If tensions are rising between a given company and its external auditor, there’s a greater chance the company will be reporting internal control weaknesses.
That’s one of the findings of a recent Audit Analytics study, which sought to identify those factors or conditions at any given company that are likely to precede reporting of problems with disclosure controls or internal control over financial reporting. A change in auditor accompanied with reported issues in dispute increases the probability of a material weakness in the same year by 13 percent, the study found. A significant vote against auditor ratification increases the probability by 24 percent.
