Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/245064 
Year of Publication: 
2021
Citation: 
[Journal:] Cogent Business & Management [ISSN:] 2331-1975 [Volume:] 8 [Issue:] 1 [Publisher:] Taylor & Francis [Place:] Abingdon [Year:] 2021 [Pages:] 1-26
Publisher: 
Taylor & Francis, Abingdon
Abstract: 
Outsourcing the internal aud it function (IAF) is a worldwide practice attractive to companies, practitioners and regulators because it is believed that providers of this function are objective and competent and can provide high-quality audit. This study explores the potential influence of company and auditor characteristics on selecting outsourced IAF providers with industry expertise. Using 334 observations for non-financial companies that outsourced this function to an external provider over the period 2010-2017, logistic regression suggests that company characteristics such as size, issue of new equity, age, and total accruals significantly determine the selection of industry-expertise outsourced IAF (IEOIAF) providers. We report similar findings when considering alternative approaches for measuring industry expertise, using a matching sample method, and controlling for the potential effect of endogeneity. In additional analysis, we explore these determinants, classifying the IEOIAF providers into big4 or second-tier audit firms; we find that size, leverage, quick ratio, concentrated ownership, loss, assets turnover, age, total accruals, external auditor type, and audit fees are the major determinants in the choice of an IEOIAF provider. Our study is of interest to a variety of users and provides the first empirical evidence for the determinants of outsourced IAF providers with industry expertise.
Subjects: 
IAF
outsourced IAF
industry expertise
company characteristics
auditor characteristics
JEL: 
M41
M42
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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