What is it about?
This study examines Enterprise Risk Management (ERM) system quality and it's association with audit fees/delay in the insurance industry. ERM involves managing all risks for the company in a holistic manner, as opposed to evaluating risks separately. ERM overlaps internal controls, suggesting that high quality ERM should impact audit pricing and delay. Results show that insurance firms with higher quality ERM are associated with lower audit fees and shorter delays on issuance of the audit.
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Why is it important?
ERM has clear theoretical benefits, yet companies have been slow to adopt and maintain high-quality ERM systems. Quantitative benefits related to a reduction in audit fee and shorter time spent on the audit may act as another argument for ERM adoption.
Perspectives
Research related to ERM has focused largely on firm performance. The overlap between ERM and internal controls suggests audit implications. Future research could further explore the relationship between ERM, financial reporting and the audit function.
Cristina Bailey
Boise State University
Read the Original
This page is a summary of: The Impact of Enterprise Risk Management on the Audit Process: Evidence from Audit Fees and Audit Delay, Auditing A Journal of Practice & Theory, September 2017, American Accounting Association,
DOI: 10.2308/ajpt-51900.
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