Influence of audit committees on internal audit conformance with internal audit standards

2015 ◽  
Vol 30 (6/7) ◽  
pp. 539-559 ◽  
Author(s):  
Abdulaziz Alzeban
Keyword(s):  
Audit Committee ◽  
Stock Exchange ◽  
Middle Eastern ◽  
Internal Audit ◽  
International Standards ◽  
Audit Committees ◽  
Content Type ◽  
Internal Auditors ◽  
The Impact ◽  
Audit Standards

Purpose – This study aims to provide empirical evidence of the association between audit committee characteristics and internal audit conformance with the International Standards for the Professional Practice of Internal Auditing (ISPPIA). Design/methodology/approach – Seventy-four usable responses were received from a survey of chief internal auditors (CIAs) from Saudi companies listed on the Saudi Stock Exchange. Findings – The results indicate that audit committee characteristics (the presence of independent members on the committee, members’ expertise in auditing and accounting and meeting with the CIA) influence internal audit conformance with the ISPPIA. Additionally, they demonstrate that such conformance is also influenced by CIA tenure. Practical implications – The findings of this study also have significant implications for audit committees wishing to improve their overall effectiveness, by identifying the impact of the committee’s characteristics on internal audit conformance with the ISPPIA. Originality/value – The results add to the literature on internal audit standards by introducing a Middle Eastern perspective and simultaneously providing insights for companies in their attempts to adhere to the international standards, hence, supporting efforts towards good corporate governance.

An examination of the impact of compliance with internal audit standards on financial reporting quality

2019 ◽  
Vol 17 (3) ◽  
pp. 498-518 ◽  
Author(s):  
Abdulaziz Alzeban
Keyword(s):  
Financial Reporting ◽  
Middle Eastern ◽  
Internal Audit ◽  
Reporting Quality ◽  
International Standards ◽  
Financial Reporting Quality ◽  
Annual Reports ◽  
Content Type ◽  
Internal Auditors ◽  
The Impact

Purpose The purpose of this study is to explore the impact of internal audit (IA) compliance with the International Standards for the Professional Practice of Internal Auditing (ISPPIA) on financial reporting quality (FRQ). Design/methodology/approach Data were gathered from 142 chief audit executive from Saudi listed companies, and also from the annual reports of the participating companies. Two proxies are used to measure FRQ, namely, discretionary accruals and accruals quality. Findings The findings reveal that companies demonstrating higher IA compliance with standards have better FRQ. They also indicate that the interaction between IA competency and its compliance with standards has an impact on FRQ. Further, the findings provide evidence that FRQ is higher in companies where IA departments have formal documentation, that is, entirely consistent with the ISPPIA. These results retain their robustness after further analysis. Originality/value In offering these findings, the paper contributes to the existing IA literature by introducing evidence from a Middle Eastern context, namely, Saudi Arabia, of the link between IA compliance with the ISPPIA and FRQ. It confirms the role of IA in FRQ, and hence, as an element of corporate governance, information, which is valuable for both the institute of internal auditors and companies.

The impact of audit committee characteristics on internal audit professionalization: empirical evidence from Greece

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Christina Vadasi ◽  
Michalis Bekiaris ◽  
Andreas G. Koutoupis
Keyword(s):  
Empirical Evidence ◽  
Audit Committee ◽  
Audit Quality ◽  
Research Question ◽  
Internal Audit ◽  
Audit Committees ◽  
Annual Reports ◽  
Substantial Impact ◽  
Content Type ◽  
The Impact

Purpose This paper aims to provide empirical evidence of the association between audit committee characteristics and internal audit quality through internal audit professionalization. Design/methodology/approach The investigation of the research question was based on 45 usable responses that were received from a survey of chief audit executives from firms listed on the Athens Stock Exchange and combined with publicly available information from annual reports. Findings The results indicate that audit committee characteristics (independence, diligence through frequent meetings and interaction with internal audit through valuation) influence internal audit professionalization. In addition, they demonstrate that internal audit professionalization is also influenced by CEO duality and firm’s external auditor. Practical implications The findings of this study have implications for audit committees wishing to improve their overall effectiveness, by identifying areas with substantial impact on internal audit quality. Moreover, regulators of corporate governance bodies can also benefit from the results to strengthen audit committee’s efficiency regarding internal audit function oversight. Originality/value The results add to the literature on the discussion of internal audit professionalization and complement the work of other researchers in the field of audit committee’s impact on internal audit quality/effectiveness. This study attempts to fill a gap in the literature on the effect of audit committee characteristics on internal audit professionalization, an element introduced from an institutional theory perspective.

