Audit Committee Composition, “Gray Directors,” and Interaction with Internal Auditing

2001 ◽  
Vol 15 (2) ◽  
pp. 105-118 ◽  
Author(s):  
K. Raghunandan ◽  
Dasaratha V. Rama ◽  
William J. Read
Keyword(s):  
Audit Committee ◽  
Empirical Support ◽  
Internal Audit ◽  
Audit Committees ◽  
Internal Auditing ◽  
Public Companies ◽  
Internal Auditor ◽  
Blue Ribbon ◽  
Internal Auditors ◽  
Governance Process

The functioning of corporate audit committees was criticized in recent years by the Treadway Commission, the Public Oversight Board, the Kirk Panel, and the SEC Chairman. In response, the NYSE and NASD sponsored the Blue Ribbon Committee (BRC) on Improving the Effectiveness of Corporate Audit Committees. The BRC Report includes recommendations aimed at strengthening director independence and qualifications, and highlights the role of internal auditors in assisting audit committees in the corporate governance process. Moreover, the first three recommendations of the BRC relate to audit committee composition: absence of inside or “gray” directors, and presence of a member with financial expertise. This study examines the association between audit committee composition and the committee's interaction with internal auditing. Our results, based on responses from chief internal auditors of 114 public companies, indicate that committees comprised solely of independent directors and with at least one member having an accounting or finance background are more likely to (1) have longer meetings with the chief internal auditor; (2) provide private access to the chief internal auditor; and (3) review internal audit proposals and results of internal auditing. These findings provide empirical support for the BRC's recommendations related to audit committee composition.

scholarly journals The Effects of Interaction between Internal Auditor and Audit Committee on Fraud Detection in Malaysia

2018 ◽  
Vol 7 (4.38) ◽  
pp. 1338
Author(s):  
Sunita Lylia Hamdan ◽  
Nahariah Jaffar ◽  
Ruzanna Ab Razak
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
Audit Committee ◽  
Specific Interaction ◽  
Fraud Detection ◽  
Internal Audit ◽  
Internal Auditing ◽  
Internal Auditor ◽  
Internal Auditors ◽  
External Auditors

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.       

scholarly journals Job satisfaction of the internal auditor – A field study on the internal auditors in the Kingdom of Saudi Arabia –: الرضا الوظيفي للمراجع الداخلي – دراسة ميدانية على المراجعين الداخليين في المملكة العربية السعودية –

2021 ◽  
Vol 5 (3) ◽  
Author(s):  
Gihan Taha Khalil
Keyword(s):  
Job Satisfaction ◽  
Saudi Arabia ◽  
Audit Committee ◽  
Internal Audit ◽  
Primary Source ◽  
Internal Auditing ◽  
Kingdom Of Saudi Arabia ◽  
Internal Auditor ◽  
Internal Auditors ◽  
The Relationship

The present study aimed to identify the extent of job satisfaction for the internal auditor in the Kingdom of Saudi Arabia where the relationship of the internal auditor with the organization is a complex relationship where on the one hand they must have a sense of independence and objectivity in the performance of their responsibilities and on the other hand their work depends on those who review their work. The population of study are members of the Saudi Association of Internal Auditors. The researcher used the electronic questionnaire as a tool to collect data that was distributed to and the researcher has reached 330 questionnaires. The results of this study contribute to understanding the factors affecting job satisfaction of the internal auditor in the Kingdom of Saudi Arabia in order to find ways to improve and development career and retain professional competencies. The study concluded that the professional and organizational conflict decreased, the study found 55.1% indicating that the internal audit report was submitted to the audit committee, and the objectives of the internal audit agreed with the goals of the organization, as the sample items agreed that salaries are the primary source for obtaining income, and 57.6% asserted that they do not match the volume of work that Assigned by the internal auditor. The study recommended that professional organizations and associations should provide greater support to the profession of internal auditing and the utility of the role of the internal auditor more in line with the internal auditing standards issued by the American Institute of Internal Auditors and providing objective criteria for evaluating the performance of the internal auditor and reformulating the salary structure in proportion to the effort made and developing incentive methods, as well as strengthening, developing and improving the relationship with the internal auditor through appreciation and continuous cooperation and notifying them that they belong to the organization and not working in it only.

scholarly journals Internal Audit Issues Facing Corporate Audit Committees

2011 ◽  
Vol 25 (2) ◽  
Author(s):  
Arnold Schneider
Keyword(s):  
Audit Committee ◽  
Internal Audit ◽  
Audit Committees ◽  
Internal Auditing ◽  
Font Size ◽  
Internal Auditor ◽  
Internal Resources ◽  
Personnel Decisions ◽  
Research Findings ◽  
Audit Standards

