire was distributed among audit practitioners working at audit firms in Egypt and 205 responses were collected. Partial least square structural equation modeling (PLS-SEM) was used to analyze and test research hypotheses.

The results reveal that BD&A has a direct significant positive effect on the audit process (AP) and auditor competence (AC). However, an insignificant impact of BD&A is found on audit fees (AF). In addition, the results indicate that BD&A has significant positive direct and indirect impacts on AQ.

The results of this study will benefit several auditing stakeholders, such as audit firms, audit regulators, novice financial auditors and academic scholars.

This research is one of the earliest to empirically address the role of BD&A in enhancing AQ. It incorporates AP, AC and AF as mediators into a single model to explain the impact of BD&A on AQ. Also, it attempts to provide empirical evidence from a developing country with a less-regulated audit environment.