Corporate governance and internal audit: an institutional theory perspective

2019 ◽  
Vol 20 (1) ◽  
pp. 175-190 ◽  
Author(s):  
Christina Vadasi ◽  
Michalis Bekiaris ◽  
Andreas Andrikopoulos
Keyword(s):  
Corporate Governance ◽  
Institutional Theory ◽  
Audit Committee ◽  
Internal Audit ◽  
Annual Reports ◽  
Substantial Impact ◽  
Content Type ◽  
Internal Auditors ◽  
The Impact ◽  
Audit Effectiveness

Purpose This paper aims to explore internal audit effectiveness through its contribution to corporate governance. Namely, the authors attempt to investigate the impact of internal audit professionalization on internal audit’s contribution to corporate governance. Design/methodology/approach Using a research framework informed by institutional theory, the authors predict that internal audit’s contribution to corporate governance is associated with factors related to internal audit professionalization. To investigate the arguments, the authors combine data from a survey of 49 listed companies in the Athens Stock Exchange with publicly available information from annual reports. Findings Empirical results indicate that internal audit professionalization affects internal audit effectiveness, as internal audit’s contribution to corporate governance is improved for organizations where internal audit function complies with internal auditing standards and internal auditors hold professional certifications. The findings also suggest that internal audit’s contribution to corporate governance is shaped by some company-specific characteristics, namely, CEO duality and audit committee quality. Practical implications The results have implications for internal auditors who wish to increase the efficiency of their work, corporate governance mechanisms such as the board of directors and the audit committee, which can use the findings of this study to better respond to their responsibilities concerning internal audit and regulators who can also benefit to strengthen areas with substantial impact on internal audit’s contribution to corporate governance. Originality/value This paper contributes to the academic discussion on the role of internal audit in corporate governance and complements the work of other researchers in the field of internal audit professionalization. This study tries to fill a gap in the literature on the effect of internal audit professionalization elements on internal audit’s contribution to corporate governance.

Internal audit as an antecedent of economic growth

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Abdulaziz Alzeban
Keyword(s):  
Economic Growth ◽  
Corporate Governance ◽  
Internal Audit ◽  
Content Type ◽  
Internal Auditors ◽  
Transparency International ◽  
Chi Squared ◽  
The Impact ◽  
Audit Standards ◽  
Professional Standing

PurposeThis paper reports a study that examines the role of the internal audit function as a cornerstone of corporate governance, on economic growth.Design/methodology/approachData were obtained from 108 countries for the period 2011–2015. The World Bank, the Institute of Internal Auditors Research Foundation and the Transparency International Corruption Perception Index were the data sources. Two statistical techniques were used: regression analysis to test the study hypotheses and the Chi-squared test to determine whether variations between countries.FindingsThe findings suggest that conformance with internal audit standards and maturity (in years) of the internal audit department contribute to economic growth. They also reveal a relationship between the professional standing of internal audit staff (represented by professional qualifications and number of training hours annually) and the contribution to economic growth, that being that the greater the professional standing of staff, the greater internal audit conformance to the standards and the higher the contribution to economic growth. Further, the findings reveal that the impact of internal audit on economic growth varies among countries according to income classifications.Originality/valueThe consideration of internal audit as one of the four fundamental bases of corporate governance, and therefore, its relationship with economic growth is a neglected topic in the research arena. This study addresses that shortcoming by providing worldwide evidence on the contribution of internal audit to economic growth and, thus, makes a new contribution to the literature. Further, evidence is provided to enlighten poorly performing economies of the value of mandating the presence of internal audit and the compliance of it with international internal audit standards.

The impact of internal audit function characteristics on internal control quality

2018 ◽  
Vol 33 (5) ◽  
pp. 450-469 ◽  
Author(s):  
Ahmed Atef Oussii ◽  
Neila Boulila Taktak
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
Audit Quality ◽  
Internal Audit ◽  
Audit Committees ◽  
Content Type ◽  
Internal Auditors ◽  
Control Quality ◽  
Internal Audit Function ◽  
The Impact

