Does the expectation of finding deficiencies impact internal audit work?

Purpose - The main purpose of this paper is to examine whether the source of an expectation of finding deficiencies – the audit committee, the chief executive officer, or the internal auditor's own assessment – affects the time budgeted by internal auditors for that audit area. Design/methodology/approach - The approach used is a behavioral experiment where audit planning decisions are made by internal auditors for three hypothetical scenarios. Findings - The paper finds that the source of the expectation makes a difference in some cases. In particular, internal auditors allocate more time when the expectation of deficiencies results from a self‐assessment than when it comes via communication from an audit committee member. The paper also finds that internal auditors do not generally increase audit time budgets if initial audit procedures find no reportable deficiencies when deficiencies are expected to be found. Research limitations/implications - Internal auditors typically obtain more information about an audit scenario than is provided in the research questionnaire. As well, economic incentives such as being fired for making poor planning decisions are absent in the paper. Practical implications - The results imply that the reliability of an expectation about deficiencies is more influential than the authority of the source. Originality/value - No prior research study has addressed the issue of whether the source of an expectation of finding deficiencies affects the time budgeted by internal auditors for that audit area.