The impact of legislation on the internal audit function

2017 ◽  
Vol 13 (4) ◽  
pp. 450-470 ◽  
Author(s):  
Kevin K. Jones ◽  
Richard L. Baskerville ◽  
Ram S. Sriram ◽  
Balasubramaniam Ramesh
Keyword(s):  
Organizational Change ◽  
Institutional Economics ◽  
Internal Audit ◽  
Case Study Method ◽  
Content Type ◽  
Roles And Responsibilities ◽  
Internal Audit Function ◽  
Change Framework ◽  
The Impact

Purpose The purpose of this study is to show how the presence of change caused a shift in the roles and responsibilities of the internal audit function (IAF). Design/methodology/approach The methodological design/approach was constructed by combining specific aspects of widely known management accounting and organizational change frameworks. The theoretical premise was based on the old institutional economics component of institutional theory. As such, this study used the case study method to examine and analyze the impact of this change in eight specific organizations using the new two-tiered organizational change framework. Findings This new framework analyzes the multidimensional facets of organizational change in the IAF. From the findings, it was observed that the change can be evolutionary, episodic, continuous and/or teleological, and people, organisms and organizations that are subject to it will react or respond to that change in a myriad of ways. Practical implications Moreover, the implications of change can be environmental, socioeconomic and political. Originality/value This study makes an intellectual contribution by introducing a new two-tiered organizational change framework to explain the IAF’s response to the environmental change factor of regulation.

Understanding the internal audit function in a digitalised business environment

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nathanaël Betti ◽  
Gerrit Sarens
Keyword(s):  
Data Analytics ◽  
New Technologies ◽  
Internal Audit ◽  
Business Environment ◽  
Future Research ◽  
The European Union ◽  
Content Type ◽  
Internal Auditors ◽  
Internal Audit Function ◽  
The Impact

Purpose This paper aims to gain an in-depth understanding of how the internal audit function evolves in an increasingly digitalised business environment. Design/methodology/approach This paper is based on 29 semi-structured interviews with members of management committees and internal auditors based in Belgium. Findings The analysis reveals that a digitalised business environment affects the internal audit function in three respects. First, it impacts its scope. The agility of the internal audit planning and the required digital knowledge are expected to increase and information technology (IT) risks gain importance, especially cybersecurity threats. Second, the demand for consulting activities performed by internal auditors is higher and third, digitalisation modifies the working practices of internal auditors in their day-to-day tasks. New technologies such as data analytics tools are being implemented progressively in internal audit departments and digital skills are considered a critical asset. Research limitations/implications This research was conducted in the European Union and gathers opinions of members of management committees and internal auditors. Future research could focus on other internal auditing stakeholders in other legal contexts. Practical implications The internal audit function needs to integrate IT and data analytics skills. In addition, the internal audit function should develop consulting activities to help organisations deal with the digitalisation of the business environment. Originality/value The impact of digitalisation on the internal audit function and its effect on internal audit practices is an underexplored area.

The impact of accreditation agencies and other powerful stakeholders on the performance measurement in Polish universities

2019 ◽  
Vol 14 (1) ◽  
pp. 84-102 ◽  
Author(s):  
Dorota Dobija ◽  
Anna Maria Górska ◽  
Anna Pikos
Keyword(s):  
Performance Measurement ◽  
Performance Information ◽  
Case Study Method ◽  
Content Type ◽  
Additional Layer ◽  
Using Data ◽  
Polish Higher Education ◽  
The Impact ◽  
Collection Methods

