scholarly journals External and internal auditors’ perceptions on compliance with internal audit standards and practices: Spirit versus letters?

2021 ◽  
Vol 18 (3) ◽  
pp. 31-45
Author(s):  
Mohamed Hegazy ◽  
Marwa Farghaly

This paper investigates differences between the external auditors’ (EA) and the internal auditors’ (IA) perceptions of the degree of usage and compliance with the Institute of Internal Auditors (IIA) International Standards for the Professional Practices of Internal Auditing (Standards) by internal audit departments. The research uses survey-based questionnaires sent to IAs and EAs of the listed firms registered in an emerging market and included interviews with individuals involved in the internal auditing function (IAF) and EAs. The survey analyzes issues relating to IAF compliance with IIA standards summarized in the Common Body of Knowledge Database (CBOK). Social identity and stakeholders’ theories are used to explain the development of the research hypotheses in relation to IAF. The research indicates that the rates of conformance for the selected individual standards vary significantly among respondents. The findings provide evidence that there are low levels of interactions between IAs and EAs in emerging markets. This study is considered among the first that surveys the status of the use of the professional IIA standards in listed firms in an emerging economy. It also investigates the importance of ensuring that the “spirit” of the IIA standards is adhered to rather than the mere compliance with their “letters”. The paper emphasizes the gap still existing in practice between IAs and EAs in relation to their interactions, communication, and cooperation to enhance the quality of the IAF activities and related financial reporting. The research study relied on a sample of companies to investigate the level of compliance with IIAs standards and selected a limited number of the IIA standards for usage and compliance assessments.

2018 ◽  
Vol 13 (1) ◽  
pp. 60-74 ◽  
Author(s):  
Ahmed Atef Oussii ◽  
Neila Boulila Taktak

Purpose The purpose of this paper is to examine whether coordination between external auditors and the internal audit function affect the timeliness of audit reports as proxied by audit delay. Design/methodology/approach This study uses a survey of chief internal auditors from Tunisian listed companies to analyze the extent of coordination between IAFs and external auditors. Data spanning a four year period (2011-2014) was collected for 53 listed companies. Further, regression analysis was used to test the hypothesis. Findings Results indicate that greater coordination between internal and external auditors results in timelier financial reporting. Practical implications Overall, the study makes several important contributions. Findings provide important insights that an IAF acts as a valuable resource to external auditors. The results should be of interest to managers, external auditors and the Tunisian Financial Market Council. Originality/value This paper is one of few studies which have examined the association between internal-external audit coordination and timeliness of audit reports in an emerging market. The study makes a meaningful contribution to the corporate governance literature by investigating the influence of internal audit assistance on the delivery of timely audited financial information to the capital market. Results also have policy implications for Tunisian regulators with respect to the promotion of internal auditing best practices.


2018 ◽  
Vol 7 (4.38) ◽  
pp. 1338
Author(s):  
Sunita Lylia Hamdan ◽  
Nahariah Jaffar ◽  
Ruzanna Ab Razak

This study aims to examine the effect of interaction between internal auditor and audit committee on fraud detection in Malaysia.  Specific interaction is firstly; audit committee approving the appointment of chief audit executive, the evaluation of chief audit executive, the dismissal of chief audit executive, the internal audit budget and the internal audit plan or program.  Secondly, audit committee’s involvement in reviewing internal auditor’s work specifically; providing input for the internal audit plan, reviewing the results of internal auditing related to financial reporting, reviewing the results of internal auditing related to internal control, reviewing the results of internal auditing related to compliance with laws and regulation, reviewing the internal audit involvement in management responses to internal audit suggestions, reviewing the difficulties or scope restrictions encountered by internal auditors and reviewing the coordination between internal auditors and external auditors.  Survey questionnaires were mailed to internal auditors attached to 782 companies listed on Bursa Malaysia’s main market. The results of this study suggest that involvement of audit committee in approving chief audit executives’ matters is insignificant on internal auditors’ contribution to fraud detection.  However, audit committee’s involvement in reviewing internal auditors’ work significantly influence the internal auditors’ contribution in fraud detection.       


2020 ◽  
Vol 6 (3) ◽  
pp. 123-136
Author(s):  
Miloš Jokić

The top management's decision-making in an agricultural enterprise should be based on valid information gathered within the enterprise itself. Collecting timely business information is done daily by all sectors of the enterprise. Merely improving the security of information gathering and the safety of all parts of the enterprise is a task performed by trained internal control and internal audit personnel in the company, appointed by top management. In performing their duties on a regular basis, internal auditors should apply procedures and methodologies that are consistent with International Standards on the Professional Practice of Internal Auditing in their work. The aim of the paper is to emphasize the importance of implementing the adopted methodology of work of internal auditors in agricultural companies. The author points out those standards that are in line with best audit practice should be applied in internal audit work. The contribution of the study authors is to emphasize the importance of applying the internal audit profession in the regular operation of agricultural enterprises, which is in line with the general objective of improving the regular business operation.