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">The paper reviews and analyzes professional audit standards, audit committee charters, and research findings pertaining to audit committee oversight of internal auditing and assistance obtained from internal auditing.<span style="mso-spacerun: yes;">&nbsp; </span>Issues examined are the development of internal audit charters, authorizing the acquisition of internal resources, reviewing and approving internal audit plans, making personnel decisions concerning the chief internal auditor, holding meetings with the chief internal auditor, and requesting special investigations from internal auditing.</span></span></p>

Factors Associated with U.S. Public Companies' Investment in Internal Auditing

2005 ◽  
Vol 19 (2) ◽  
pp. 69-84 ◽  
Author(s):  
Joseph V. Carcello ◽  
Dana R. Hermanson ◽  
K. Raghunandan
Keyword(s):  
Audit Committee ◽  
Internal Audit ◽  
Cash Flows ◽  
Financial Service ◽  
Company Size ◽  
Internal Auditing ◽  
Public Companies ◽  
Ability To Pay ◽  
Factors Associated ◽  
Operating Cash Flows

Internal auditing has been the focus of much attention in recent years. This study examines factors associated with U.S. public companies' investment in internal auditing. Data from a survey administered to Chief Audit Executives of midsized U.S. public companies were supplemented with publicly available data. Based on data from 217 companies, the results indicate that total internal audit budgets (inhouse plus outsourced portions) are related to several factors associated with company risk, ability to pay for monitoring, and auditing characteristics. Specifically, we find evidence that internal audit budgets are positively related to company size, leverage, financial, service, and utility industries, relative amount of inventory, operating cash flows, and audit committee review of the internal audit budget. Total internal audit budgets are negatively related to the percentage of internal auditing that is outsourced. This study contributes to our understanding of internal audit services, and it allows companies to benchmark their investment in internal auditing.

scholarly journals Peran Internal Audit dalam Implementasi Enterprise Risk Management berupa Pelaporan Kerusakan Prosedur Risiko.

2020 ◽  
Vol 14 (2) ◽  
Author(s):  
Indarti Indarti
Keyword(s):  
Risk Management ◽  
Internal Audit ◽  
Enterprise Risk Management ◽  
Audit Committees ◽  
Corporate Risk Management ◽  
Internal Auditor ◽  
Internal Auditors ◽  
Enterprise Risk ◽  
Management Procedures ◽  
Corporate Risk

Implementation of Enterprise Risk Management (ERM) by Internal Audit in an orga-nization or company becomes important because Internal Audit is expected to help the organization achieve its objectives by approaching systematic and discipline to evaluate and improve the effectiveness of risk management, control, and governance process. As for which affects it is the involvement of internal auditors, the relation-ship of the audit committee with the internal auditor, and ERM.This study aims to analyze the involvement of Internal Audit in Enterprise Risk mana-gement implementation. Internal auditors should assist both management and audit committees in risk management responsibilities and supervisory roles by examining, evaluating, reporting and recommending improvements to the adequacy and effec-tiveness of risk management processes. An interesting issue is whether internal auditors involved in corporate risk management have a link to the willingness of internal auditors to report to the audit committee.The population in this study are the internal auditors and audit committees who working in companies manufacturing and financial services. The reason for determining the company is because the researcher wants to know how internal audit is involved in ERM implementation on that entity. The sample used in this research is internal auditor at private company and at Banking in this case internal auditor at local bank.The analytical method used is multiple regression analysis with SPSS version 23 pro-gram. The analysis technique used in this research is descriptive statistical analysis, classical assumption test, F-statistic hypothesis test to test influence together with 5% confidence level and use t-statistics to test partial regression coefficients. This re-search was conducted to analyze how much influence the role of Internal Audit in applying Enterprise Risk Management in the implementation of Audit.The result of this research is that the high level of internal auditor involvement in Enterprise Risk management implementation has no significant and significant im-pact on reporting of damage to risk management procedures. This indicates that the role of internal auditors in corporate risk management does not affect the reporting of damage to corporate risk management procedures. While the characteristics of strong relationships between internal auditors and audit committees positively and significantly influence the reporting of risk procedures, this indicates that internal audits that have strong internal audit-audit committee relationships strongly support internal auditors who have high involvement to report damage Greater risk procedures.

Drivers of stakeholders’ view of internal audit effectiveness

2018 ◽  
Vol 33 (1) ◽  
pp. 90-114 ◽  
Author(s):  
Lourens Erasmus ◽  
Philna Coetzee
Keyword(s):  
Audit Committee ◽  
Internal Audit ◽  
Principal Component ◽  
Senior Management ◽  
Audit Committees ◽  
Internal Auditing ◽  
Content Type ◽  
Key Stakeholders ◽  
Audit Effectiveness ◽  
Insight Into

