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    Internal Audit Assistance and External Audit Timeliness.
    research summary posted October 14, 2015 by Jennifer M Mueller-Phillips, tagged 15.0 International Matters 
    Internal Audit Assistance and External Audit Timeliness.
    Practical Implications:

    The findings have implications for firms and external auditors who are evaluating the role and use of IAFs. The authors believe the findings will be of interest to regulators and exchanges. It may force external auditors to move more audit procedures, such as confirmations, to interim periods which would have been otherwise best addressed at year-end. Audit standards suggest that reducing the amount of testing performed after year-end increases audit risk. It may impair audit quality by increasing the time pressure on the external audit engagement team. Time pressure may decrease audit effectiveness as external auditors begin accepting weaker explanations or procedures, such as truncating sample selections.


    Peters, G. F., L. J. Abbott, and S. Parker. 2012. Internal Audit Assistance and External Audit Timeliness. Auditing: A Journal of Practice & Theory 31 (4): 3-20.

    audit delay, audit efficiency, internal audit assistance, internal audit quality, internal control reliance
    Purpose of the Study:

    This study examines the association between external audit delay and the internal audit function’s (IAF’s) financial statement audit assistance. The timeliness of audited financial reporting has been a longstanding concern for various stakeholders, including shareholders, managers, and regulators, as well as internal and external auditors. The recent accelerated filing requirements of the Sarbanes-Oxley Act (SOX) have exacerbated the pressure on firms and their auditors to conduct financial statement audits in a timely manner. These tight reporting deadlines have elevated the importance of seeking means to increase audit timeliness and reduce audit delay. The authors argue, and find archival evidence to support, that the IAF can effectively alleviate some of the audit pressures created by the post-SOX reporting environment by assisting the external auditor with the financial statement audit.

    In this paper, the authors posit that IAF-provided financial statement audit assistance can reduce audit delay in two non-mutually exclusive ways. First, IAF-provided assistance can substantially alleviate personnel shortages/staffing pressures facing external auditors. Second, IAFs not only have more client-specific experience, but they may also be more attuned to a company’s culture, chain of command, and information sources.

    Design/Method/ Approach:

    The survey questionnaire was mailed to the CAEs of Fortune 1000 (in terms of total sales) companies, after excluding banks, requesting information on IAF activities in fiscal 2005. The authors sent the first survey in July 2006, which resulted in a total of 72 usable responses. They conducted a follow-up mailing in September 2006 and produced 62 additional usable responses, for a final sample size of 134 observations.


    The authors find that the IAF audit assistance is negatively associated with audit delay. Specifically, this study suggests that when a firm moves from the 25th percentile to the 75th percentile in terms of the IAF-provided financial statement audit assistance, audit delays decrease by approximately 2.5 days. Further analysis documents evidence of moderating relationships between IAF assistance and other IAF environmental characteristics such as the extent of internal control reliance, coordination with the external auditor, and the firm’s investments in IAF quality. For example, the evidence suggests that external auditors are able to use IAF assistance to curb the incremental increases in audit delay that result from low control reliance audit engagements. The authors also find that the audit timeliness benefits of IAF assistance increase with the extent of coordination between the IAF and external auditors. Finally, the authors find that increases in IAF quality magnify the negative association between IAF assistance and audit delay.

    International Matters