Purpose This paper aims to investigate the association between internal audit function (IAF) characteristics and internal control quality. Design/methodology/approach Using data gathered from 59 chief audit executives from Tunisian listed companies, this paper uses a regression model to examine research hypothesis related to the association between IAF characteristics and internal control quality. Findings The findings of the current study reveal that internal control quality is significantly and positively associated with IAF competence, internal audit quality control assurance level, follow-up process and audit committee’s involvement in reviewing the internal audit program and results. Practical implications The findings have significant implications for IAF wishing to enhance their effectiveness, by recognizing the impact of the IAF’s characteristics on internal control quality. The findings of this study also have significant implications for regulatory bodies who are concerned with the internal control quality, managers and audit committees who determine IAF investment, oversight IAF activities and assess internal auditors’ performance. Originality/value This study helps fill a gap in the extant literature where existing empirical evidence of how the IAF characteristics influences the quality of the financial reporting process in emerging markets is scant.

scholarly journals The internal audit dilemma – the impact of executive directors versus audit committees on internal auditing work

2017 ◽  
Vol 32 (9) ◽  
pp. 854-878 ◽  
Author(s):  
Marc Eulerich ◽  
Jörg Henseler ◽  
Annette G. Köhler
Keyword(s):  
Internal Audit ◽  
Research Direction ◽  
Interaction Effects ◽  
Audit Committees ◽  
Executive Directors ◽  
Content Type ◽  
Internal Auditors ◽  
Body Of Knowledge ◽  
New Research ◽  
The Impact

Purpose The purpose of this study is to analyze how internal audit function (IAF) activities differ, depending on the impact of executive boards (EBs) and audit committees (ACs). Design/methodology/approach This study is based on data collected from the Common Body of Knowledge (CBOK) study conducted by the Institute of Internal Auditors Research Foundation in 2010. Using 524 responses from US Chief audit executives the authors examine the direct and interaction effects of ACs and EBs on the probability to perform specific activities with a logistic regression model. Findings This manuscript shows that ACs and EBs have different direct and interaction effects on the portfolio of activities performed by the IAF. Furthermore, a varying prevalence among activities was identified, which pinpoints to the maturity of IAFs. All findings contribute to the prior and recent discussion about the position of IAFs between the stakeholders’ AC and EB. Research limitations/implications When the CBOK study was designed by the Institute of Internal Auditors, the investigators did not have the research questions in mind. The authors are therefore limited to those variables that have been collected as part of a larger questionnaire. Nevertheless, the new approach tries to open a new research direction, analyzing different activities performed by IAFs. Practical implications The identified portfolio of IAF activities can help practitioners to double-check their own work and to evaluate the impact of the EB and the AC on their activities. Originality/value This study provides the first empirical evidence of the influence of ACs and EBs on IAF activities.

The relationship between adherence of internal audit with standards and audit fees

2016 ◽  
Vol 14 (1) ◽  
pp. 72-85 ◽  
Author(s):  
Abdulaziz Alzeban ◽  
Nedal Sawan
Keyword(s):  
Stock Exchange ◽  
Internal Audit ◽  
Performance Standards ◽  
Audit Fees ◽  
International Standards ◽  
Annual Reports ◽  
External Audit ◽  
Content Type ◽  
Internal Auditors ◽  
The Relationship

Purpose This study aims to examine the relationship between external audit fees and the adherence of internal audit with the International Standards for the Professional Practice of Internal Auditing (ISPPIA), i.e. whether such adherence has a relation with lower or higher audit fees. Design/methodology/approach Data were gathered from the annual reports and 229 chief internal auditors (CIAs) from UK companies listed on the London Stock Exchange. Findings The result suggests that, in fact, higher external audit fee is related with adherence with both attribute and performance standards. Also, there is an association between audit fees and budget for the internal audit with longer tenure of the CIA. Originality/value Given the lack of attention to the potential impact of the ISPPIA on audit fees by previous researchers, any insight provided by the study in this regard will represent a valuable contribution to the literature in complementing what already exists and pointing the way to further research opportunities.

Organizational identity, professional identity salience and internal auditors’ assessments of the severity of internal control concerns

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ian Burt ◽  
Theresa Libby
Keyword(s):  
Professional Identity ◽  
Internal Control ◽  
Organizational Identity ◽  
Internal Audit ◽  
Identity Salience ◽  
Content Type ◽  
Internal Auditors ◽  
Internal Control Weaknesses ◽  
The Impact ◽  
Benefits And Costs

