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    The Effects of Employer and Client Identification on...
    research summary posted September 12, 2013 by Jennifer M Mueller-Phillips, last edited September 12, 2013, tagged 08.0 Auditing Procedures – Nature, Timing and Extent, 08.11 Reliance on Internal Auditors 
    The Effects of Employer and Client Identification on Internal and External Auditors' Evaluation of Control Deficiencies
    Practical Implications:

    The Primary implication of this study is that reliance on the work of internal auditors may improve audit quality. AS5 recommends reliance on the work of internal auditors for lower-risk areas because it is presumed to improve efficiency. This paper, however, suggests that quality will be improved as well. Therefore, auditors may want to evaluate policies regarding regarding using the work of internal auditors and do so more heavily in the future.

    For more information on this study, please contact C.M. Stefaniak.


    Stefaniak, C., R. Houston, and R. Cornell. 2012. The Effects of Employer and Client Identification on Internal and External Auditors' Evaluations of Internal Control Deficiencies. Auditing: A Journal of Practice and Theory. (31)1:39 –56.

    Auditor judgment, organizational identification, internal auditor, external auditor
    Purpose of the Study:

    Auditing Standard No. 5 (AS5) encourages external auditors to rely on internal auditors to increase the efficiency of lower-risk internal control evaluations. This study uses experimental data to determine whether internal auditors or external auditors are more lenient and by extension, which auditors perform higher quality audits.

    Design/Method/ Approach:

    In the post-Sarbanes Oxley period, the authors conducted an experiment with 40 internal auditors and 48 external auditors. Participants were given a hypothetical scenario, and were asked to evaluate the internal controls of the hypothetical firm.


    The main differences between internal and external auditors are as follows:

    • Internal auditors perceive a greater level employer identification when compared to external auditors
    • Internal auditors are less lenient than external auditors
    Auditing Procedures - Nature - Timing and Extent
    Reliance on Internal Auditors