A Post-SOX Examination of Factors Associated with the Size of Internal Audit Functions

2012 ◽  
Vol 26 (2) ◽  
pp. 167-191 ◽  
Author(s):  
Urton L. Anderson ◽  
Margaret H. Christ ◽  
Karla M. Johnstone ◽  
Larry E. Rittenberg
Keyword(s):  
Leadership Development ◽  
Audit Committee ◽  
Internal Audit ◽  
Data Availability ◽  
Private Companies ◽  
Public And Private ◽  
Internal Auditors ◽  
Factors Associated ◽  
Internal Audit Function ◽  
Prior Literature

SYNOPSIS This study develops and tests a conceptual model articulating factors associated with internal audit function size in the post-SOX era. These factors include audit committee characteristics, internal audit characteristics and mission, internal audit activities performed by others (including outsourced providers and other divisions within the organization), and organization characteristics. Results from a survey of 173 public and private companies reveal that internal audit function size is positively associated with: (1) better audit committee governance, (2) greater organizational experience of the chief audit executive, (3) missions involving IT auditing, (4) the use of sophisticated audit technologies, (5) the use of a staffing model in which internal audit is used for rotational leadership development, (6) organization size, and (7) the number of foreign subsidiaries that the organization possesses. Further, internal audit function size is inversely associated with: (1) the percentage of internal audit employees that are Certified Internal Auditors, and (2) the extent of assurance and compliance activities outsourced to outsiders. These results contribute to prior literature on internal audit function size by considering a variety of factors that are associated with internal audit function size in the contemporary era. Data Availability: Contact the authors.

Factors associated with security/cybersecurity audit by internal audit function

2018 ◽  
Vol 33 (4) ◽  
pp. 377-409 ◽  
Author(s):  
Md. Shariful Islam ◽  
Nusrat Farah ◽  
Thomas F. Stafford
Keyword(s):  
Audit Committee ◽  
Internal Audit ◽  
Mixed Effect ◽  
Content Type ◽  
Internal Auditors ◽  
Factors Associated ◽  
Security Breaches ◽  
Internal Audit Function ◽  
Enterprise Risk

Purpose The purpose of the study is to explore the factors associated with the extent of security/cybersecurity audit by the internal audit function (IAF) of the firm. Specifically, the authors focused on whether IAF/CAE (certified audit executive [CAE]) characteristics, board involvement related to governance, role of the audit committee (or equivalent) and the chief risk officer (CRO) and IAF tasked with enterprise risk management (ERM) are associated with the extent to which the firm engages in security/cybersecurity audit. Design/methodology/approach For analysis, the paper uses responses of 970 CAEs as compiled in the Common Body of Knowledge database (CBOK, 2015) developed by the Institute of Internal Auditors Research Foundation (IIARF). Findings The results of the study suggest that the extent of security/cybersecurity audit by IAF is significantly and positively associated with IAF competence related to governance, risk and control. Board support regarding governance is also significant and positive. However, the Audit Committee (AC) or equivalent and the CRO role are not significant across the regions studied. Comprehensive risk assessment done by IAF and IAF quality have a significant and positive effect on security/cybersecurity audit. Unexpectedly, CAEs with security certification and IAFs tasked with ERM do not have a significant effect on security/cybersecurity audit; however, other certifications such as CISA or CPA have a marginal or mixed effect on the extent of security/cybersecurity audit. Originality/value This study is the first to describe IAF involvement in security/cybersecurity audit. It provides insights into the specific IAF/CAE characteristics and corporate governance characteristics that can lead IAF to contribute significantly to security/cybersecurity audit. The findings add to the results of prior studies on the IAF involvement in different IT-related aspects such as IT audit and XBRL implementation and on the role of the board and the audit committee (or its equivalent) in ERM and the detection and correction of security breaches.

External Auditors' Involvement in the Internal Audit Function's Work Plan and Subsequent Reliance Before and After a Negative Audit Discovery

2016 ◽  
Vol 35 (4) ◽  
pp. 159-173 ◽  
Author(s):  
Byron J. Pike ◽  
Lawrence Chui ◽  
Kasey A. Martin ◽  
Renee M. Olvera
Keyword(s):  
Internal Control ◽  
Internal Audit ◽  
Internal Controls ◽  
Professional Standards ◽  
Data Availability ◽  
Internal Auditors ◽  
External Auditors ◽  
Internal Audit Function ◽  
Anchoring Bias ◽  
Before And After

SUMMARY To reduce redundancies and increase efficiency in the evaluation of internal controls (PCAOB 2007, 402–403), professional standards encourage coordination between external auditors and their clients' internal audit function (IAF). Recent surveys of internal auditors find that a component of this coordination is external auditors' involvement in developing the IAF's audit plans. Nevertheless, it is not known how such involvement affects external auditors' reliance on the internal control test work of the IAF, either before or after a negative audit discovery. Based on an experiment with 107 experienced auditors, we find that external auditors involved in the development of the IAF's audit plan perceive the IAF as more objective and that both objectivity and involvement contribute to these auditors' placing more reliance on the IAF as compared to external auditors with no involvement. This initial reliance results in the involved auditors' proposing reductions to the audit budget and re-performing less of the IAF's work. Consistent with an anchoring bias, we find that involvement leads to external auditors' continuing to place greater reliance on the IAF's work, even after they become aware of a negative audit discovery that should not have occurred had the client's controls been effective. Data Availability: Data are available from the authors on request.

