scholarly journals Effectiveness of internal audit in local governments: The moderating role of internal and external auditors’ relations

Accounting ◽  
2022 ◽  
Vol 8 (2) ◽  
pp. 177-186 ◽  
Author(s):  
Dwi Ratmono ◽  
Darsono Darsono
Keyword(s):  
Local Governments ◽  
Good Governance ◽  
Conflicts Of Interest ◽  
Practical Implication ◽  
Statistical Tests ◽  
Internal Audit ◽  
Primary Data ◽  
Management Support ◽  
External Auditors ◽  
Internal Audit Function

Research on the internal audit function is relevant for improving the quality of governance in organizations. The internal auditor is an important element of government management in the context of realizing good governance by providing quality and effective audit results. The aim of this study is to examine the factors influencing (determinants) the effectiveness of the internal audit function in Indonesian local government organizations. The research samples were 137 respondents. This study used primary data in the form of a questionnaire. The hypothesis testing technique used Partial Least Squares-Structural Equation Modelling (PLS-SEM) analysis. The results of statistical tests showed that independence, competence, and management support could increase the effectiveness of the internal audit function. However, this cooperative relationship does not moderate the influence of competence and management support on the effectiveness of internal audit. The practical implication of this study is that in order to increase the effectiveness of internal audit, internal auditors must uphold an attitude of independence, objectivity and freedom from conflicts of interest in carrying out their professional responsibilities. The practical value of this study also shows that to increase the effectiveness of public sector internal audit, internal and external auditors must increase cooperation to improve the effectiveness of internal audit, especially in discussion activities between internal and external auditors, communication between internal and external auditors, and activities to share working papers between internal and external auditors.

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.

The Effect of Frequency and Automation of Internal Control Testing on External Auditor Reliance on the Internal Audit Function

2015 ◽  
Vol 30 (1) ◽  
pp. 21-40 ◽  
Author(s):  
Maia J. Farkas ◽  
Rina M. Hirsch
Keyword(s):  
Internal Control ◽  
Work Performance ◽  
Internal Audit ◽  
Internal Controls ◽  
External Auditors ◽  
Internal Audit Function ◽  
Remediation Strategies ◽  
Low Degree ◽  
External Auditor ◽  
Manual Testing

ABSTRACT Failure of the internal audit function (IAF) to detect a significant deficiency in internal controls is a significant shortcoming in the IAF's work performance. This shortcoming in the IAF's work performance reduces external auditors' willingness to rely on the IAF's work. Using a two-stage experiment, we investigate how the implementation of three different internal control testing remediation strategies (akin to CCM, ACL, and periodic manual testing), which vary in their automation and frequency, affect external auditors' perceptions of IAF strength and planned reliance on the IAF's work. We find that automated remediation strategies fully remediate external auditors' perceptions of poor IAF work performance and low degree of reliance on the IAF, whereas manual remediation strategies result in only partial remediation. Counterintuitively, less frequent remediation strategies are more effective at improving perceptions of poor IAF work performance and low levels of reliance on the IAF, relative to continuous remediation strategies.

scholarly journals ANALISIS DETERMINAN EFEKTIVITAS AUDITOR INTERNAL PADA INSPEKTORAT PROVINSI DAERAH ISTIMEWA YOGYAKARTA

2016 ◽  
Vol 13 (2) ◽  
pp. 191
Author(s):  
Dea Nurfika Sari ◽  
Haryanto Haryanto
Keyword(s):  
Statistical Tests ◽  
Internal Audit ◽  
Primary Data ◽  
Internal Auditor ◽  
The Public ◽  
Independent Variables ◽  
External Auditor ◽  
Audit Activity ◽  
Audit Effectiveness ◽  
Special Region

