Prior research examining enterprise risk management (ERM) focuses mainly on entity-level measures, relying heavily on the link between ERM and internal controls. We argue that auditors leverage the client's ERM system at the application level to create audit efficiencies beyond those created by strong internal controls. Using a Heckman two-stage analysis for our sample of insurance/reinsurance firms rated on ERM quality by Standard & Poor's, we find results consistent with our expectations that higher-quality ERM systems incrementally reduce audit fees, audit delay, and the likelihood of late filing. However, we find that this association is nonlinear and that much of the assurance benefit from ERM systems is captured when firms improve their ratings from Weak to Adequate.

JEL Classifications: G22; M41.

Data Availability: The Standard & Poor's data on ERM quality is available at: http://www.standardandpoors.com/ratingsdirect/.

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