Internal Audit's Role in GHG Emissions and Energy Reporting: Evidence from Audit Committees, Senior Accountants, and Internal Auditors

2013 ◽  
Vol 34 (1) ◽  
pp. 199-230 ◽  
Author(s):  
Andrew J. Trotman ◽  
Ken T. Trotman
Keyword(s):  
Agency Theory ◽  
Audit Committee ◽  
Resource Dependence ◽  
Ghg Emissions ◽  
Internal Audit ◽  
Sustainability Reporting ◽  
Resource Dependence Theory ◽  
Audit Committees ◽  
Internal Auditors

SUMMARY Internationally, disclosures related to greenhouse gas (GHG) emissions and energy usage have increased dramatically due to trends toward increased sustainability reporting, growing concerns about climate change, and the introduction of new legislation and taxes. Audit committees, management, internal auditors, external auditors, and other stakeholders all have a potential role in relation to GHG disclosures. Our study addresses the role of internal auditors. We conducted 29 interviews with senior audit committee members, senior accountants, in-house internal auditors, and partners specializing in internal audit from the major accounting firms. These interviews allowed us to gain insights into the present role of internal auditors in GHG/energy reporting, the factors explaining internal audit's role, and the future role of internal audit. In addition, audit committee members describe their present involvement in GHG/energy reporting. We consider the consistency of our findings with three corporate governance theories (agency theory, institutional theory, and resource dependence theory). Although our results support the importance of effective monitoring consistent with agency theory, no one theory fully explains our results.

scholarly journals Determinants of Audit Committees Effectiveness in Enhancing Compliance With Regulations: Evidence From Saudi Context

2018 ◽  
Vol 8 (4) ◽  
pp. 438
Author(s):  
Ali A. Alnodel
Keyword(s):  
Audit Committee ◽  
Resource Dependence ◽  
Listed Companies ◽  
Resource Dependence Theory ◽  
Audit Committees ◽  
Annual Reports ◽  
Financial Expertise ◽  
Dependence Theory ◽  
Governance Practices

This paper aims to investigate how effective audit committees are in ensuring compliance with regulations in the Saudi context. Particularly, it examines whether there is an association between the value of fines imposed by the Saudi Capital Market Authority (CMA) and the size, frequency of meeting, and the financial expertise of the audit committee. Other variables have also been incorporated to control for possible effects, particularly size, leverage, ROA, age of the company, and year of fines. Data has been collected from the archives of CMA and from the annual reports of listed companies from 2014 to 2016. In total, 360 year-observations relating to 120 non-financial listed companies were analyzed among which 95 fines and actions imposed by CMA. The results suggest that the size and financial expertise of the audit committee and the leverage of the company and years of fines have significant association with the value of the fines imposed by CMA. In contrast, the regression analysis does not show significant association between the frequency of meeting of the audit committee and other controlled variables on the value of the fines imposed by CMA. These results suggest that the availability of resources to the audit committee, as suggested by the resource dependence theory, has a significant impact on its effectiveness. Regulators and companies could benefit from these findings to enhance compliance with regulations and to improve the role of audit committees. Moreover, these findings could be valuable to strengthen corporate governance practices in similar emerging markets.

The Role of Accounting Mechanisms for Corporate Governance in Reducing Creative Accounting Practices in Telecommunications Sector Companies in Riyadh City: An Empirical Study: دور الآليات المحاسبية لحوكمة الشركات في الحد من ممارسات المحاسبة الإبداعية في شركات قطاع الاتصالات بمدينة الرياض: دراسة ميدانية

2020 ◽  
Vol 4 (15) ◽  
Author(s):  
Lamis Jameel Banasser, Maha Faisal Alsayegh
Keyword(s):  
Corporate Governance ◽  
Internal Control ◽  
Audit Committee ◽  
Internal Audit ◽  
Internal Auditors ◽  
External Auditors ◽  
Riyadh City ◽  
Creative Accounting ◽  
Telecommunications Sector

The study aimed to identify the role of accounting mechanisms for corporate governance in reducing creative accounting practices in telecommunications sector companies in Riyadh city. A descriptive analytical approach was followed to conduct the field study. Sample of the study consisted of members of the audit committee, internal auditors, accountants from the surveyed telecommunications’ sector companies, and the external auditors in the audit offices that specialized on auditing the examined sample of companies. Questionnaire was used as a data collection method. Results showed that activating the role of accounting mechanisms for corporate governance can greatly contribute in limiting creative accounting practices. As they are controlling mechanisms that capable of protecting companies, shareholders and stakeholders from any manipulation or misleading information in the financial statements. Further, internal audit plays a major role in limiting creative accounting practices by examining and evaluating the effectiveness of the internal control system. Furthermore, the independence and competence of the external auditor and his commitment to the rules of conduct and ethics of the profession contribute greatly in limiting creative accounting practices in the examined companies. The study recommended the necessity of holding specialized training courses for members of audit committees, internal auditors and external auditors on methods of detecting creative accounting practices to combat and reduce them.

