Archival Evidence on the Audit Process: Determinants and Consequences of Interim Effort

Posted: 11 Dec 2020

See all articles by Brant E. Christensen

Brant E. Christensen

University of Oklahoma; Norwegian School of Economics (NHH) - Department of Accounting, Auditing and Law

Nathan J. Newton

Florida State University

Michael S. Wilkins

University of Kansas

Multiple version iconThere are 2 versions of this paper

Date Written: July 8, 2020

Abstract

Using proprietary data from a global accounting firm, we investigate the determinants of auditors’ interim effort as well as the impact of interim effort on audit quality, client disclosure timeliness, audit hours, and audit fees. Public statements from accounting firms and regulators suggest various benefits from accelerating auditor effort, but these claims remain largely untested. We find that interim effort is higher for large, complex clients that require integrated audits of both financial statements and internal control over financial reporting. With respect to consequences, we find that allocating relatively more work to the interim period is associated with a reduced likelihood of late 10-K filings, decreased total audit hours, and higher fees. Although increasing interim period effort is not, on average, associated with a reduced likelihood of misstatement, we do find that current period material weaknesses are less likely with greater interim work. Thus, greater interim effort appears to facilitate the remediation of internal control deficiencies before year-end. We also show that the benefits of increased interim period effort allocation are much stronger – including improved audit quality – when manager and partner interim involvement is high. Overall, our study provides important new insights on audit production and highlights benefits of reduced hours for auditors, earlier identification of control deficiencies for clients, and more timely financial reports for investors.

Keywords: Audit hours, interim testing, audit quality, timely filings, audit fees

Suggested Citation

Christensen, Brant E. and Newton, Nathan J. and Wilkins, Michael S., Archival Evidence on the Audit Process: Determinants and Consequences of Interim Effort (July 8, 2020). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3731385

Brant E. Christensen

University of Oklahoma ( email )

Norman, OK 73019-4004
United States

Norwegian School of Economics (NHH) - Department of Accounting, Auditing and Law ( email )

Helleveien 30
N-5045 Bergen
Norway

Nathan J. Newton

Florida State University ( email )

Rovetta Business Bldg. (RBA)
College of Business
Tallahassee, FL 32306-1110
United States

HOME PAGE: http://https://business.fsu.edu/person/nate-newton

Michael S. Wilkins (Contact Author)

University of Kansas ( email )

Capitol Federal Hall
1654 Naismith Dr.
Lawrence, KS 66045
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
284
PlumX Metrics