Purpose The purpose of this paper is to extend the understanding of how internal organisational processes change in response to external demands, by investigating the changes undertaken by two Polish business schools (b-schools) in anticipation of and in response to the demands of accreditation agencies (AAs) and other powerful stakeholders. Specifically, it examines the internal research-related performance measurement (PM) system and changes in the use of performance information (PI). Design/methodology/approach The case study method is adopted, using data from publicly available documents and interviews with the faculty and management at the two schools. The data are interpreted and analysed using the neo-institutional theory. Findings Powerful stakeholders are the primary reason for changes in PM systems and the manner in which PI is used. Specifically, AAs reflect an additional layer in the PM system, allowing for a downward cascading PI effect. This also leads to a wider use of PI across different organisational levels. Research limitations/implications This study focusses on two case studies in a region still undergoing transition. Thus, this analysis could be reinforced through additional cases, different data collection methods and cross-country and between-country comparative analyses. Originality/value The changes in PM systems and particularly the use of PI are discussed in the context of Polish higher education (HE) and, more broadly, the entire Central and Eastern Europe (CEE) region. Moreover, the consideration of two b-school cases facilitates a comparative analysis of the differences in PM systems and the use of PI in the context of stakeholders’ PI needs.

E-business internal audit: the elephant is still in the room!

2014 ◽  
Vol 15 (1) ◽  
pp. 43-63 ◽  
Author(s):  
Amr Kotb ◽  
Alan Sangster ◽  
David Henderson
Keyword(s):  
Resistance To Change ◽  
Internal Audit ◽  
Business Environment ◽  
Content Type ◽  
Internal Auditors ◽  
Internal Audit Function ◽  
The Usa ◽  
The Uk ◽  
It Audit ◽  
The Impact

Purpose – The purpose of this paper is to explore the impact of technological change on the internal audit practices and skills requirements for internal auditors in an e-business environment. Design/methodology/approach – Generalist internal auditors and specialist information technology (IT) internal auditors were surveyed online in ten countries, including the USA and the UK which, together, provided the majority of responses. Findings – The results suggest a need for advanced IT-audit techniques in conducting the internal audit function, thereby increasing IT audit skill demands on generalist internal auditors. However, the results show a low confidence among internal auditors about their IT training and a continuing reliance upon IT audit specialists, rather than their own training/retraining. Research limitations/implications – The responses obtained in this study provide insight into both the status quo of the internal audit function, and to the changes that are needed to prepare generalist internal auditors for work in an e-business environment and, while the scale of the study limits the extent to which the findings may be generalized, they are consistent with the literature concerning the changing business environment and with the literature on resistance to change, suggesting that the issues revealed should be of concern. Practical implications – The results reported in this paper are useful to internal auditing educators and regulators in their consideration of the skills needed by generalist internal auditors in e-business environment. Originality/value – This study sheds light on a significantly growing area which remains relatively unexplored in the auditing-related literature, e-business audit. The study provides empirical evidence on challenges facing internal auditors in an e-business environment, thereby serving as a wake-up call, to both internal auditors and the professional bodies representing them, to defend their jurisdictional space against rival professional groups.

scholarly journals The dilemma of internal audit function adaptation

2015 ◽  
Vol 28 (1) ◽  
pp. 93-106 ◽  
Author(s):  
Hany Elbardan ◽  
Maged Ali ◽  
Ahmad Ghoneim
Keyword(s):  
Conceptual Framework ◽  
Internal Audit ◽  
Resource Planning ◽  
Erp Systems ◽  
Control Logic ◽  
Content Type ◽  
Systems Implementation ◽  
Internal Audit Function ◽  
External Pressures ◽  
The Impact

Purpose – The purpose of this paper is to provide a conceptual framework that helps to investigate how the internal audit function (IAF) responds to both the introduction of the control logic of Enterprise Resource Planning (ERP) systems, and corporate governance’s (CG) institutional pressures. Furthermore, the paper aims to articulate the concurrence between the external pressures of CG and internal control logic of ERP systems. Design/methodology/approach – The paper presents a review of the normative literature pertaining to the increase in significance of CG in the light of the worldwide economic crisis. The paper highlights a literature gap related to the lack of studies focusing on the impact of ERP systems implementation on the IAF practices. Findings – The authors articulate institutional theory to formulate a conceptual framework that explains the reciprocal interplay between the macro external governance pressures, micro internal institutional logics inscribed in the ERP systems and their effect on IAF practices and structure within organisations. Research limitations/implications – The paper is conceptual in nature and therefore the proposed framework will be subsequently validated using a qualitative research approach in future research. Practical implications – The conceptual framework would offer the internal auditors some strategies for enabling adaptation to the different internal and external pressures. Also the paper provides a platform for research community to investigate the influence of CG and ERP systems implementation on IAF adaptation. Originality/value – The paper provides a clearer articulation of the various constructs that affect the IAF, which has gained great attention for assuring good CG.

