This study aims to examine how the external auditor’s detection method and their level of collaboration with internal auditors influence internal auditors’ feelings of ownership of an internal control deficiency, as well as their perceived ability to influence the external auditor’s conclusions about the deficiency.
In a 2×2 experiment with 76 internal auditors as participants, the authors study how external auditors’ control deficiency detection method (tests of controls or substantive tests) and the level of internal–external audit collaboration (low or high) impact the internal auditors’ feelings of ownership of an internal control deficiency and perceived influence over the external auditors’ conclusions about the control deficiency.
The authors find that internal auditors feel greater ownership when a control deficiency is identified through tests of controls rather than substantive tests. In addition, in a highly collaborative environment, internal auditors believe external auditors will be more receptive to their input about the deficiency but only marginally successful in their efforts to influence the external auditors’ conclusions about the deficiency.
The authors extend prior research on internal audit and identify potential implications for external audit research. The authors suggest future research on external auditors’ reliance on internal audit should consider the internal–external audit relationship. In practice, external auditors should be aware of both the benefits (knowledge and organizational insight) and drawbacks (possible undesired influence from internal audit) of a highly collaborative relationship.
