The relationship between auditors’ human capital attributes and the assessment of the control environment

The International Standards on Auditing (ISA) consider the understanding of the control environment as a basic phase of an auditor’s assessment of internal control. This comprehension influences the nature, timing, extent and, ultimately, the quality of the procedures managed by auditors. Several studies have investigated the determinants and implications of control environment assessment, internal control evaluation, and audit quality. However, very few studies have adopted a human capital perspective and matched the number and type of the control environment elements considered during control environment evaluation with auditors’ human capital attributes. Starting from these considerations, the paper examines the relationship between auditors’ human capital attributes and the assessment of the control environment. Based on a survey of 100 Italian external auditors, this study reveals that auditors perceive “Communication and enforcement of integrity and ethical values” as a relevant element in undertaking control environment assessments. Moreover, the findings indicate that the type of audit firm (Big Four), the regional context (Northern Italy), and the auditor’s degree specialization (accounting, finance and auditing) influence the control environment assessment. This study contributes to the literature by consolidating the use of human capital theory in the auditing domain and presenting new results that help clarify the relationship between human capital attributes and control environment evaluation. We have identified the human capital attributes of auditors that match a control environment evaluation based on all seven elements indicated by ISA 315