The Valances of the Internal Audit in Relationship with the Internal Control – Corporate Governance

The study aimed to identify the role of accounting mechanisms for corporate governance in reducing creative accounting practices in telecommunications sector companies in Riyadh city. A descriptive analytical approach was followed to conduct the field study. Sample of the study consisted of members of the audit committee, internal auditors, accountants from the surveyed telecommunications’ sector companies, and the external auditors in the audit offices that specialized on auditing the examined sample of companies. Questionnaire was used as a data collection method. Results showed that activating the role of accounting mechanisms for corporate governance can greatly contribute in limiting creative accounting practices. As they are controlling mechanisms that capable of protecting companies, shareholders and stakeholders from any manipulation or misleading information in the financial statements. Further, internal audit plays a major role in limiting creative accounting practices by examining and evaluating the effectiveness of the internal control system. Furthermore, the independence and competence of the external auditor and his commitment to the rules of conduct and ethics of the profession contribute greatly in limiting creative accounting practices in the examined companies. The study recommended the necessity of holding specialized training courses for members of audit committees, internal auditors and external auditors on methods of detecting creative accounting practices to combat and reduce them.

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Factors affecting the voluntary use of internal audit: evidence from the UK

Managerial Auditing Journal ◽

10.1108/maj-08-2016-1425 ◽

2018 ◽

Vol 33 (3) ◽

pp. 288-317 ◽

Cited By ~ 4

Author(s):

Hazem Ramadan Ismael ◽

Clare Roberts

Keyword(s):

Corporate Governance ◽

Agency Theory ◽

Internal Control ◽

Audit Committee ◽

Internal Audit ◽

Theoretical Framework ◽

Policy Implications ◽

Content Type ◽

Factors Affecting ◽

The Uk

Purpose This study aims to identify the factors that lead non-financial companies listed in the UK to use an internal audit function (IAF) as a monitoring mechanism. Although the use of an IAF in the UK is voluntary, no prior research has examined the drivers for using one. Design/methodology/approach Financial and non-financial data were collected from the annual reports of 332 UK non-financial companies listed on the London Stock Exchange (LSE) Main Market. Univariate tests and multivariate logistic regression tests were used to test the research hypotheses. A theoretical framework based on both agency theory and transaction cost economics (TCE) theory was used to explain the economic factors affecting the use of an IAF. Findings The study provides evidence that firm size, level of internal risks, agency problem between owners and managers and existence of an effective audit committee are associated with the existence of an IAF. Thus, the need to have strong internal control and risk management systems and to reduce both internal and external agency costs drives companies to have an IAF. These results suggest the importance of IAF as an internal corporate governance tool and the effectiveness of UK governance regulations in monitoring the effectiveness of internal control systems. Practical implications Given the importance of the IAF’s corporate governance role, the study provides some policy implications. Regulators should pay more attention to the issue of maintaining an IAF, especially by large companies, the relationship between the IAF and other governance parties, especially the audit committee, and the disclosure of more relevant information about the IAF’s characteristics and practices. Originality/value This is the first study to examine the factors affecting the existence of the IAF within the UK’s distinctive regulatory approach of “comply or disclose reasons”. Furthermore, it provides a theoretical framework that explains how both the agency theory and TCE theory can interpret the adoption of internal audit.

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Can internal audit functions improve firm operational efficiency? Evidence from China

Managerial Auditing Journal ◽

10.1108/maj-01-2019-2136 ◽

2020 ◽

Vol 35 (8) ◽

pp. 1167-1188

Author(s):

Ying Chen ◽

Bin Lin ◽

Lizhen Lu ◽

Gaoguang Zhou

Keyword(s):