The aims of this study is to examine factors that affect (determinants) internal audit effectiveness in the public sector, Inspectorate office at Province Special Region of Yogyakarta. This study is a replication of the research that has been done by Alzeban and Gwilliam in Saudi Arabia. There are 4 (four) independent variables that affect internal audit effectiveness as dependent variable. There are competence of internal auditor, the relationship between internal and external auditor, auditee support to internal audit activity, and independence of internal auditor. The population in this research is 51 internal auditor working in Inspectorate office at Province Special Region of Yogyakarta. This study uses primary data in the form of questionnaire. All of questionnaire can be processed. The datawere collected were processed using PLS analysis with SmartPLS 3 program. Statistical tests showed that three of four independent variables, there are the competence of the internal auditor, the auditee support and the independence of the internal auditor affect the effectiveness of the internal audit. while relationship between the internal auditor with the external auditor does not affect the internal audit effectiveness Keywords: Internal auditor effectiveness, competence of internal auditor, relationship between internal and external auditor, auditee support to internal audit activity, independence of internal auditor.

scholarly journals Does Internal Audit Function Quality Deter Management Misconduct?

2014 ◽  
Vol 90 (2) ◽  
pp. 495-527 ◽  
Author(s):  
Matthew S. Ege
Keyword(s):  
Internal Control ◽  
Audit Committee ◽  
Internal Audit ◽  
Audit Committees ◽  
Regulatory Requirements ◽  
Difference In Differences ◽  
External Auditors ◽  
Internal Audit Function ◽  
Auditor Quality ◽  
External Auditor

ABSTRACT Standard-setters believe high-quality internal audit functions (IAFs) serve as a key resource to audit committees for monitoring senior management. However, regulators do not enforce IAF quality or require disclosures relating to IAF quality, which is in stark contrast to regulatory requirements placed on boards, audit committees, and external auditors. Using proprietary data, I find that a composite measure of IAF quality is negatively associated with the likelihood of management misconduct even after controlling for board, audit committee, and external auditor quality. This result is robust to a variety of other specifications, including controlling for internal control quality and separate estimation during the pre- and post-SOX time periods. A difference-in-differences analysis indicates that misconduct firms have low IAF quality and competence during misconduct years and improve IAF quality and competence in the post-misconduct years. These findings suggest that regulators, audit committees, and other stakeholders should consider ways to improve IAF quality.

Sustainable development and spirituality: a critical analysis of GNH index

2017 ◽  
Vol 44 (12) ◽  
pp. 1919-1939 ◽  
Author(s):  
Kanupriya Gupta ◽  
Rajat Agrawal
Keyword(s):  
Sustainable Development ◽  
Socioeconomic Development ◽  
Good Governance ◽  
Practical Implication ◽  
Environmental Conservation ◽  
Cultural Preservation ◽  
Primary Data ◽  
Spiritual Values ◽  
Critical Approach ◽  
Content Type

Purpose The purpose of this paper is to understand the relationship between sustainable development (SD) and spirituality. Bhutan, a country believing deeply in Buddhist spiritual values has created a model of Gross National Happiness (GNH) where it is believed that the holistic evolution of human being can take place with a balance of material as well as non-material aspects of spiritual, cultural, societal and environmental. The paper critically analyzes GNH to establish the role of spirituality in SD. Design/methodology/approach The paper analyses the GNH concept using literature review. Further, personal meetings with authorities in Bhutan and interaction with citizens of Bhutan used to gather primary data. A critical approach has been applied to understand the practical implication of the concept. Findings Good governance, sustainable socioeconomic development, cultural preservation and environmental conservation formed the four basic pillars of the GNH index, further elaborated into 9 domains and 33 clustered indicators. The concept has been commendable in giving new direction to the understanding of SD. Nevertheless, certain discrepancies create ambiguity and limitations around the validity of adoption of the concept in other countries. Research limitations/implications A balanced and holistic, yet practical model of SD is necessitated. Bhutan has been a pioneer to suggest the different dimensions that can be acted upon to produce a more honest and sustainable path of being in concord with nature, community and other-related surroundings. Practical implications The paper provides insights to researchers and practitioners in understanding the basic essentials required for the SD agenda. The paper derives the learnings from the GNH model which can help in understanding the areas where the western three-pillar model of development needs more refinement. At the same time, the paper also helps in creating the insights for Bhutanese practitioners and policymakers about the areas where the GNH model still needs to be worked upon to improve its efficacy. Originality/value The paper proposes that SD can only be achieved through spirituality.

