THE ROLE OF DOCUMENTATION AND MEMORY IN INTERNAL CONTROL EVALUATION

SAS No. 78 requires that auditors obtain “a sufficient understanding of internal control to plan the audit and to determine the nature, timing, and extent of tests to be performed ” (AICPA 1995). It also requires auditors to document their understanding of an entity’s control activities. Given the importance of internal control evaluation to audit planning, it is important to understand how the auditor’s documentation process affects internal control evaluation. Consequently, this study examines how documentation procedure affects memory of internal control information and internal control risk assessments. This study extends the decision-maker task involvement research by investigating the amount of auditor attention given to information during internal control documentation procedures, and the effect of this attention on internal control knowledge acquisition. Based on the levels-of-processing framework (Craik and Lockhart 1972), I predict that the greater attention paid when preparing an internal control questionnaire after reviewing an internal control narrative should lead to the acquisition of mor