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.

scholarly journals The Effect of Audit Committee Characteristics on the Profitability: Panel Data Evidence

2019 ◽  
Vol 11 (4) ◽  
pp. 104
Author(s):  
Yazan Oroud
Keyword(s):  
Panel Data ◽  
Agency Theory ◽  
Audit Committee ◽  
Resource Dependence ◽  
Stock Exchange ◽  
Fixed Effect Model ◽  
Resource Dependence Theory ◽  
Annual Reports ◽  
Industrial Firms ◽  
Industrial Companies

This study attempts to investigat the relationship between audit committee characteristics (size, independence, meeting and financial expertise) and the profitability of industrial companies listed on the Amman Stock Exchange (ASE) for the years 2013 to 2017. The model of this study is theoretically founded on both the agency theory and the resource dependence theory. To examine the developed model, the data were gathered from the annual reports of 51 listed industrial firms. To analyse the data, this study utilized the panel data methodology on 51companies with 255 observations. Moreover, this study used company size and leverage as control variables. Based on the panel data results, the fixed-effect model was used to examine the effect of the experimental variables on profitability, measured by return on investment (ROI) and return on equity (ROE). The results show that the audit committee characteristics have a significant effect on profitability of the industrial companies listed on the ASE. This study evinces that the RD theory is more significant compared to the agency theory when describing CG practices in Jordan.

scholarly journals An exploration of the role of records management in corporate governance in South Africa

2013 ◽  
Vol 15 (2) ◽  
Author(s):  
Mpho Ngoepe ◽  
Patrick Ngulube
Keyword(s):  
South Africa ◽  
Corporate Governance ◽  
Audit Committee ◽  
Corporate Citizenship ◽  
Internal Audit ◽  
Audit Committees ◽  
Records Management ◽  
Good Corporate Governance ◽  
Auditor General

Background: Corporate governance maybe approached through several functions such as auditing, an internal audit committee, information management, compliance, corporate citizenship and risk management. However, most organisations, including governmental bodies, regularly exclude records management from the criteria for a good corporate-governance infrastructure. Proper records management could be the backbone of establishing good corporate governance.Objectives: Utilising the King report III on corporate governance as a framework, this quantitative study explores the role of records management in corporate governance in governmental bodies of South Africa.Method: Report data were collected through questionnaires directed to records managers and auditors in governmental bodies, as well as interviews with purposively selected auditors from the Auditor-General of South Africa. Data were analysed using various analytical tools and through written descriptions, numerical summarisations and tables.Results: The study revealed that records management is not regarded as an essential component for corporate governance. Records management is only discussed as a footnote; as a result it is a forgotten function with no consequences in government administration in South Africa. The study further revealed that most governmental bodies have established internal audit units and audit committees. However, records-management professionals were excluded from such committees.Conclusion: The study concludes by arguing that if records management is removed as a footnote of the public-sector operations and placed in the centre of operational concern, it will undoubtedly make a meaningful contribution to good corporate governance.

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 Conflict-handling during multinational audits: The internal auditor-auditee relationship

2019 ◽  
Vol 16 (3) ◽  
pp. 159-173
Author(s):  
Ronja Krane
Keyword(s):  
Resource Dependence ◽  
Qualitative Content Analysis ◽  
Internal Audit ◽  
Resource Dependence Theory ◽  
Conflict Theory ◽  
Internal Auditor ◽  
Internal Auditors ◽  
Conflict Situations ◽  
Diverse Backgrounds ◽  
Conflict Handling

As companies expand their operations across national borders, international internal audit assignments are becoming commonplace. However, the internal audit functions of multinational companies face unique issues since their work quality is influenced by interactions with employees from various locations and culturally diverse backgrounds. The aim of this paper is to analyze these interactions. For this purpose, fourteen qualitative in-depth interviews with internal audit practitioners working for globally operating companies are conducted. Qualitative content analysis is used to structure and analyze the interview data and results are presented within a conceptual framework based on Resource Dependence Theory and insights from conflict theory. The study examines the conflict-handling strategies that are employed during the distinct stages of cross-national internal audit assignments and sheds light on how internal auditors achieve their audit related goals while interacting with auditees of different cultural and linguistic backgrounds. Findings indicate that internal auditors are partly reliant on the knowledge and cooperation of auditees, and conflicts need to be handled in a manner which allows the internal audit function to obtain the necessary resources. Overall, results show that country and culture-specific differences can cause or complicate conflict situations and auditors are tasked with finding the difficult balance between trust and skepticism towards auditees when conducting cross-corporate audit assignments. This paper contributes to the scarce literature on the relationships between internal auditors and auditees and expands the current understanding of internal audit work in an international context.