Evidence and leading indicators of change success

2015 ◽  
Vol 31 (10) ◽  
pp. 1-5 ◽  
Author(s):  
Paul Arnold
Keyword(s):  
Organizational Change ◽  
Change Management ◽  
Business Leaders ◽  
Change Strategies ◽  
Change Initiatives ◽  
Content Type ◽  
Corporate Change ◽  
Technological Discontinuities ◽  
The Impact

Purpose – This paper discusses the important issues relating to the management of corporate change and includes an appropriate case study. It will benefit all business leaders, particularly those involved with the development of change strategies and the implementation of those strategies. Paul Arnold’s experience will improve their understanding of change management by providing the tools that will enable them to effectively understand and assess the progress of change initiatives in their organization. Findings – Every organization is subject to change, and virtually, everyone within the organization will be affected by change. Such is the impact of a rapidly evolving marketplace that organizational change management has become a permanent feature of the business landscape. To be effective, organizational change must be able to genuinely transform the business. Yet in the relentless search for new techniques to revolutionize the way things are done, and in the haste to manage technological discontinuities, many organizations fail to adequately develop, communicate and execute their vision for the change. Originality/value – The recently developed Change Index discussed in this paper provides a concrete and clear measurement system that enables management to effectively understand and assess progress of change initiatives in their organization. The paper benefits all business leaders, particularly those involved with the development of change strategies and the implementation of those strategies.

The emerging importance of “homestays” in the Indian hospitality sector

2019 ◽  
Vol 11 (4) ◽  
pp. 458-466
Author(s):  
Sandeep Kulshreshtha ◽  
Ruchika Kulshrestha
Keyword(s):  
Design Methodology ◽  
Secondary Data ◽  
Case Study Method ◽  
Content Type ◽  
Cultural Life ◽  
Emerging Trends ◽  
Hospitality Sector ◽  
The Impact ◽  
Factual Data

Purpose The purpose of this paper is to analyse the potential of “homestays” and also observe the trends related to this emerging concept in India. This paper also discusses various challenges faced by the owners of homestays. Design/methodology/approach This paper is based on an exploratory study that sought to collect factual data about the present scenario and the emerging trends related to homestays. A qualitative case study method was used to analyse the actual practices followed by stakeholders. This paper expresses the viewpoint of the authors on the augmented demand for homestay supported by secondary data published in several academic papers and reports published by various government departments. The author interviewed a number of homestay owners to obtain a first-hand perspective. Findings This paper brings to light the rising trend toward homestays, the benefits of homestay tourism from the perspective of homestay stakeholders (both tourists and owners) and the impact on economic, social and cultural life, as a result of growth in the homestay concept. Originality/value The current level of discussion about homestays is limited, as there are relatively few prior studies reported in the literature.

scholarly journals Earnings quality and audit attributes in high concentrated ownership market

2016 ◽  
Vol 16 (2) ◽  
pp. 377-399 ◽  
Author(s):  
Ahmed Hussein Al-Rassas ◽  
Hasnah Kamardin
Keyword(s):  
Audit Quality ◽  
Earnings Quality ◽  
Internal Audit ◽  
Resource Dependence Theory ◽  
Ownership Concentration ◽  
Content Type ◽  
Internal Audit Function ◽  
Financial Expertise ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this study is to examine the effect of the audit committee (AC) independence, financial expertise, internal audit function, audit quality and ownership concentration on earnings quality (EQ) and, consequently, ascertain whether the AC’s independence and financial expertise has a moderating effect on the relationship between internal audit function and EQ. Design/methodology/approach The study sample is 508 firms listed on the Main Market of Bursa Malaysia (formerly known as Kuala Lumpur Stock Exchange) for the years 2009 to 2012. EQ was measured using two modified Jones models of discretionary accruals. Findings The findings reveal that the independence of AC and investment in internal audit function, as well as the Big4 audit firm, are related to greater EQ. Ownership concentration is found to be associated with lower EQ. The study provides evidence that AC’s independence moderates the relationship between internal audit function (investment in and sourcing arrangements of internal audit function) and EQ. It also shows that AC’s financial expertise moderates the relationship between sourcing arrangements of internal audit function and EQ. Practical implications This study extends the prior related literature by examining the AC’s independence and financial expertise as moderating variables on the relationship between internal audit function and EQ. Social implications Policymakers might use the findings regarding EQ in relation to governance practices, to recognize the important roles played by the AC’s independence and financial expertise on the effectiveness of internal audit function with EQ. Originality/value This study uses the agency theory and resource dependence theory to provide empirical evidence on the impact of internal audit function and AC on EQ in the ownership concentration environment.

