Auditor evaluation of manager’s competence after a failure in internal control

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1 Scopus citations


Audit guidance requires auditors to assess management’s competence with respect to internal controls over financial reporting (ICFR) based on the recommendations of COSO’s integrated framework. The omission bias theory suggests that after internal control failures, auditors may assess managers’ competence in a manner inconsistent with these requirements. Results from four experiments using 313 experienced audit and accounting professionals support this concern and a means of mitigating it. I find that auditors view the manager to be most competent when prior to the failure in the key control the manager did nothing to prevent the failure versus reinforced the key control. I do not find this effect when auditors had shared their concerns about the key control with the manager prior to the control’s failure. My results also show that auditors incorporate their competence judgments about management into evaluations of the ICFR, as required by the audit guidance.

Original languageEnglish (US)
Pages (from-to)105-125
Number of pages21
Issue number3
StatePublished - Aug 2021


  • COSO
  • Competence
  • ICFR
  • Internal control
  • Omission bias

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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