Date of Award

2017

Document Type

Dissertation

Degree Name

PhD in Accountancy

Department

Department of Accountancy

First Advisor

Jean C. Bedard, Ph.D.

Second Advisor

Tracy Noga, Ph.D.

Third Advisor

Sandra Vera-Muñoz, Ph.D.

Abstract

The importance and role of specialists on audit engagements has recently increased. My dissertation comprises three studies that examine whether and how the use of specialists in audit engagements is associated with audit quality.

The first study synthesizes prior research on auditors’ use of valuation, tax, IT, and forensic specialists. I organize the literature by: (1) determinants of specialist use (including the nature, timing, and extent of use); (2) the process of using a specialist; and (3) outcomes of specialist involvement, and propose several directions for future study.

The second study reports findings from interviews with experienced auditors and tax specialists about the specialists’ involvement in the financial statement audit and non-audit tax services (NATS) to audit clients. Given that tax continues to be a risky audit area, it is important to understand how tax specialists contribute to audit quality. Further, archival research generally finds a positive association between NATS and audit quality. Yet, little is understood about what mechanisms might underlie this positive relationship. This study contributes to theory and practice by providing key insights about the variation in tax specialists’ role on audit engagements, factors that contribute to and impede effective communication between auditors and specialists, and how the information shared benefits audit and tax practices.

The third study provides the results of an experiment investigating the effects of changes to the auditor’s reporting model on audit report users’ perceptions of audit quality and their investment decisions. A new PCAOB standard requires disclosure about the use of component auditors in the audit, but not about the use of specialists (while both disclosures were originally considered by the Board). The findings in this study suggest that information about these two audit participants affect investors’ perceptions of the audit and their investment decisions, but the impact of this information varies depending on the type of participant involved. This study contributes to research on the auditor’s reporting model and is important in informing regulators about the effects of their reporting changes.

Collectively, these results highlight the importance of specialists’ involvement on audits from three perspectives: auditors, specialists, and audit report users.

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