The Relationship Between the Internal Audit Function and Corporate Governance in the EU - a Survey

This article examines the importance of leadership in the context of the internal audit function (IAF). We investigate the influence of the Chief Audit Executive’s (CAE) leadership in enabling the IAF to become a strategic player in corporate governance (CG). Using the responses of 804 CAEs from the Anglosphere countries and South Africa, we find that strong CAE leadership skills and the existence of a leadership training program are significantly and positively associated with IAF involvement in CG processes. This provides support for the argument that CAEs with strong leadership skills help the IAF to move from a behind-the-scenes player to a key actor in the improvement of CG practices, increasing the IAF’s organizational relevance. We also find that the use of a risk-based audit plan, the existence of a quality assurance and improvement program (QAIP), activity type (consulting vs. assurance), and IAF size are also positively associated with IAF involvement in CG. These findings suggest that IAF activity characteristics also have significant implications for this function’s stronger involvement in the CG space.

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Internal Audit Function Quality and Audit Committees’ Practices: Survey Evidence from Jordan

Business and Economic Research ◽

10.5296/ber.v11i2.18263 ◽

2021 ◽

Vol 11 (2) ◽

pp. 20

Author(s):

Fawzi Ata Al Sawalqa ◽

Atala Qtish

Keyword(s):

Corporate Governance ◽

Significant Relationship ◽

Audit Quality ◽

Internal Audit ◽

Audit Committees ◽

Current Status ◽

Internal Audit Function ◽

Compliance Level ◽

Significant Difference ◽

The Relationship

The current study examines the extent to which audit committees comply with the requirements of corporate governance in Jordan and describes the current status of internal audit function. In addition, the study examines empirically the relationship between the internal audit quality and the compliance of audit committees with the governance requirements. The results from 49 respondents indicate that audit committees comply with the requirement of corporate governance and no significant difference is found in such compliance due to sector. In addition, the internal audit quality attributes are met among Jordanian companies to a considerable extent. Further, the independence and objectivity dimension of internal audit quality has a positive and significant relationship with the compliance of audit committees with governance requirements. Internal audit competence and due professional care have no significant relationship with audit committees compliance. One important implication of the current study is the development of a scale to measure the compliance level of audit committees with the governance requirements that can be used by both academics and decision-makers in firms.

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Adherence to the Internal Audit Core Principles and Threats to Internal Audit Function Effectiveness

Auditing A Journal of Practice & Theory ◽

10.2308/ajpt-19-072 ◽

2021 ◽

Author(s):

Christopher G Calvin

Keyword(s):

Corporate Governance ◽

Future Development ◽

Internal Audit ◽

Internal Auditors ◽

The Core ◽

Body Of Knowledge ◽

Internal Audit Function ◽

Lower Likelihood ◽

Practitioner Survey ◽

The Impact

I investigate the impact that adherence to the Institute of Internal Auditors' Core Principles has on the likelihood that an internal auditor's effectiveness is threatened through pressure to modify valid audit findings. I use responses from the Institute of Internal Auditors' 2015 Common Body of Knowledge Practitioner Survey to show that higher adherence to the Core Principles by both internal audit staff and CAEs is associated with a lower likelihood of being pressured to modify audit findings. I also explore which of the ten Core Principles are dominant in explaining these associations to inform the future development of the internal audit profession. Finally, I investigate the sources of pressure to modify audit findings and explore the effect the Core Principles have in mitigating pressure from each source. My findings are relevant to the Institute of Internal Auditors, internal audit practitioners, and academics interested in internal audit or corporate governance.

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

Vezetéstudomány / Budapest Management Review ◽

10.14267/veztud.2012.11.02 ◽

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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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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The Effect of Continuous Auditing on the Relationship between Internal Audit Sourcing and the External Auditor's Reliance on the Internal Audit Function

Journal of Information Systems ◽

10.2308/isys-50430 ◽

2013 ◽

Vol 27 (1) ◽

pp. 41-59 ◽

Cited By ~ 14

Author(s):

Bruce I. Davidson ◽

Naman K. Desai ◽

Gregory J. Gerard

Keyword(s):

Internal Audit ◽

Continuous Auditing ◽

Internal Audit Function ◽

The Relationship

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The Effectiveness of Enterprise Risk Management and Internal Audit Function on Quality of Financial Reporting in Universities

Journal of Economics and Behavioral Studies ◽

10.22610/jebs.v9i4(j).1836 ◽

2017 ◽

Vol 9 (4(J)) ◽

pp. 230-241

Author(s):

Wadesango N ◽

Mhaka C.

Keyword(s):

Risk Management ◽

Corporate Governance ◽

Financial Reporting ◽

Internal Audit ◽

Enterprise Risk Management ◽

State Universities ◽

Internal Audit Function ◽

Enterprise Risk ◽

The Impact

This study examined the impact of enterprise risk management (ERM) and internal audit function (IAF) on the financial reporting quality (FRQ) of state universities in Zimbabwe. Utilizing a dataset of 250 respondents from across nine (9) state universities, the researchers examined the effectiveness of ERM and the IAF on the quality of financial reporting in state universities. The researchers employed the contingency theory and studied each university separately to report on items that are specific to each and then also establish a commonality in the definition of parameters to be used in setting up the benchmark against which future performance may be measured. The findings were that there is a strong and significant relationship between ERM and the FRQ and also that there is a positive relationship between the internal audit function and FRQ. Quality internal audit results improved corporate governance systems. The results also underscore the significance and need for central government to establish and monitor a system of good ERM processes that minimize corporate governance breaches and enhance integrity and independence in financial reporting in state universities.

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Financial crisis and corporate governance: The role of internal audit in the Greek context

Corporate Board role duties and composition ◽

10.22495/cbv15i2art5 ◽

2019 ◽

Vol 15 (2) ◽

pp. 45-55

Author(s):

Andreas Koutoupis ◽

Michail Pazarskis ◽

Grigorios Lazos ◽

Ioannis Ploumpis

Keyword(s):

Corporate Governance ◽

Financial Crisis ◽

Audit Committee ◽

Stock Exchange ◽

Internal Audit ◽

Listed Companies ◽

Athens Stock Exchange ◽

Total Turnover ◽

The Relationship

In this paper, our purpose is to examine the relationship between the role of Internal Audit (IA), Corporate Governance (CG) and the Audit Committee (AC) in the recent financial crisis in Greece and to investigate the contribution of IA to CG structures as well as its possible, the IA’s role during the financial crisis in Greece. Moreover, little research has been conducted based on the relationship between corporate governance and internal audit during the financial crisis in case of Greece. For this reason, we conducted a survey, using questionnaires, which were sent to the listed companies of the Athens Stock Market. Out of a total of 192 listed companies on the Athens Stock Exchange, the relevant questionnaires were sent to 100 companies. Those companies were selected firstly based on their total turnover and secondly due to the availability of information from company websites such as employees’ numbers and Internal Audit Department Structures. Our conclusion was that Internal Audit adds value to the organization and it can also help the senior management towards the accomplishment of the organizational goals.

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