[This study uses an experiment to investigate how structured audit approaches affect managers' human resource assignments in environments varying in complexity. Results indicate that consistent with a "knowledge-sharing" role of structured approaches, structured firm managers assigned less experienced auditors than did unstructured firm managers to perform and to supervise/review a set of judgment-oriented audit tasks. Increased environmental complexity resulted in the assignment of more experienced auditors in unstructured firms, but not in structured firms, which instead increased reliance on specialists. Finally, structured firm managers' staffing assignments were generally less variable than those of unstructured firm managers. Analysis using task-level structure measures suggests that task-level structure rather than a firm-level mediating variable is the operational construct.]

Investigates how structured audit approaches affect managers' human resources assignments in environments varying in complexity. Definition of environmental complexity; Assessment of the effects of structure on experience level for the performance and supervision of judgment-oriented audit tasks; Explanation for the apparent lack of response to the complexity manipulation.

This study examines how auditors' job performance is affected by the interaction between individual auditors' locus of control and the extent to which the employing audit firm uses a structured audit technology. We distributed an instrument that measures locus of control (“internal” vs. “external”) and other key constructs to staff- and senior-level auditors from the two most structured and the two least structured (then) Big 6 accounting firms. Results indicate that supervisor-assessed job performance is positively associated with the “fit” between individual auditors' locus of control and the employing firm's audit structure. Specifically, auditors who have an internal locus of control perform at a higher level at unstructured than at structured firms, on average, while auditors who have an external locus of control perform better at structured than at unstructured firms. These findings are relevant to audit firms and individual auditors seeking a match between personal and firm characteristics, and to firms seeking to determine the potential impact of audit reengineering that may alter the level of structure in their audit approaches.

Using unique survey data from Great Place to Work® Institute, we investigate the association of intraorganizational trust (i.e., employees’ trust in management) with three aspects of financial reporting: accruals quality, misstatements, and internal control quality. We find that trust is associated with better accrual quality, lower likelihood of financial statement misstatements, and lower likelihood of internal control material weakness disclosures. However, these effects are not uniform across all companies. Consistent with trust improving financial reporting quality through improved information production and information sharing, we find that trust is significantly associated with financial reporting quality in relatively decentralized firms, but not in firms that are relatively centralized. Our results are robust to several analyses that attempt to control for potential alternative explanations.

Internal auditors perform work that is relevant to their host entities' financial reporting processes; yet, little research attention has focused on the effects of internal auditing on companies' external financial reporting. Using a unique and previously unavailable data set, we investigate the relation between internal audit function (IAF) quality and earnings management. We measure IAF quality using a composite measure comprising six individual components of IAF quality based on SAS No. 65, which guides external auditors in assessing the quality of an IAF with respect to its role in financial reporting. Earnings management is measured using two separate proxies: (1) abnormal accruals and (2) the propensity to meet or barely beat analysts' earnings forecasts. We find evidence that IAF quality is associated with a moderation in the level of earnings management as measured by both proxies.