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Prior research suggests that perceived levels of a subordinate auditor’s competence affects audit reviewers’ judgments. We extend this line of research by investigating the effects of perceived client competence (hereafter, ClientComp) and its interaction with subordinate auditor’s competence (hereafter, AuditorComp) on audit reviewers’ judgments. Using data from highly experienced CPA audit managers, senior managers, and partners, we find a significant main effect for AuditorComp, but not for ClientComp. We also find that when AuditorComp is high, levels of ClientComp do not affect audit reviewers’ judgments. However, we cannot support the hypothesis that when AuditorComp is low ClientComp will significantly affect audit reviewers’ judgments. These mixed results suggest that in the post-SOX (2002) era regulatory environment, audit reviewers may be exercising heightened professional skepticism about ClientComp whenever they consider clients’ assertions.

The protection of public assets, fighting corruption and providing accountability for government agencies is necessary for public welfare, and it is possible to achieve this by quality auditing of the public sector. Since audit quality depends on the competencies of the auditor, this chapter focusses on the competencies of the public auditor and how these competencies are expected to evolve in the future with the development of technology. The chapter concentrates on the most sought-after skills for today’s public auditors by analysing the employment criteria in the Supreme Audit Institutions (SAIs) of the European Union, the United States, the United Kingdom and Turkey. Even though the SAIs of these countries/regions are quite different, it is possible to find common ground. The SAIs of these countries, in general, require public auditors to have an undergraduate degree and require the candidates to pass extensive tests on reasoning abilities.

Moreover, the author investigates the requirements for public auditor competency in the public auditing standards followed by these countries. In addition to this, the author discusses the future expectations from public auditors and the new skills these will need. Past skills include technical knowledge, prior experience, hierarchical order in audit teams, professional scepticism, reasoning abilities and reporting skills. Advancements in technology such as Artificial Intelligence and Industry 4.0 will require auditors to have technological knowledge, emotional intelligence, interpersonal skills, project management skills, critical thinking and strong communication skills. Furthermore, understanding the business and related risks will overshadow prior experience.

This paper reviews key aspects of the regulatory response in the UK and the USA to the apparent crisis of confidence in auditing stimulated by Enron and other recent corporate scandals. Drawing on a consideration of the nature of the market for auditing services and the regulatory and corporate governance structures in which auditing is embedded, the paper argues that the bulk of recent regulatory attention appears to have been on matters of auditor independence rather than auditor competence. Such a focus is seen to have parallels with former ‘crisis’ eras in the auditing arena, while the analysis presented also raises questions about the status of the auditing function within accounting firms and the capacity of regulatory reform to deliver a fundamentally enhanced auditing function. The paper concludes by stressing the importance of making more transparent what is being done in the name of auditing and audit regulation.

This chapter aims to enhance understanding of the main drivers of internal auditors' moral courage to speak up about sensitive information and their cause-and-effect relationships. We use cognitive mapping method to analyze 20 chief audit executives' cognitive maps in Tunisia. A collective map was grounded through assembling the full individual maps. Using the Decision Explorer software for our analysis, we find that the state hope, whistle-blowing policy, self-efficacy, perceived supervisor support and independence of internal audit function are the main drivers for internal auditors' moral courage. Our findings are also supplemented by semi-structured interviews. Our chapter offers a novel methodological contribution to auditing literature as well as new empirical evidence (contribution to knowledge) on the drivers of internal auditors' moral courage.

This study challenges the conventional theoretical approach of the ‘Three Lines of Defence’ Model adopted by most of the Maltese credit institutions. The authors propose a paradigm shifting conceptualised framework that would alter the corporate governance structures of banks. The objective is to test the feasibility and willingness of credit institutions to adopt such an approach.

This study challenges the current practices of the internal auditing profession and organisations and invites them to evaluate their structures whilst recognising the benefits of adopting a combined assurance function.

In order to test this hypothesis, the authors sought out semi-structured interviews with controllers (Internal Auditors, Risk Managers and Compliance Officers) within Maltese Credit Institutions, varying in size from significant, medium-sized and small institutions; personal from the Malta Financial Services Authority – The regulator, the Big four audit firms and members of the Malta Forum of Internal Auditors, and practitioners working both within and outside the financial industry.

There were two contrasting opinions regarding the suggested proposition. On the one hand, those operating within the credit institutions, as well as the regulator and the external auditors, do not believe that the proposition of integrating risk, compliance and internal audit functions (IAF) in one team would be possible; the reason being that independence, which is the cornerstone of every IAF, would be severely impacted. On the other hand, there were those practitioners working outside the banking industry but with sufficient experience and knowledge in the field, who challenged the traditional concept of independence. They argue that the functions should not be separate from each other because they have much in common.

Four themes emerged from the study: (1) challenges as a concept, (2) benefits, (3) risks and (4) condition for successful implementation. All interviewees, from risk departments, boards, external auditors and regulators agree that a strong, knowledgeable and independent IAF is fundamental to every organisation but more so within the financial industry. Nevertheless, this study revealed two schools of thought that emerged from the findings in relation to the IAF and its regulation, and specifically, when the authors presented the proposition of an integrated function.

This paper presents an institutional theory framework integrating normative, regulatory and cognitive-cultural pillars (Scott, 2008) to depict an interinstitutional system within which professions operate and develop. The pillars highlight the trade-offs between institutions leading to conflicts of interest that also impact the stability of the system and the ability of the profession to self-regulate. To illustrate the framework, the paper uses selected accounting-based professions and their alignment with the institutional pillars. Drawing from examples emerging from the Enron experience, the paper delves more deeply into the regulatory profession and professionals as agents to explore implications of their role in interpreting and in some instances developing institutions. Further, the paper highlights the potential fissures that emerge in a competitive environment between the public interest and market-based cognitive-cultural pillars that tends to erode public trust and weaken the institutional system, leading to the need for increased regulation to maintain the stability of the pillars. Overall, the framework presents a unique perspective on the role of public interest as a component of the normative pillar in aligning and thereby, stabilizing the functioning of the interinstitutional system. This perspective provides a basis to contextualize and articulate a public interest perspective for the accounting profession in an interinstitutional system.