Corporate Governance ◽

Internal Control ◽

Internal Audit ◽

Operational Efficiency ◽

Alternative Measure ◽

Maturity Model ◽

Firm Level ◽

Content Type ◽

Internal Auditors ◽

The Relationship

Purpose The purpose of this study is to examine the effects of internal audit function (IAF) quality on the operational efficiency of Chinese firms. Design/methodology/approach The authors use regression models with a sample of Chinese listed companies to test their research hypotheses. Findings The authors find that IAF quality is positively associated with firm operational efficiency. The result is unchanged after correcting for endogeneity via the instrumental variable method and using an alternative measure of firm operational efficiency. The authors show that IAF competence improves firm operational efficiency, but the relationship between IAF independence and firm operational efficiency is insignificant. Additionally, they find that IAF quality can only significantly improve firm operational efficiency in the presence of effective corporate governance at the firm level and strong institutions at the province level. Using path analysis, the authors find that an IAF can improve firm operational efficiency directly or indirectly by promoting firm internal control quality. Practical implications The findings of this study suggest the need for a balance between IAF competence and independence to achieve the goals of IAF. Additionally, the authors study suggests that the effectiveness of IAF is contingent on corporate governance and market-based institutions. Originality/value The study’s findings contribute to the burgeoning literature on the relationship between IAF and firm operational performance and deepen the authors’ understanding of the role of IAF in an emerging economy whose government plays a major role in promoting and enforcing internal audits. The study also empirically support the Internal Audit Governance Maturity Model proposed by the Institute of Internal Auditors.

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Corporate governance characteristics of firms reporting internal control deficiencies

Corporate Ownership and Control ◽

10.22495/cocv8i2c3p4 ◽

2011 ◽

Vol 8 (2) ◽

pp. 363-390

Author(s):

Kathleen Rupley

Keyword(s):

Corporate Governance ◽

Internal Control ◽

Audit Committee ◽

Internal Audit ◽

High Growth ◽

Audit Committees ◽

Market Reactions ◽

Sarbanes Oxley ◽

Internal Control Deficiencies ◽

Nominating Committees

From a sample of firms reporting internal control deficiencies (ICD), I compare corporate governance structures to industry, exchange, and size – matched firms. I examine market reactions to reports of ICDs in 8-K filings. Additionally, I examine shifts in corporate governance characteristics since the Sarbanes-Oxley Act of 2002 (SOX). Results indicate that weaker boards, larger audit committees, less independent nominating committees, and high growth companies are associated with ICDs. Market reaction is negative to ICD disclosures when they are associated with controls over revenue. Firms have made changes post-SOX including reduced non-audit services, more frequent audit committee meetings, formation of nominating and governance committees, creation of internal audit functions, and implementation of corporate governance policies.

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The concept and the appearance of internal audit committees

Annals Constanta Maritime University ◽

10.38130/cmu.2067.100/42/19 ◽

2018 ◽

Vol 27 (2018) ◽

pp. 111-114

Author(s):

Cristian Dragan

Keyword(s):

Corporate Governance ◽

Internal Control ◽

Boards Of Directors ◽

Audit Committee ◽

Internal Audit ◽

Audit Committees ◽

External Audit ◽

General Management ◽

Proper Functioning

The Audit Committee is a concept of Corporate Governance, whose main concerns are focused on organizing and ensuring the proper functioning of internal control, internal audit, and its relationship with external audit. Audit committees have emerged from the need to send recommendations to the general management or board, to understand them and provide needed assistance for their implementation. For these reasons, the boards of directors thoroughly oversee the qualifications of committee members, their autonomy towards managers, the information they receive from auditors, and what they report.

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The Effect of Corporate Governance in Palestine on the Efficiency of Internal Audit: Empirical Evidence

International Journal of Economics and Finance ◽

10.5539/ijef.v8n5p124 ◽

2016 ◽

Vol 8 (5) ◽

pp. 124 ◽

Cited By ~ 1

Author(s):

Suhaib Tawfiq Jarrar

Keyword(s):

