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Based on the theoretical development by House et al. (2004), the purpose of this paper is to investigate the cross-cultural differences of internal auditors’ perceptions on the importance of internal auditor skills.

The authors developed a survey based on the competency framework for internal auditing and collected data from the UK (Anglo cultural cluster) and Korea (Confucian cultural cluster). In total, 231 internal auditors participated in the study.

The results showed that UK auditors perceived behavioral skills as more important than cognitive skills, while Korean auditors had an opposite perception. Not surprisingly, UK auditors rated each sub-category of behavioral skills higher than Korean auditors; Korean auditors gave higher scores than UK auditors for each sub-category of cognitive skills.

One limitation of the study is that two different data collection methods were used for the study: online for the UK and paper-based for Korean auditors. Another limitation of the study is that the authors did not analyze the possible impact of each participating auditor’s background knowledge.

The findings of the study contributes to professional practice by providing culturally adaptive criteria for regulators’ policy-making, organizations’ employee hiring and training, and educators’ curriculum design across various cultural environments.

The findings of the study can provide some insights on cultural impacts to help academic researchers develop models regarding the internal auditor selection and training in different nations.

The purpose of the paper is to examine the corporate social responsibility (CSR) – earnings response coefficient (ERC) relation in the code-law tradition and the early stage of CSR practice to fill the research gap in the literature on CSR–ERC relation.

The authors use an association framework for the study. They use the firms listed on Korea Stock Exchange because Korea is classified as a code-law country and most of firms in Korea are in the early stages of CSR development, and Korean samples are considered credible and stable because of the effective financial reforms initiated by Korean government in the late 1990s. The authors collected data from the two data sources: KisValue and Korea Corporate Governance Service.

The authors find the following. First, CSR is negatively associated with ERC, which indicates that the ability of earnings to capture CSR implication is lower under the circumstances of the code-law and the early stage of CSR development. Second, political sensitivity (business group effect) is positively (negatively) associated with CSR–ERC relation, which means that the politically noticeable CSR concerns strengthen the CSR–ERC relation, and the inclusion of a firm in a business group weakens the CSR–ERC relation.

The paper derives theoretical implications on the quality of earnings reflecting CSR activities, provides practical implications to the investors who target international capital markets and is expected to help broaden the understanding of CSR–ERC relations in international capital markets.

The paper provides practical implications to the investors who target international capital markets. Regarding the interpretation of accounting earnings that contain information on CSR activities, the legal origin and the CSR development stages are considered as key factors. Specifically, in the code-law and the early CSR environment, the potential benefits of CSR activities tend to be evaluated optimistically and reflected aggressively in reported earnings. Thus, if investors are in a similar international investment environment, they may need to recalibrate estimates in their decision model with additional CSR information from non-financial sources (e.g. sustainability reports).

The paper is based on the international institutional theory and the discussion of CSR development stages. The international institutional theory states that the legal origin is one of the factors that can help explain the differential aggressiveness of reported earnings by country. In addition, the discussion of CSR stages argues that the CSR practices can be differentially implemented by CSR stages. The authors try to fill the gap in the existing literature by conducting an empirical study based on data from Korea Stock Exchange.

There has been an increasing amount of research on personnel selection in many business disciplines (Hough & Oswald, 2000; Breaugh & Starke, 2000). Research on internal auditor selection, however, has had limited exposure in the auditing literature (Bailey, Gramling, & Ramamoorti, 2003). Recently, Seol and Sarkis (2005) introduced an analytic hierarchy process (AHP) model that used a decision hierarchy based on the CFIA (competency framework for internal auditing) framework. A limitation of AHP, however, is the assumption of strict hierarchical relationship that needs to exist among factors.

The purpose of this paper is an introduction of a more robust model, the analytical network process (ANP), which relaxes the strict hierarchical and decomposition levels of the hierarchy and incorporates possible interrelationships and interdependencies of various personnel selection criteria, factors, and alternatives. In illustrating the application, we return to the CFIA model framework, describe how and where interdependencies exist amongst the CFIA factors/attributes, and how ANP is used in the internal auditor selection process. The illustration will also describe some sensitivity analysis for the ANP approach. The tool is not without its limitations that include the potential for geometrically more questions and information elicitation from the decision makers. Finally managerial and research implications associated with the technique and results are described.

To investigate the effects of auditor interaction on problem representation, information acquisition, and performance in the going‐concern task.

Participants were asked to evaluate the going‐concern status of a company. The study used a pretest‐posttest control group (CG) experimental design. Half of participating accountants were randomly assigned to the CG and the other half to the experimental group (EG). In stage one, participants in both CG and EG performed the entire task individually. In stage two, participants in EG performed the experimental task as an interacting dyad while participants in CG performed the experimental task again individually.

The results showed that interacting auditors' “shared problem representation” focus more on relationship between information and less focus on the simple facts or abstraction. Interacting auditors acquired fewer total number of cues, spent more time, visited financial cues fewer times, and acquired fewer liquidity and management cues than did individual auditors. The results also showed that the effects of auditor interaction were maximized when the member of a dyad were heterogeneous.

