I investigate how auditors integrate information technology (IT) specialist input into internal control over financial reporting (ICFR) issue classifications. Given the ill-structured nature of evaluating ICFR issues and the impact of these issues on audit quality, combining knowledge from different perspectives is likely beneficial. Drawing on social identity theory, I predict and find that a weaker one-team identity between auditors and IT specialists yields benefits. Auditors with a weaker versus stronger team identity place more weight on IT specialist input for IT-related issues and differentially weight higher and lower quality input for non-IT issues. I also find that more severe ICFR issues drive the predicted results. My study provides insight into how team identity influences auditor integration of input from specialists. The implications of my study are of interest to researchers, regulators, and practitioners, especially as recent firm initiatives encourage a one-team view for auditors and IT specialists.

Regulators are concerned that auditors do not sufficiently identify and report material weaknesses in internal control over financial reporting (ICFR). However, psychological licensing theory suggests reporting material weaknesses could have unintended consequences for acceptance of aggressive client financial reporting. In an experiment, we predict and find auditors accept more aggressive client reporting after they report a material weakness in ICFR than after they report no material weakness. We provide evidence licensing underlies this effect. In a second experiment, we investigate the efficacy of an intervention to reduce the identified licensing effects by prompting an audit quality goal. We find this prompt mitigates the unintended consequence when auditors report a material weakness. While regulators are concerned companies are undeservedly receiving clean ICFR audit opinions, our findings indicate adverse ICFR opinions may lead auditors to give companies undeservedly clean financial statement opinions. We provide a potential remedy to this unintended consequence.