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I synthesize the extant experimental literature examining auditor evaluation of others’ credibility published in six top accounting journals over the last three-and-a-half decades. I adapt the original definition of credibility by Hovland, Janis, and Kelley (1953): the extent of perceiving someone as competent and trustworthy. Audit guidance requires auditors to consider credibility of management, internal auditors, and staff, yet the research literature on auditor evaluation of others’ credibility is fragmented and scarce, limiting our understanding of determinants and consequences of auditor evaluations. I develop a framework for analysis of research on auditor evaluation of others’ credibility and review extant literature by types of examined effects (determinants of credibility vs. consequences of credibility) and by examined credibility components (competence, trustworthiness, or both). Throughout the literature review I suggest areas for future research.

This research aims to explore whether recent audit reforms have improved auditor objectivity when performing non-audit services.

In two separate experiments, the authors tested whether external and internal auditors' inventory obsolescence judgments are influenced by their client's (or company's) role as the buyer or seller in an acquisition setting.

External auditors assessed the likelihood of inventory obsolescence objectively, regardless of their consulting role in the acquisition setting. Internal auditors assessed the likelihood of inventory obsolescence as higher when consulting for the buyer than when consulting for the seller, consistent with the supposition that the buyer would prefer to write-down inventory and negotiate a lower purchase price, whereas the seller would prefer the inventory not be written down.

From a regulatory perspective, external auditors may be relying too much on the work of internal auditors if internal auditors' lack of objectivity as consultants extends to their assurance role.

This paper extends prior research in the area of internal and external auditor objectivity and is the first paper to include both subject groups in the same experiment. It also addresses the current policy issues that may have a significant effect on audit quality and auditor liability.

This study aims to examine the objectivity of accounting professionals based in India.

To examine the objectivity of accountants based in India, this study performs an experiment using a well-established instrument from prior literature. The authors asked accounting professionals based in India to act as either the seller or buyer in a hypothetical acquisition scenario. Participants were asked to evaluate the obsolescence of an apparel company’s inventory, assessing both the probability of inventory obsolescence and the likelihood they would propose an inventory write-down.

The results indicate external auditors and tax professionals were able to remain objective, reflected in the consistency of their assessments across the buyer and seller conditions. Internal auditors were less objective, evaluating inventory obsolescence as more likely when their client was considering buying a subsidiary than when their client was considering selling a subsidiary. Internal auditors were also more likely to recommend an inventory write-down adjustment when hired by the buyer than when hired by the seller.

This study informs regulators and accounting professionals. Offshoring has “prompt(ed) questions regarding the factors that affect the quality of work in India” (Dickey et al., 2022, p. 680). While the authors do not prescribe specific actions, this study provides evidence on the decision-making process of accounting professionals based in India that regulators might use to craft policy. Furthermore, this study responds to calls for additional evidence on the decision-making process of accounting professionals based in India (Spilker et al., 2016; Mohapatra et al., 2015), and for evidence on the objectivity of internal auditors (Burt and Libby, 2021; Stewart and Subramaniam, 2010).

This paper aims to examine whether increasing the salience of the internal auditor’s professional identity, defined by the expectations of their professional group, increases internal auditors’ judgments of the severity of internal control concerns when their organizational identity is high.

This paper tests the hypothesis using a laboratory experiment with internal auditors as participants.

The results support the hypothesis that professional identity salience moderates the relation between organizational identity and the assessed severity of identified internal control weaknesses. Increasing the salience of professional identity results in a more severe assessment of identified internal control weaknesses when organizational identity is high than when it is low.

Prior research in the lab and in the field provides mixed results about the impact of organizational identity on internal auditors’ judgments of the severity of identified internal control concerns. This paper contributes to the discussion on this issue. In addition, the results have implications for the debate about the benefits and costs of in-house versus out-sourced internal audit functions.

External auditors often rely on other professionals for the audit of the financial statements of their clients. Generally, external auditors rely on clients’ internal auditors. Reliance on internal auditors results in cost savings to the client. The objective of this study is to determine which of the criteria as mentioned by AI 610 will be used by the external auditors to evaluate the work of the internal auditors. Respondents of the study consist of those from the big four and non‐big four firms located in Kedah and Penang. A one‐quarter replicate of 2⁸ Kempthorne's design was used to determine the experimental task. The findings of the study indicate that technical competence and scope of function are the two most important criteria that external auditors consider in their reliance on internal auditors. Malaysian Institute of Accountants (MIA), being the standard setter of the auditing standards in Malaysia, will have to develop precise and operational criteria for these factors in planning the audits. The study also shows that there was consistency in audit judgement.

