Materials and procedures

The experimental instrument asked each participant to assume the role of an in-charge auditor for a hypothetical audit client and to make a planning decision related to the integrated audit. The first section of the instrument included background information about the company that was held constant between the groups (i.e., selected current and prior year financial statement amounts, industry information, a description of the board of directors, audit committee, and management's Section 404 assessment process). Both the board and audit committee were described as compliant with NYSE requirements and accepting of the corporate governance reforms from Sarbanes–Oxley. This section included the manipulation of internal audit source, in-house or outsourced as described in the section below. The description of management's Section 404 assessment process included information about the involvement of the internal audit team in monitoring and performing independent tests of control. At the end of this first section, participants were asked to evaluate statements concerning internal audit team perceived competence and objectivity.11

The second section provided detail on the audit planning process for this client including the description of two accounts, the allowance for doubtful accounts and raw material purchases, which varied in the manipulated levels of risk of material misstatement as described below. Following the description of each account and a discussion of procedures performed on the account during the Section 404 management assessment process, participants were asked to make audit planning decisions related to reliance on the work of internal audit. The final section contained manipulation checks, demographic questions and the questions used to measure perceived litigation risk.