Audit committee, internal audit function and earnings management: evidence from Jordan

2019 ◽  
Vol 27 (1) ◽  
pp. 72-90 ◽  
Author(s):  
Ebraheem Saleem Salem Alzoubi
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Audit Committee ◽  
Internal Audit ◽  
Reporting Quality ◽  
Discretionary Accruals ◽  
Least Squares Regression ◽  
Content Type ◽  
Internal Audit Function ◽  
The Impact

PurposeThis study aims to examine the influence of audit committee existence and internal audit function on the earnings management of companies.Design/methodology/approachThis paper uses generalised least squares regression to investigate the influence of audit committee existence, internal audit function and the interaction of these two mechanisms on earnings management for a sample of 86 industrial companies listed on the Amman Stock Exchange over a four-year period from 2007 to 2010. The paper uses the extent of discretionary accruals as the proxy for earnings management.FindingsThis paper finds that audit committee existence and the internal audit function reduce the level of earnings management. The number of meetings between the audit committee and internal audit function also reduces discretionary accruals. Overall, this study finds that audit committee existence and internal audit function decrease earnings management and improve the financial reporting quality.Originality/valueThe main contribution of this study is that it investigates the combined effects of audit committee existence and internal auditors on earnings management. Furthermore, this study is the initial paper to examine the impact of audit committee and internal audit on earnings management in Jordan.

scholarly journals The puzzle of internal audit function budget toward specialist auditor choice and audit fees

2019 ◽  
Vol 34 (2) ◽  
pp. 208-243 ◽  
Author(s):  
Adel Ali AL-Qadasi ◽  
Shamharir Abidin ◽  
Hamdan Amer Al-Jaifi
Keyword(s):  
Audit Quality ◽  
Internal Audit ◽  
Positive Association ◽  
Audit Fees ◽  
Least Square ◽  
Family Ownership ◽  
Content Type ◽  
Internal Audit Function ◽  
The Impact ◽  
Industry Specialist

PurposeThis study is motivated by the lack of internal audit function (IAF) research and by the call for research on the impact of dominant owners such as family shareholders on audit fees and the demand for audit quality. This study aims to examine the impact of the IAF budget on the selection of industry-specialist auditors and on audit fees, particularly in companies with family-controlled shareholders, a feature unique to Malaysia.Design/methodology/approachData of Malaysian-listed companies during the period 2009-2012 are used. To examine the relationships, logit and ordinary least square regressions are used. Several additional analyses are conducted to assess the robustness of the main results, including alternative measures of specialist auditor and family ownership, endogeneity problems and self-selection bias.FindingsThe results show that the IAF budget is positively related to hiring industry-specialist auditors and audit fees. However, family companies are less likely to support the positive association between IAF costs and engage specialist auditors than non-family companies. In addition, a complementary association between the costs of IAF and audit fees for both family and non-family companies was found. Finally, the results show that there is a negative association between family ownership and the ratio of IAF costs to audit fees, suggesting that family companies rely more upon external auditing than internal auditing.Originality/valueThe contribution of this study is to provide an empirical evidence about the tradeoff between IAF and both industry-specialist auditors and audit fees with considering the moderating impact of family-ownership shareholdings. This issue is yet to be examined, and it provides implications for policymakers and practitioners, as it offers insights into the importance of investing in IAF toward hiring industry-specialist auditors and pricing the audit services.

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.

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