2018 ◽  
Vol 14 (2) ◽  
pp. 19-44
Author(s):  
Anna Margrét Jóhannesdóttir ◽  
Stina Nielsson Kristiansson ◽  
Niina Sipiläinen ◽  
Riikka Koivunen

The subject of this paper is a comparative study about the current status of internal audit within the public sector in the Nordic countries. The aim is to understand the basis and recognize trends in the development of internal audit in the public sector in these countries. The status of internal audit within each country, Denmark, Finland, Iceland, Norway and Sweden, is presented and also the regulatory basis, laws and regulations, for internal audit and the main challenges that internal auditing faces. Finally, the opportunities for further development of internal audit in the public sector are addressed. The International Standards for Internal Auditing are well recognized and in use in all the countries. There are differences between these countries in their approach of the regulatory framework for internal audit and the arrangement of the operation of internal audit units. Therefore, further development of internal auditing should be pursued in cooperation and to harmonize the regulatory bases in these countries and to learn from each other when implementing internal audit in the public sector.


2015 ◽  
Vol 30 (1) ◽  
pp. 143-156 ◽  
Author(s):  
Geoffrey D. Bartlett ◽  
Joleen Kremin ◽  
K. Kelli Saunders ◽  
David A. Wood

SYNOPSIS While the internal audit function (IAF) plays a critical role in organizations, it faces challenges in finding sufficient numbers of high-quality job applicants to fill its ranks. The results of two experiments suggest that practicing external auditors are twice as likely to apply for positions that are labeled as accounting positions rather than either in-house or outsourced internal audit positions. The results also suggest that external auditors have negative perceptions of the profession and work environment of internal auditors—especially in-house internal auditors relative to outsourced internal auditors—and are more likely to recommend that mediocre rather than top students apply to work in internal auditing. We also provide survey results from experienced external auditors about aspects of internal auditing that may be improved to make it a more attractive career option. Taken together, the results suggest internal auditing faces significant hiring challenges, but also offer ways to mitigate these challenges.


2019 ◽  
Vol 17 (3) ◽  
pp. 498-518 ◽  
Author(s):  
Abdulaziz Alzeban

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.


Auditor ◽  
2019 ◽  
Vol 5 (1) ◽  
pp. 20-24 ◽  
Author(s):  
И. Дымова ◽  
I. Dymova

The article presents the analysis of possible variants of application of the external auditors the results of the activities of the internal audit service from the perspective of the recommendations of the international standards on auditing. The issues of practice of Russian auditors to determine the degree of participation of internal auditors in their work are touched upon. The author's version of the test to assess the quality and objectivity of the internal audit service of the audited entity by external auditors is proposed.


2014 ◽  
Vol 34 (1) ◽  
pp. 25-58 ◽  
Author(s):  
Mina Pizzini ◽  
Shu Lin ◽  
Douglas E. Ziegenfuss

SUMMARY The number of days required to complete financial statement audits (i.e., audit delay) increased significantly with the implementation of Section 404 of the Sarbanes-Oxley Act (SOX, U.S. House of Representatives 2002). As firms' in-house experts on internal control, Internal Audit Functions (IAFs) can substantially affect financial reporting processes and, thus, audit delay. Internal auditors can help management maintain strong internal controls and assist external auditors with financial statement audits. Accordingly, we investigate whether IAF quality and the IAF's contribution to financial statement audits affect audit delay in a sample of 292 firm-year observations drawn from the pre-SOX 404 period. Using survey data from the Institute of Internal Auditors (IIA), we develop a comprehensive proxy for IAF quality; we measure different aspects of IAF quality (e.g., competence, objectivity, fieldwork rigor); and we measure the nature of the IAF's contribution to financial statement audits (independently performed work and direct assistance). Results indicate audit delay is decreasing in IAF quality, and this decrease is driven by IAF competence and fieldwork quality. Delay is four days shorter when IAFs contribute to external audits by independently performing relevant work. High-quality IAFs contribute to financial statement audits by independently performing relevant work, while low-quality IAFs provide direct assistance.


2009 ◽  
Vol 84 (4) ◽  
pp. 1255-1280 ◽  
Author(s):  
Douglas F. Prawitt ◽  
Jason L. Smith ◽  
David A. Wood

ABSTRACT: Internal auditors perform work that is relevant to their host entities' financial reporting processes; yet, little research attention has focused on the effects of internal auditing on companies' external financial reporting. Using a unique and previously unavailable data set, we investigate the relation between internal audit function (IAF) quality and earnings management. We measure IAF quality using a composite measure comprising six individual components of IAF quality based on SAS No. 65, which guides external auditors in assessing the quality of an IAF with respect to its role in financial reporting. Earnings management is measured using two separate proxies: (1) abnormal accruals and (2) the propensity to meet or barely beat analysts' earnings forecasts. We find evidence that IAF quality is associated with a moderation in the level of earnings management as measured by both proxies.


2020 ◽  
Vol 34 (4) ◽  
pp. 57-74
Author(s):  
Giuseppe D'Onza ◽  
Gerrit Sarens ◽  
Steven DeSimone

SYNOPSIS We identify several dimensions of the internal audit function (IAF) as a composite measure of IAF maturity by using a Principal Components Analysis (PCA). Our data are from the Common Body of Knowledge in Internal Auditing (CBOK) 2015 dataset. We find confirmation for our four hypotheses, where the support the IAF receives from the board, diversified training programs, the use of the IAF as a management training ground (MTG), and the maturity of the risk management (RM) system are significantly related to IAF maturity. Our hypotheses are verified both at a global and a regional level. Regarding control variables, IAF age, chief audit executive (CAE) tenure, CAE certifications, and unlisted companies are also significant at a global level. We discuss implications of these findings for future practice and research. Data Availability: Please contact the Institute of Internal Auditors Research Foundation.


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