Corporate Governance ◽

Internal Control ◽

Audit Committee ◽

Audit Quality ◽

Internal Audit ◽

Public Companies ◽

Internal Auditor ◽

The Right ◽

The Impact

This paper comes to examine the impact of corporate governance in Palestine on the efficiency of internal audit from the reality of the listed corporations in the Palestine Exchange; [PEX]. The population of this paper consists of all the 25 listed Palestinian companies in the Palestine Exchange that have internal auditor. It also includes another 5 companies that rely on the internal audit by external companies. Hence, the number of the reviewed companies by this study is 30 companies (Palestine Exchange Market). Thereupon, 30 questionaires were distributed and retrived. However, this manuscript states a summary of the most important results. These results are explained as is shown in the following: (1) the findings of the study state that there is an effect of applying the variables of corporate governance altogether on the quality of the internal audit of the listed public companies in the Palestine Exchange. These rules are (disclosure and transparency, accountability, responsibility, justice, and independency). (2) The results of the study indicate that there is a significant effect of applying the corporate governance variables individually on the quality of the internal audit of the listed public companies in the Palestine Exchange. Thus, the effect of these variables appears contrasted respectively as the following: disclosure and transparency, justice and accountability, independency and responsibility. (3) The corporate governance represents combining the right practices and procedures which operate within the standards and rules that governed by the obligatory standards. These standards aim at ensuring that there aren’t any contradictions between the strategic goals of the company and the fuctional procedures of the administration in achieving these goals. (4) The internal audit adds value to the company through the functions that enhance its performance within corporate governance. This includes providing information to all levels of the management, evaluating the system of the internal control and the risk management, in addition to sticking the company with the principles of corporate governance. The findings of the study come up with the following recommendations: (1) the study assures the importance of applying the corporate governance principles because of their clear effect on the internal audit quality. It also recommends working efficiently on the professional development of the auditors and improving their performance through training programs, as well, encouraging them to keep up with the latest developments in the field of the auditing and other related fields. (2) It strongly recommends working on enhancing and activating the role of the board of directors and the audit committee; as well as granting them the independency. Hence, they will be able to carry out the tasks assigned to them. Consequently, they will avoid the effects that the company may be exposed to as a result of the internal weakness of the practical aspects of the principles of corporate governance; in addition to the negative impacts of this issue on the quality of the internal audit.

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PENGARUH SISTEM PENGENDALIAN INTERNAL DAN AUDIT INTERNAL TERHADAP PELAKSANAAN GOOD CORPORATE GOVERNANCE

Jemasi: Jurnal Ekonomi Manajemen dan Akuntansi ◽

10.35449/jemasi.v16i2.138 ◽

2020 ◽

Vol 16 (2) ◽

pp. 17-32

Author(s):

Opan Arifudin ◽

Juhadi Juhadi ◽

Yayan Sofyan

Keyword(s):

Corporate Governance ◽

Control System ◽

Internal Control ◽

Internal Audit ◽

Analytical Description ◽

Positive Effects ◽

Good Corporate Governance ◽

Internal Control System ◽

Analysis System ◽

Better Than

This research is conducted based on the recently viral phenomenon of the Good Corporate Governance issue, yet in reality there is also absence in full realization by state-owned institutions to implement it as the necessity and as its obligation in community service. This proves in several corruption cases which are revealed both in State-Owned Enterprise (BUMN) and Region-Owned Enterprise, especially in Bandung. The aim of this research is to identify the influence of internal control and internal audit to the implementation of Good Corporate Governance both directly and indirectly in BUMN and BUMD in particular in Bandung. This research uses the population of BUMN and BUMD in Bandung as many as 18 enterprises which consists of 14 BUMNs and 4 BUMDs. The method used for this research is analytical description with path analysis system. The results of this research show that the implementation of internal control and internal audit systems in BUMNs are significantly better than in BUMDs. This condition is caused by the rule of Good Corporate Governance binding the BUMNs to apply its organizational management better than in BUMDs. It also proves in statistical result that shows that internal control and internal audit systems have positive effects on the implementation of Good Corporate Governance. Directly, internal control system affects positively for 61.4%, while internal audit system does for 19.2%. Indirectly, both internal control and internal audit systems affect 80.6%. From this results showed, it can be concluded that internal control system in an organization supported by the efficiency of internal audit function will result in the satisfactory implementation of the Good Corporate Governance in the organization.

