Evidence on the Audit Risk Model Do Auditors Increase Audit.pdfVIP

Trinity University Digital Commons @ Trinity School of Business Faculty Research Spring 2008 Evidence on the Audit Risk Model: Do Auditors Increase Audit Fees in the Presence of Internal Control Deficiencies? Chris E. Hogan Michael S. Wilkins Trinity U niversity, mike.wilkins@ Follow this and additional works at : /busadmin_faculty Repository Citation Hogan, C.E., Wilkins, M.S. (2008). Evidence on the Audit Risk Model : Do Auditors Increase Audit Fees in the Presence of Internal Control Deficiencies? Contemp orary Acco unting R esearch, 25(1), 219-242. doi : 10.1506/car.25.1.9 This Article is brought to you for free and open access by Digital Commons @ rinity. It has been accepted for inclusion in School of Business Faculty Research by an authorized administrator of Digital Commons @ rinity. For more information, please contact jcostanz@. Evidence on the Audit Risk Model: Do Auditors Increase Audit Fees in the Presence of Internal Control Deficiencies?* CHRIS E. HOGAN, Michigan State University MICHAEL S. WILKINS, Texas AM University 1. Introduction Internal controls over financial reporting (ICOFR) should provide reasonable assurance about the reliability of financial statements by setting in place policies and procedures related to maintaining accounting records, authorizations, and safeguarding of assets.1 For such controls to be effective, they should ensure, to the greatest extent possible, that material financial statement misstatements either can- not occur within a given functional area or will be detected and corrected by manage- ment before financial reports are issued. If ICOFR cannot provide this assurance, it is widely assumed that financial reporting quality will suffer. This assumption underlies many of the provisions of the Sarbanes-Oxley Act (SOX) of 2002, including the requirement that managers attest to the effectiveness of ICOFR