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.

The role of audit committee attributes in corporate sustainability reporting

2019 ◽  
Vol 21 (2) ◽  
pp. 249-264 ◽  
Author(s):  
Amina Buallay ◽  
Jasim Al-Ajmi
Keyword(s):  
Audit Committee ◽  
Corporate Sustainability ◽  
Sustainability Reporting ◽  
Audit Committees ◽  
Content Type ◽  
Disclosure Requirements ◽  
Sustainability Disclosure ◽  
Financial Expertise ◽  
The Impact

Purpose The purpose of this paper is to analyze the extent to which sustainability reporting by banks in the Gulf Cooperation Council (GCC) is affected by the attributes of audit committees. Design/methodology/approach The research is positivist and quantitative, based on a cross-sectional and time series analysis of 59 banks from 2013 to 2017. A multivariate model is used to investigate the impact of selected audit committee attributes (financial expertise, size, members’ independence and meeting frequency) on sustainability reporting. The model is built on agency, legitimacy, resources and stakeholders theories. Findings In contrast to the hypothesis, the authors report a negative association between financial expertise and sustainability reporting. Members’ independence and meeting frequency play a positive role in determining the extent of disclosure. The control variables (bank size, age and auditor type) are positively associated with corporate sustainability reporting. Research limitations/implications The main limitations of this study are related to the chosen attributes of audit committee and do not consider the board’s attributes. However, the authors believe these limitations do not affect the findings. Future research that includes more attributes when they became available will offer more insights into the role of audit committees on sustainability disclosure of financial institutions. Overcoming these limitations may make the results more generalizable. Practical implications The results of this study have important implications for regulators, bank management, investors and creditors. For regulators, in the countries of the GCC and in countries like them, the findings reveal the importance of disclosure requirements. The development of disclosure requirements is likely to improve corporate sustainability reporting and reduce variations in the extent of disclosure among banks. Banks could use these results to improve their reporting to outsiders. For creditors and investors, the study improves their awareness of the importance of corporate social responsibility, corporate governance and environmental information on credit and investment decisions and encourages banks to improve their disclosures of non-financial information. Originality/value This research makes a contribution to the scarce literature on sustainability reporting by banks, especially in an environment where capital markets lack active institutional investors, where regulators play the dominant role in determining the extent of disclosure and where banks are the main source of external finance for the corporate sector.

The role of stakeholders' perception in internal audit status: the case of Iran

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Bita Mashayekhi ◽  
Farzaneh Jalali ◽  
Zabihollah Rezaee
Keyword(s):  
Internal Control ◽  
Audit Committee ◽  
Internal Audit ◽  
Chief Executive ◽  
Audit Committees ◽  
Current Status ◽  
Structured Interviews ◽  
Audit Process ◽  
Content Type

PurposeThe purpose of this study is to explore the internal audit actors and stakeholders' perceptions of the IA status in Iranian companies, and those actors and stakeholders' roles in shaping the current situation of IA in Iran.Design/methodology/approachThis paper uses the interpretive qualitative method. Data comprises of semi-structured interviews with board of directors, audit committees, chief executive officers and chief audit executives. The paper analyzes internal audit policy documents, reports and legislations.FindingsThe results illustrate that the internal audit in Iran is perceived as a “perfunctory” practice among its stakeholders due to being recognized as an inefficient process. The key actors and stakeholders in internal audit process–including executive and board managers, audit committee members and chief audit executives–play important roles in shaping the current status of internal audit via their perceptions and actions.Practical implicationsThe fact that internal audit in Iran is perceived as an inefficient process and is used as a perfunctory practice highlights the importance of addressing this issue at the standardization and regulation level. The deficits in the roles of key actors and stakeholders need to be considered as the legislative guide in different levels.Originality/valuePrior studies mostly focus on the role of internal audit in organizations. In contrast, this study focuses on the role of key actors and stakeholders of internal auditing process in shaping the current perceived role of internal audit in organizations. Also, the study examines an emerging economy, which differs from advanced economies in important ways, including regulations, organizational culture, internal control structure and internal audit.

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