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Internal auditor’s contribution to good corporate governance: An empirical analysis for the one-tier governance system with a focus on the relationship between internal audit function and audit committee

Corporate Ownership and Control ◽

10.22495/cocv13i1c1p1 ◽

2015 ◽

Vol 13 (1) ◽

pp. 141-151 ◽

Cited By ~ 3

Author(s):

Marc Eulerich ◽

Patrick Velte ◽

Jochen Theis

Keyword(s):

Risk Management ◽

Corporate Governance ◽

Internal Control ◽

Audit Committee ◽

Control Function ◽

Central Element ◽

Internal Audit ◽

Governance Structure ◽

Governance System ◽

Good Corporate Governance

The effectiveness and efficiency of the corporate governance structure depends on different governance bodies within the organization. As crucial parts of good corporate governance they provide constituting, monitoring and controlling tasks concerning the risk management and internal control system. These corporate governance mechanisms include the internal control function (IAF) and the audit committee (AC). Based on a dataset of 550 responses from U.S. internal auditors, our study explores empirically the IAF’s contribution to good corporate governance. Our results suggest that the IAF constitutes a central element of the governance structure. Furthermore, an intensive interaction between the IAF and the AC is positively linked with the efficiency and effectiveness of the governance processes, internal controls and risk management.

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Relationship between internal audit factors and corporate governance

Journal of Governance and Regulation ◽

10.22495/jgr_v7_i3_p2 ◽

2018 ◽

Vol 7 (3) ◽

pp. 13-17

Author(s):

George Drogalas ◽

Evgenia Anagnostopoulou ◽

Andreas Koutoupis ◽

Michail Pazarskis

Keyword(s):

Corporate Governance ◽

Internal Control ◽

Audit Committee ◽

Audit Quality ◽

Stock Exchange ◽

Internal Audit ◽

Management Support ◽

Internal Auditor ◽

Empirical Survey ◽

Financial Scandals

In the aftermath of major corporate financial scandals, corporate governance and internal control frameworks have been extensively developed and adopted by corporations worldwide. This study investigates the importance of internal audit in corporate governance and, simultaneously, the degree of importance of the internal auditor regarding corporate governance. An empirical survey was conducted by distributing a questionnaire in Greek firms listed on the Athens Stock Exchange. Regression analysis is used in order to illustrate the gathered information. The findings indicate that internal audit has a great impact on the effectiveness of corporate governance. More particularly, internal audit quality and internal audit senior management support are statistically significantly associated with enhanced corporate governance effectiveness, in contrast to the audit committee independence which is not statistically significant.

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(The relationship between the level of actual application of corporate governance principles and the efficiency of internal control systems)

Journal Ishraqat Tanmawya ◽

10.51424/ishq.26.22 ◽

2021 ◽

Vol 26 ◽

pp. 667-708

Keyword(s):

Corporate Governance ◽

Private Sector ◽

Control Systems ◽

Internal Control ◽

Internal Audit ◽

Actual Application ◽

Efficiency And Effectiveness ◽

Rules And Principles ◽

The Impact ◽

The Relationship

Today, corporate governance is one of the concepts that have increased in importance and need in various sectors of the business because of its role and a significant impact in the process of corporate governance and the resulting protection of shareholders' rights and other parties that have interests with the company, so the importance of internal audit in all its administrative and technical aspects as one of the tools Which contribute to the application of the principles and rules of governance, and to be able to accomplish oversight functions and auditing in a manner that achieves the objectives envisaged by the commitment to the rules and principles of disclosure and proper disclosure of decisions and policies and the extent of adherence to the rules and standards of governance and presentation of information This research aims to measure and demonstrate the impact of the relationship between the actual application of the principles of corporate governance and the efficiency and effectiveness of internal audit systems in the private sector companies. The private sector operating in Iraq were selected three banks from this sector in the province of Maysan to be a sample of research and prepared a questionnaire to collect data and analyzed statistically The most important results that resulted from this study is that there is an actual application of the principles of governance in a relatively The Corporate Governance Code increases the efficiency and effectiveness of the internal audit systems in the companies. Key words:- corporate governance , internal control systems

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