Purpose The purpose of this study is to determine the differences in perception of the key stakeholders on the drivers of internal audit effectiveness, namely, senior management and the audit committee, in relation to identified measures. To be seen as an effective internal audit function, value needs to be added for both these stakeholders. It is thus important for internal auditing to obtain an understanding of what these stakeholders respectively perceive as the most prominent drivers of internal audit effectiveness. Design/methodology/approach Heads of internal audit functions (providing insight into the drivers), chairpersons of audit committees and senior management (providing insight into the measures) within the South African public sector responded to a survey. The data were subjected to an exploratory factor analysis and principal component analysis to reduce the set of items and to provide continuous scores for use in a multivariate multiple regression analyses. Findings Senior management and the audit committee differ in their level or order of prominence of the identified drivers that influence the identified measures of internal audit effectiveness. No statistical similarities in their level of views could be found. Originality/value To enhance the effectiveness of internal auditing, the internal audit functions should take cognisance of the difference in perceptions of its key stakeholders on the drivers of internal audit effectiveness, in relation to identified measures, to manage these relationships. No previous research could find that statistically compared views of senior management and the audit committee regarding the drivers of internal audit effectiveness.

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

2016 ◽  
Vol 8 (5) ◽  
pp. 124 ◽  
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.

Influence of audit committees on internal audit conformance with internal audit standards

2015 ◽  
Vol 30 (6/7) ◽  
pp. 539-559 ◽  
Author(s):  
Abdulaziz Alzeban
Keyword(s):  
Audit Committee ◽  
Stock Exchange ◽  
Middle Eastern ◽  
Internal Audit ◽  
International Standards ◽  
Audit Committees ◽  
Content Type ◽  
Internal Auditors ◽  
The Impact ◽  
Audit Standards

Purpose – This study aims to provide empirical evidence of the association between audit committee characteristics and internal audit conformance with the International Standards for the Professional Practice of Internal Auditing (ISPPIA). Design/methodology/approach – Seventy-four usable responses were received from a survey of chief internal auditors (CIAs) from Saudi companies listed on the Saudi Stock Exchange. Findings – The results indicate that audit committee characteristics (the presence of independent members on the committee, members’ expertise in auditing and accounting and meeting with the CIA) influence internal audit conformance with the ISPPIA. Additionally, they demonstrate that such conformance is also influenced by CIA tenure. Practical implications – The findings of this study also have significant implications for audit committees wishing to improve their overall effectiveness, by identifying the impact of the committee’s characteristics on internal audit conformance with the ISPPIA. Originality/value – The results add to the literature on internal audit standards by introducing a Middle Eastern perspective and simultaneously providing insights for companies in their attempts to adhere to the international standards, hence, supporting efforts towards good corporate governance.

scholarly journals Criteria for evaluating the effectiveness of the internal audit of an economic entity

2021 ◽  
Vol 7 (3B) ◽  
pp. 504-510
Author(s):  
Yulia Nikolaevna Kovalenko ◽  
Svetlana Nikolaevna Kovalenko ◽  
Natalia Alekseevna Prodanova ◽  
Marina Mikhailovna Krekova ◽  
Vadim Anatolevich Mironchuk ◽  
...  
Keyword(s):  
Audit Committee ◽  
Internal Audit ◽  
Control Measures ◽  
Executive Management ◽  
Internal Auditor ◽  
Internal Auditors ◽  
External Auditors ◽  
Audit System ◽  
Economic Entity ◽  
The Board Of Directors

The article raises issues related to the need and possibility of evaluating the effectiveness of the internal audit system. The directions of internal auditors 'audits are formed, the procedure of actions of various structural divisions within the framework of effective corporate governance is described, the key factors of the effectiveness of internal auditors' work are given, their essence is revealed. The necessity of creating an internal audit committee is justified, and the provisions of the internal audit committee are prescribed, according to its supervisory role in the activities of an economic entity. The role of the internal auditor and its interaction with external auditors who carry out control measures are described, arguments are given about internal cooperation between the board of directors, the internal audit committee and the executive management of an economic entity in relation to the control system.

scholarly journals Interdependence between audit committee and internal audit

2012 ◽  
Vol 8 (2) ◽  
pp. 6-14
Author(s):  
Boris Tušek ◽  
Ivana Pokrovac
Keyword(s):  
Audit Committee ◽  
Internal Audit ◽  
The Other ◽  
Mutual Interaction ◽  
Audit Committees ◽  
Internal Auditing ◽  
Key Factors ◽  
Internal Audit Function ◽  
Source Of Information ◽  
Adequate Communication

Internal audit is an indispensable resource and a source of information for the audit committee. Audit committees have to meet a number of obligations and responsibilities which is not possible without adequate communication with the internal audit. Internal audit is often seen as an "eyes and ears" of the audit committee. On the other hand, one of the key factors for the successful internal auditing functioning in an organization is a support that audit committee provides to the internal audit function. Previous studies stress out the importance of mutual interaction which is extremely important for reciprocal strengthening. of each other’s functions. The purpose of this paper is to investigate the relevant theoretical features of the connection between internal and Audit Committee.

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