The Role of Independence in the Effectiveness of Continuous Auditing

Download or read book The Role of Independence in the Effectiveness of Continuous Auditing written by Dereck D. Barr and published by . This book was released on 2014 with total page 121 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, I examine whether and how the frequency of internal audits (continuous vs. periodic), functional independence (separate vs. combined internal audit assurance and consulting functions), and the type of earnings management (accrual-based vs. real) affect internal auditors' perception of the likelihood managers will manipulate earnings. I find that earnings management is less likely when the internal audit function uses continuous auditing, regardless of the level of independence. However, the effect of independence is context-dependent such that internal auditors expect that real (accrual-based) earnings management is less likely when the internal audit function is independent (not independent), regardless of audit frequency. The findings of this study could be of importance to regulators, accounting researchers, and audit practice.