Purpose This paper aims to examine whether increasing the salience of the internal auditor’s professional identity, defined by the expectations of their professional group, increases internal auditors’ judgments of the severity of internal control concerns when their organizational identity is high. Design/methodology/approach This paper tests the hypothesis using a laboratory experiment with internal auditors as participants. Findings The results support the hypothesis that professional identity salience moderates the relation between organizational identity and the assessed severity of identified internal control weaknesses. Increasing the salience of professional identity results in a more severe assessment of identified internal control weaknesses when organizational identity is high than when it is low. Originality/value Prior research in the lab and in the field provides mixed results about the impact of organizational identity on internal auditors’ judgments of the severity of identified internal control concerns. This paper contributes to the discussion on this issue. In addition, the results have implications for the debate about the benefits and costs of in-house versus out-sourced internal audit functions.

scholarly journals Impact of Corporate Governance on Financial Performance: Karachi Stock Exchange, Pakistan

2016 ◽  
Vol 6 (2) ◽  
pp. 401 ◽  
Author(s):  
Aon Waqas Awan ◽  
Javed Ahmed Jamali
Keyword(s):  
Corporate Governance ◽  
Financial Performance ◽  
Audit Committee ◽  
Stock Exchange ◽  
Profit Margin ◽  
Audit Committees ◽  
Board Size ◽  
Good Decision ◽  
Return On Equity ◽  
The Impact

The aim of the research is to understand the impact of corporate governance on financial performance of listed companies on Karachi Stock Exchange Pakistan. Data was collected from forty two companies from different sectors like, insurance, banking, investment banking, and sugar industries. Study includes variables like profit margin & return on equity as a dependent (profitability) and board size, audit committee, annual general meetings & chief executive office (corporate governance). Using Pooled OLS, the result of the study proved those board size and audit committees have positive relationship with Profit margin and Return on Equity, if any independent variable changes it also stimulus the positively changing impact on Return on Equity (ROE) and Audit Committee (AC). This research offers imminent guidelines to the policy and decision makers in any type of firms to take good decision to set their firms hierarchy system.

scholarly journals A versenyképesség és a társaságok belső ellenőrzése (Competitiveness and corporate internal audit)

2012 ◽  
pp. 19-33
Author(s):  
Mária Bordáné Rabóczki
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Supervisory Board ◽  
Internal Audit ◽  
Senior Management ◽  
Internal Auditors ◽  
Mutual Dependency ◽  
Internal Audit Function ◽  
External Auditor ◽  
The Impact

A cikk a belső ellenőrzésnek a hatékony társaságirányításhoz való hozzájárulását és ennek a versenyképességre gyakorolt hatását vizsgálja. A belső ellenőrzés és a társaságirányítás kölcsönös összefüggésben áll egymással. Nemcsak a belső ellenőrzés hat a társaságirányításra, hanem a releváns társaságirányítási struktúrák, emberi kapcsolatok és magatartásformák jelentős hatást gyakorolnak a belső ellenőrzés színvonalára és hatékonyságára. A cikk ezért különös figyelmet szentel a belső ellenőröknek az igazgatósággal, az auditbizottsággal/felügyelőbizottsággal, a menedzsmenttel és a könyvvizsgálóval való kapcsolatainak vizsgálatára. Rávilágít a belső ellenőrzés legfőbb funkciójára, amely objektív bizonyosságot nyújt az igazgatóság és a felső vezetők számára a kockázatok azonosítására, kezelésére és elfogadható szintre történő csökkentésére szolgáló kontrollfolyamatok megfelelőségéről és hatékonyságáról. A bemutatott belső ellenőrzési modell azt a szemléletet közvetíti, hogy a belső ellenőrzés által nyújtott objektív bizonyosság megszerzése nemcsak a jogszabályoknak vagy az ajánlásoknak való megfelelés, hanem a társaságok versenyképessége szempontjából is kiemelkedő jelentőségű. _________ The purpose of this paper is to consider the contribution of internal audit to the sound corporate governance and the impact of that on the competitiveness of the companies. There is a mutual dependency between internal audit and corporate governance. Not only the internal audit has impact on the corporate governance but the relevant governance structures, relationships and behaviour influence the level and effectiveness of the internal audit. Therefore the present paper is highly concerned with the internal auditors` relationships with the board, audit committee/supervisory board, senior management and the external auditor. It highlights the internal audit function, that provides objective assurance to the board and senior management about the adequacy and effectiveness of the processes by which risks are identified, managed, controlled and mitigated to acceptable levels. The internal audit model demonstrated represents an approach, according to that getting objective assurance provided by internal audit is important not only to be in line with laws and recommendations but to facilitate the corporate competitiveness.

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