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.

Internal audit function, audit committee effectiveness and accountability in the Ugandan statutory corporations

2018 ◽  
Vol 16 (1) ◽  
pp. 138-157 ◽  
Author(s):  
Juma Bananuka ◽  
Stephen Korutaro Nkundabanyanga ◽  
Irene Nalukenge ◽  
Twaha Kaawaase
Keyword(s):  
Audit Committee ◽  
Sampling Error ◽  
Internal Audit ◽  
Hierarchical Regression ◽  
Cross Sectional ◽  
Content Type ◽  
Internal Auditors ◽  
Internal Audit Function ◽  
Correlational Data ◽  
Finance Officers

Purpose The purpose of this study is to investigate the contribution of internal audit function and audit committee effectiveness on accountability in statutory corporations (SCs). Design/methodology/approach This study is cross sectional and correlational. Data have been collected through a questionnaire survey of 52 SCs in Uganda through their Chief Internal Auditors and Chief Finance Officers. Data have been analysed using Statistical Package for Social Sciences. Findings The internal audit function significantly contributes to accountability of SCs in Uganda and audit committee effectiveness is not where effective internal audit is present in such organisations. However, audit committee effectiveness significantly contributes to accountability when an internal audit function is not present. Research limitations/implications The use of hierarchical regression is prone to problems associated with sampling error. However, the likelihood of these problems is mitigated by the interface with data. Originality/value Whereas hitherto both internal audit function and audit committee effectiveness had been viewed as explanations of accountability, this study only confirms the internal audit function as a significant predictor of SCs’ accountability relative to audit committee effectiveness.

scholarly journals The Contribution of the Internal Audit Function in Risk Management

2017 ◽  
Vol 8 (3) ◽  
pp. 178
Author(s):  
Faten Hanna Kerazan
Keyword(s):  
Risk Management ◽  
Internal Audit ◽  
Professional Organizations ◽  
Professional Certification ◽  
Public And Private ◽  
Internal Auditors ◽  
Internal Audit Function ◽  
Private Banks ◽  
Regulatory Bodies ◽  
Training Courses

This study aimed to identify the contribution of internal audit in risk management in Syrian public and private banks, the questionnaire was used in collecting the initial data, which was distributed to a sample of board of directors and executives in these banks.The study found that there is a contribution to the internal audit function in risk management in all Syrian public and private banks and there are no statistically significant differences on this contribution.The study recommended of the need to conduct training courses for workers in the internal audit function and issue instructions and necessary legislations to regulate the activity of internal audit in banks, a committee of internal audit must be formed within the Association of Chartered Accountants in Syria, where its mission is to the development of internal auditors and the need for cooperation of professional organizations of accounting, auditing and regulatory bodies in Syria to establish an association for internal auditors to qualify them and give them a professional certification to carry out their roles under the new framework for exercising of the profession that guarantees to provide the necessary advice and guidance for them to bring the profession up to the required level.

Correlates of Co-Sourcing/Outsourcing of Internal Audit Activities

2013 ◽  
Vol 32 (3) ◽  
pp. 69-85 ◽  
Author(s):  
Mohammad Abdolmohammadi
Keyword(s):  
Audit Committee ◽  
Value Added ◽  
Internal Audit ◽  
Data Availability ◽  
Control Variables ◽  
Multinational Organizations ◽  
Internal Auditors ◽  
For Profit ◽  
Governmental Organizations ◽  
Committee Involvement

SUMMARY: I use responses from 1,059 chief audit executives (CAEs) of organizations located in Australia, Canada, New Zealand, South Africa, the U.K./Ireland, and the U.S. to investigate several correlates of co-sourcing and/or outsourcing (hereafter, simply “outsourcing”) of internal audit activities. An important finding of the study is that audit committee involvement is positively and significantly associated with outsourcing of internal audit activities. Interactions of audit committee involvement with organization size and location generally indicate that medium and large international/multinational organizations with audit committee involvement outsource more than medium and large local/national organizations with no audit committee involvement. Analysis of control variables produces significance for an inverse relationship between outsourcing and value-added activities of the internal audit function, and for positive relationships between outsourcing and missing skill set and audit staff vacancies. Other control variables, such as CAE age, college degree (graduate/undergraduate), major (accounting versus others), internal audit certification, and regular meetings with the audit committee do not show significant associations with outsourcing. Also, country of residence (U.S. versus other Anglo-culture countries) is not significant, but for-profit organizations outsource significantly more of their internal audit activities than not-for-profit/governmental organizations. Data Availability: Please contact the Institute of Internal Auditors Research Foundation, which owns the CBOK (2010) database used in this study.

