@article{776ce625554547969a71916fa2e04837,
title = "Auditor evaluation of manager{\textquoteright}s competence after a failure in internal control",
abstract = "Audit guidance requires auditors to assess management{\textquoteright}s competence with respect to internal controls over financial reporting (ICFR) based on the recommendations of COSO{\textquoteright}s integrated framework. The omission bias theory suggests that after internal control failures, auditors may assess managers{\textquoteright} competence in a manner inconsistent with these requirements. Results from four experiments using 313 experienced audit and accounting professionals support this concern and a means of mitigating it. I find that auditors view the manager to be most competent when prior to the failure in the key control the manager did nothing to prevent the failure versus reinforced the key control. I do not find this effect when auditors had shared their concerns about the key control with the manager prior to the control{\textquoteright}s failure. My results also show that auditors incorporate their competence judgments about management into evaluations of the ICFR, as required by the audit guidance.",
keywords = "COSO, Competence, ICFR, Internal control, Omission bias",
author = "Maksymov, {Eldar M.}",
note = "Funding Information: I am grateful to my editor, Lisa Gaynor, and two anonymous reviewers for their helpful comments and guidance. I am grateful to my dissertation committee members: Mark Nelson (Chair), Jacob Bien, Rob Bloomfield, and Dennis Regan for their valuable guidance and advice. I also thank Lindsay Andiola, Scott Asay, Ann Backof, Jeremy Bentley, Andy Call, Scott Emett, Rick Hatfield, Max Hewitt, Kathryn Kadous, Steve Kaplan, Justin Leiby, Bob Libby, Michal Mat≤ejka, Ken Merkley, Hun Tong Tan, and participants at the workshops at Arizona State University, Bentley University, Cornell University, Iowa State University, and University of Wisconsin–Madison for helpful comments and discussions. I gratefully acknowledge auditor participants from two Big 4 auditing firms and financial support from the AICPA Foundation, the Samuel Curtis Johnson Graduate School of Management at Cornell University, and the W.P. Carey School of Business at Arizona State University. Funding Information: I am grateful to my editor, Lisa Gaynor, and two anonymous reviewers for their helpful comments and guidance. I am grateful to my dissertation committee members: Mark Nelson (Chair), Jacob Bien, Rob Bloomfield, and Dennis Regan for their valuable guidance and advice. I also thank Lindsay Andiola, Scott Asay, Ann Backof, Jeremy Bentley, Andy Call, Scott Emett, Rick Hatfield, Max Hewitt, Kathryn Kadous, Steve Kaplan, Justin Leiby, Bob Libby, Michal Mat_ejka, Ken Merkley, Hun Tong Tan, and participants at the workshops at Arizona State University, Bentley University, Cornell University, Iowa State University, and University of Wisconsin?Madison for helpful comments and discussions. I gratefully acknowledge auditor participants from two Big 4 auditing firms and financial support from the AICPA Foundation, the Samuel Curtis Johnson Graduate School of Management at Cornell University, and the W.P. Carey School of Business at Arizona State University. Publisher Copyright: {\textcopyright} 2021, American Accounting Association. All rights reserved.",
year = "2021",
month = aug,
doi = "10.2308/AJPT-18-036",
language = "English (US)",
volume = "40",
pages = "105--125",
journal = "Auditing",
issn = "0278-0380",
publisher = "American Accounting Association",
number = "3",
}