Previous research on auditors’ processing of nondiagnostic evidence demonstrates the existence of a dilution effect – the tendency to underreact to diagnostic information when accompanied by nondiagnostic information. Prior audit studies find that accountability, a prominent feature in audit settings, does not affect the magnitude of the dilution effect exhibited by auditors. Based on more recent theories about accountability, this line of research is extended by exploring whether (1) the dilution effect previously identified is a robust phenomenon that can be replicated, (2) accountability has an impact on both the frequency and magnitude of dilution effect, and (3) the impact of accountability on both the frequency and magnitude of dilution effect is conditional on the degree of accountability experienced by the participants through various reporting levels. The experimental results from a sample of internal auditors provide evidence supporting the first two propositions; however, the results related to reporting levels are not significant. A discussion of the implications of these findings for audit research and practice follows.

This study’s purpose is to examine whether providing prior consulting services influences internal auditors’ subsequent assessments when providing assurance services to assist management in its assessment of internal control over financial reporting. A behavioral experiment is used, with internal auditors as participants. We provide some evidence that internal auditors who perform prior consulting services are less likely than others to conclude that an identified control deficiency is a material weakness, but only when the deficiency is directly related to the prior consulting services performed. Limitations include relatively small sample sizes and manipulation check failure rates that, although consistent with several prior studies, are somewhat high. If internal auditors have provided consulting services, they may want to consider limiting the assurance services provided to management that are more directly related to their consulting services. While prior studies have examined the effects of internal auditors’ role in designing internal controls on subsequent services, this is the first study to focus on the impact of providing internal audit consulting services on subsequent assurance services.

This study aims to explore the effect of negotiating audit differences on auditors’ internal control deficiency (ICD) severity assessments, an ensuing, non-negotiated judgment, in an integrated audit.

The experiment manipulates the client’s concession timing strategy as either immediate or gradual, holding the outcome constant. A total of 34 auditors (primarily managers) resolve an audit difference with the client.

The client’s concession timing strategy during the negotiation of an audit difference spills over to affect auditors’ severity assessment of a related ICD. Auditors judged the ICD severity to be higher (lower) in the immediate (gradual) condition. Client retention risk inferences mediate this effect.

The effect on auditors’ ICD severity assessments may not ultimately affect the audit report. Participants did not control their negotiation strategy, allowing the client’s negotiation strategy and the outcome to be held constant; it is possible that interactive effects between the client and auditor’s strategy might affect the study’s implications.

Features of the auditor–client negotiation process may influence auditors’ downstream, post-negotiation judgments and may therefore help to explain empirical evidence and Public Company Accounting Oversight Board inspection findings that show auditors often fail to identify an internal control material weakness after identifying a financial statement misstatement.

This paper expands current negotiation research by exploring the impact of inferences made based on counterparty concession strategy for downstream, non-negotiated judgments and current integrated audit research by identifying client retention perceptions as a driving factor of lower ICD severity assessments.

This study examines the effects of incentive compensation and guanxi, a type of informal personal relationship between people, on the objectivity of Chinese internal auditors. Given that the objectivity of internal auditors is essential for promoting financial reporting quality, it is important to investigate the effectiveness of internal audit functions, especially in emerging markets where the corporate governance mechanisms designed to promote objectivity are less mature.

The research employs a 2 × 2 between participants experiment with 116 graduate accounting student participants.

After controlling for internal auditors’ ethicality, we find that close-guanxi between management and internal auditors and incentive compensation in the form of bonuses based upon meeting earnings targets both have the capacity to impair the objectivity of Chinese internal auditors. Participants were more tolerant of management’s attempts to manage earnings when there was close guanxi or bonus compensation. Further, compensation structure only influenced internal auditors’ support of management when guanxi was distant, but when there was close guanxi between internal auditors and management, internal auditors were unlikely to challenge management regardless of the compensation structure.

The purpose of this paper is to investigate how internal auditors’ performance reputation for auditing and assurance engagements affects corporate managers’ reliance on their consulting recommendations.

This study conducted a 2 × 2 between-subjects experiment in which 103 MBA students were randomly assigned to one of the four conditions. This paper uses analysis of covariance to analyze the data.

The results show that internal auditors’ reputation for performing assurance engagements positively influences managers’ reliance on their consulting recommendations. In addition, managers’ compensation structure affects their perceptions of the importance of the decision, and the perceived decision importance in turn partially moderates the effect of internal auditors’ performance reputation on managers’ reliance decision.

This paper advances the understanding of the consulting function of the internal audit function (IAF) and provides evidence on how internal auditors’ performance in one field (assurance) affects management’s perception of their performance in the other field (consulting).

The findings of this paper should be particularly interesting to the parties that are responsible for training internal auditors by highlighting the importance of strengthening internal auditors’ capability of performing consulting service with respect to business operation.

This study is one of the few studies that examine how internal auditors’ consulting recommendations affect managerial decisions in an operational setting. The findings of the interdependence between the assurance and consulting components of the IAF advance the growing research stream of internal audit and its impact on management decision-making.