The paper used a going‐concern task and non‐hierarchical dyads. Future studies might investigate the effects of: different tasks other than going‐concern evaluation, hierarchical dyads (e.g. senior‐manager) after statistically controlling for the power variable, and different types of dyads (e.g. traditioned vs staticized) on group decision making.

The results can be used for training purposes for auditors to increase their performance.

The study is one of the first to work in the area of multi‐person audit judgment (especially in interacting auditor judgment).

This study investigates the relationship between environmental audit programs and various organizational characteristics in S&P 500 companies.

The data for the study are derived from two different sources. First, environmental audit related data were obtained from the corporate environmental profiles database (CEPD) which is published by the Investor Research Responsibility Center (IRRC). All firms who responded to the survey between 1998 and 2003 were included for the study. In total, 192 firms responded during this time period. Second, other firm specific and industry data were obtained from research insight (i.e. COMPUSTAT) database, which is published by Standard and Poor's.

The results show that an increasing number of companies are adopting environmental audit programs and industry‐specific factors affect an organization's decision to adopt environmental audit programs.

Since the paper relies on the survey data, one of the limitations of the study is possible self‐selection bias in the sample. Caution is needed before the results may be generalized. One promising area of future research is to investigate the relationship between the firm‐specific characteristics identified in this study and the performance (both financial and non‐financial) of the organization.

The results of the study can provide useful information to organizations that are planning to implement environmental auditing program.

The study is one the first for investigating the characteristics between companies with environmental audit programs and those who do not using an entire set of S&P 500 firms. Even though there have been some studies regarding environmental auditing, few have investigated the entire population of S&P 500 companies.

To investigate the nature of investment expertise and factors affecting the information processing and performance of investment experts, this paper hypothesizes normative characteristics of investment expertise and compares such characteristics with actual characteristics documented in prior literature on the investment expert. Based on collective evidence from these sources, a model of investment expertise is proposed.

Results support the existence of investment expertise in (1) the nature of knowledge, (2) problem solving and information search, and (3) performance. A variety of factors that could influence the information processing and performance of the investment expert, including personal, cognitive, and contextual elements, are also discussed in the paper and included in the proposed model of investment expertise.

The purpose of this paper is to investigate how the brainstorming component of Statement of Auditing Standards (SAS) No. 99 influences decision aid use and reliance, and the effectiveness of fraud risk assessment.

The research framework links the influences of the fraud assessment setting and decision aid reliance. The hypotheses are tested in an experiment with two manipulated factors: setting (group or individual) and decision aid (provided or not provided).

The results of the study provide insight on how the brainstorming impacts fraud risk assessment, decision aid use and decision aid reliance. The results show that groups using a decision aid with fraud risk factors demonstrate superior decision quality and effectiveness even with lower decision aid reliance.

The influence of the setting (group or individual) on the fraud evaluation and detection is highlighted.

This paper will be informative for auditors and firms involved in designing an efficient and effective fraud risk assessment.

This paper integrates the fraud risk assessment and decision aid literature to evaluate decision quality and effectiveness of group fraud risk assessment.

The purpose of this paper is to provide an in‐depth analysis of a major fraud case in a local government setting, specifically a public school district, as a guide to managers and overseers of such organizations and as an instructional resource. Fraud cases outside the corporate arena have not been well represented in the literature.

The paper describes the multi‐faceted fraud that occurred, identifies the control, oversight and auditing deficiencies that permitted it to happen, and suggests how adherence to good practices contributes to fraud prevention. What happened, why it happened, and how it might have been prevented are discussed. An extensive state audit provides richness of detail for this case study.

The absence of, or non‐adherence to, internal controls, failures of oversight by the supervisory board, collusion among top executives, and substandard auditing all contributed to a multi‐million dollar public fraud extending over several years. The case led to new requirements for the financial management of school districts.

The case provides guidance to management, board members, auditors, and regulators as to how fraud can thrive when control and oversight deficiencies exist, and demonstrates how adherence to good practices can reduce the occurrence of fraud in the local government environment.

This paper provides a broader exposure to a major, multi‐faceted fraud case in a non‐corporate environment.

PurposeThe purpose of the paper is to help organizations more effectively select and evaluate internal auditors by introducing a multi‐criteria decision model, the analytic hierarchy process (AHP) that has been applied to many areas of managerial decision‐making.Design/methodology/approachThe paper structures the decision hierarchy in entering level internal auditor selection based on the competency framework for internal auditing (CFIA) and provides an illustrative application example as part of a decision support system.FindingsRecruiting and hiring qualified employees is one of the critical issues facing any organization. The selection of internal auditors is not an exception. Making the wrong choice can prove to be very costly as organizations try to uncover candidates' potential for success. Recently, there have been increasing numbers of research papers regarding the employee selection process.Originality/valueInvestigates an area that has not seen much progress in the auditing and auditor management field. Contributes to internal auditing research and practice.