The Effect of Using the Internal Audit Function as a Management Training Ground on the External Auditor's Reliance Decision

2011 ◽  
Vol 86 (6) ◽  
pp. 2131-2154 ◽  
Author(s):  
William F. Messier ◽  
J. Kenneth Reynolds ◽  
Chad A. Simon ◽  
David A. Wood
Keyword(s):  
Internal Audit ◽  
Management Training ◽  
Audit Fees ◽  
Data Availability ◽  
External Audit ◽  
Internal Auditors ◽  
External Auditors ◽  
Internal Audit Function ◽  
Management Positions ◽  
The Many

ABSTRACT This study examines how using the internal audit function (IAF) as a management training ground (MTG) affects external audit fees and the external auditors' perceptions of the IAF. Over half of all companies that have an IAF specifically hire internal auditors with the purpose of rotating them into management positions (or cycle current employees into the IAF for a short stint before promoting them into management positions). Using archival data, we find that external auditors charge higher fees to companies that use the IAF as a MTG. Using an experiment, we provide evidence as to why fees are higher. Specifically, we find that external auditors perceive internal auditors employed in an IAF used as a MTG to be less objective but not less competent than internal auditors employed in an IAF not used as a MTG. These results have important implications for the many companies that use their IAF as a MTG. Data Availability: Contact the authors. Data provided by the Institute of Internal Auditors Research Foundation are subject to restrictions.

Serving Two Masters: The Association between Audit Committee Internal Audit Oversight and Internal Audit Activities

2010 ◽  
Vol 24 (1) ◽  
pp. 1-24 ◽  
Author(s):  
Lawrence J. Abbott ◽  
Susan Parker ◽  
Gary F. Peters
Keyword(s):  
Audit Committee ◽  
Internal Audit ◽  
Positive Association ◽  
Internal Controls ◽  
Fiscal Year ◽  
Composite Measure ◽  
Internal Auditors ◽  
Internal Audit Function ◽  
Fortune 1000 ◽  
Budgetary Control

SYNOPSIS: In this paper, we investigate the association between the audit committee’s oversight of the internal audit function (IAF) and the nature of IAF activities. The importance of internal controls and of the roles of both the audit committee and the internal audit function in monitoring control activities have grown in recent years. Despite the importance of these topics, relatively little regulatory or best practices guidance addresses the distribution of IAF activities and amount of audit committee involvement with the IAF. We hypothesize that when the balance of oversight over the IAF lies with the audit committee (vis-a`-vis management), the committee will steer the IAF toward a more internal-controls-oriented focus. Our hypothesis is based on the existing practice guidance in this area and the relative incentives of management and the audit committee. To test our hypothesis, we survey 134 chief internal auditors from Fortune 1000 firms regarding the amount of internal audit resources allocated across internal audit activities in fiscal year 2005. We then construct a composite measure of audit committee oversight contingent on the relative control that the audit committee has over IAF vis-a`-vis management. Our composite measure is derived from three key facets of the audit committee/internal audit relationship: reporting duties, termination rights, and budgetary control. Consistent with our hypothesis, we document a strong, positive association between our audit committee oversight variable and the amount of IAF budget allocated to internal-controls-based activities.

scholarly journals The Role of Internal Auditors in Private and Public Organizations of Jimma Zone Selected Weredas, Ethiopia

2018 ◽  
Vol 6 (6) ◽  
Author(s):  
Amina Ahmed Muhammed
Keyword(s):  
Audit Committee ◽  
Secondary Data ◽  
Public Organizations ◽  
Public Organization ◽  
Private Companies ◽  
Public And Private ◽  
Internal Auditors ◽  
Jimma Zone ◽  
Private And Public

The objective of this study is to assess the role of internal auditors in both private and public organizations found in limma zone purposively selected weredas. Both primary and secondary data have been used. Totally 128 self administered questionnaires were distributed to members of the audit committee or equivalent found in both the public and private enterprises in the study area. From this 100 (78 % response rate) questionnaires were completely filled and returned (77questionnaires from public organizations and 23 from the private companies). Collected data was edited, coded, and entered into the computer using SPSS 20 and was then scored. Data analyses are conducted through a descriptive statistics to provide details regarding the roles played by internal auditors. The major finding of the research shows that some of the private and public organization in the case study did not have an audit committee, audit charter and the members of the audit committee did not have a professional certificate in the field. On average, even though the chief audit executive and the internal auditors of both the private and public organization found in jimma zone selected weredas are playing different activities in the organizations, as compared to the standard, they are not playing their role as expected. Based on these findings the organizations are recommended to enhance the role of internal auditors through training of staff in accredited institutes at home and abroad, preparing a comprehensive charter that incorporate all the activities of internal auditing.

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