scholarly journals GOVERNANCE AND PERFORMANCE OF VILLAGE-OWNED ENTERPRISES (BUMDES)

2021 ◽  
Vol 6 (2) ◽  
Author(s):  
Sigit Kurnianto ◽  
Budiharjo Iswanu Iswanu
Keyword(s):  
Linear Regression ◽  
Organizational Performance ◽  
Local Governments ◽  
Quantitative Data ◽  
Good Governance ◽  
Research Data ◽  
Data Sources ◽  
Primary Data ◽  
Simple Linear Regression ◽  
And Performance

This study aims to examine the effect of governance on the performance of village-owned enterprises. The governance variable consists of 6 principles, namely transparency, accountability, cooperation, participation, emancipation and sustainability. Organizational performance includes financial and non-financial performance. This study uses quantitative data with primary data sources. The research data comes from questionnaires distributed online and offline to village-owned enterprises administrators in East Java. Quantitative data were processed using SPSS 25 software. The hypothesis in this study was tested using simple linear regression. The results of this study found that governance has a positive and significant influence on the performance of village-owned enterprises organizations in the East Java region. This finding is expected to provide a reference in Good Governance for BUMDes in Indonesia. Armed with the knowledge gained from this research, it is hoped that local governments will improve the governance and performance of BUMDes. In addition, the BUMDes Management is expected to improve organizational performance which is assessed both in terms of financial and non-financial through good governance of BUMDes.

scholarly journals An Examination Of Underreporting Of Time And Premature Signoffs By Internal Auditors

2010 ◽  
Vol 14 (4) ◽  
Author(s):  
Qianhua (Q) Ling ◽  
Michael D. Akers
Keyword(s):  
Internal Audit ◽  
Internal Controls ◽  
Professional Skepticism ◽  
Internal Auditors ◽  
External Auditors ◽  
Considerable Research ◽  
Internal Audit Function ◽  
Sarbanes Oxley ◽  
Audit Team ◽  
The Impact

The passage of the Sarbanes-Oxley Act of 2002 (SOX) heightened the importance of internal controls and accordingly, a key control - the internal audit function.  Consequently, management and external auditors have both increased their reliance on internal auditors’ work.  While there has been considerable research regarding the impact of the underreporting of time and premature sign-offs on the external audit, there has only been one study that has examined the impact of these two items on the internal auditors’ work.  Such research is dated (1994) and prior to the passage of SOX.  We surveyed members of the Institute of Internal Auditors (IIA) in the Midwest to examine their behavior and perceptions regarding these two items.  The respondents in our study believe the underreporting of time is unethical and is supported by their reporting of all time worked, even if such time exceeded the budget.  Our findings also show that the respondents feel premature sign-offs are unethical and result primarily from lack of professional skepticism and inadequate training.  Increasing training in audit areas and improving communications within the audit team are possible solutions to reduce premature sign-offs.  Premature sign-offs are more likely to occur in operational audits and to a lesser degree in financial audits and compliance audits. 

Attracting Applicants for In-House and Outsourced Internal Audit Positions: Views from External Auditors

2015 ◽  
Vol 30 (1) ◽  
pp. 143-156 ◽  
Author(s):  
Geoffrey D. Bartlett ◽  
Joleen Kremin ◽  
K. Kelli Saunders ◽  
David A. Wood
Keyword(s):  
Critical Role ◽  
Internal Audit ◽  
Job Applicants ◽  
Internal Auditing ◽  
Internal Auditors ◽  
External Auditors ◽  
Internal Audit Function ◽  
Career Option ◽  
Negative Perceptions ◽  
Survey Results

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.

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