（1999）External Auditors Reliance on Work Performed by Internal Auditors：The Influence of Fee Pressure on This Reliance Decision.pdfVIP

Auditing : A Journai of Practice Theory Voi. 18, Suppiement 1999 External Auditors Reliance on Work Performed by Internal Auditors: The Influence of Fee Pressure on This Reliance Decision Audrey A. Gramling SUMMARY Observers of the auditing profession have long expressed concern that client fee pressures pose a threat to auditor independence . Concerns about impaired indepen- dence may be warranted if auditors alter their audit plans in response to client fee pressure. The purpose of this study is to examine whether audit managers planning decisions are influenced by client fee pressure and by the preferences of the audit partner. I experimentally examine these issues by having audit managers complete a case in which they were asked to determine how the work performed by a clients internal audit department will affect planned external audit procedures, in an environ- ment where the quality of the internal audit department is questionable . Client and partner preferences are manipulated between subjects . I operationalize client prefer- ences as an explicit preference for : (1) lower audit fees (i.e., high fee pressure), or (2) quality audit work ; and I operationalize audit partner preferences as an explicit pref- erence for : (1) efficiency and profitability, or (2) audit quality and professional skepticism. The results indicate that audit managers encountering clients who imp