Abstract
The International Standards on Auditing (ISA) consider the understanding of the control environment as a basic phase of an auditor’s assessment of internal control. This comprehension influences the nature, timing, extent and, ultimately, the quality of the procedures managed by auditors. Several studies have investigated the determinants and implications of control environment assessment, internal control evaluation, and audit quality. However, very few studies have adopted a human capital perspective and matched the number and type of the control environment elements considered during control environment evaluation with auditors’ human capital attributes. Starting from these considerations, the paper examines the relationship between auditors’ human capital attributes and the assessment of the control environment. Based on a survey of 100 Italian external auditors, this study reveals that auditors perceive “Communication and enforcement of integrity and ethical values” as a relevant element in undertaking control environment assessments. Moreover, the findings indicate that the type of audit firm (Big Four), the regional context (Northern Italy), and the auditor’s degree specialization (accounting, finance and auditing) influence the control environment assessment. This study contributes to the literature by consolidating the use of human capital theory in the auditing domain and presenting new results that help clarify the relationship between human capital attributes and control environment evaluation. We have identified the human capital attributes of auditors that match a control environment evaluation based on all seven elements indicated by ISA 315.
Highlights
The relevance of the control environment implies that auditors should understand and evaluate each of its elements to collectively assess their quality as part of the internal control evaluation (ISA Italia no. 315, 2015: 4–5)
We have hypothesized that the more control environment elements indicated in the International Standards on Auditing (ISA) 315 that are perceived to be relevant for the evaluation, the higher the quality of the evaluation will be
As auditor-specific characteristics, we considered the probability of working for a Big Four firm (BIG4), the regional context of the office in which the auditors’ work (AREA), the auditors’ experience level (EXP), and their degree specialization (EDU)
Summary
Auditing standards (e.g., ISA 315.74, IFAC 2004b, SAS 109.75. AICPA 2006b), international control frameworks (e.g., CoSo 2013, 2014) and academic stud‐ ies (Kizirian et al 2005; Pickerd et al 2014) highlight the relevance of the control environment as a key component that auditors should be concerned with to further understand the other components of internal control. The extant studies have concentrated on the assessment of the following elements, high‐ lighting their roles in the effective development of the audit process: management integrity (Beaulieu 2001; Kizirian et al 2005; Schmidt 2014), corporate govern‐ ance factors (Cohen and Hanno 2000; Cohen et al 2002; Carcello and Neal 2000; Dechow et al 1995), and management control philosophy (Cohen and Hanno, 2000). We developed a linear multiple regression to determine whether there are positive associations among the four main human capital attrib‐ utes of auditors (working for a Big Four audit firm, the regional context, the audi‐ tors’ audit experience, and the auditors’ degree specialization) and control environ‐ ment assessment. The final section discusses the implications and limitations of this study and presents opportunities for future research
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
