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11 – 20 of over 9000Joe Christopher, Gerrit Sarens and Philomena Leung
This study aims to critically analyse the independence of the internal audit function through its relationship with management and the audit committee.
Abstract
Purpose
This study aims to critically analyse the independence of the internal audit function through its relationship with management and the audit committee.
Design/methodology/approach
Results are based on a critical comparison of responses from questionnaires sent out to Australian chief audit executives (CAEs) versus existing literature and best practice guidelines.
Findings
With respect to the internal audit function's relationship with management, threats identified include: using the internal audit function as a stepping stone to other positions; having the chief executive officer (CEO) or chief finance officer (CFO) approve the internal audit function's budget and provide input for the internal audit plan; and considering the internal auditor to be a “partner”, especially when combined with other indirect threats. With respect to the relationship with the audit committee, significant threats identified include CAEs not reporting functionally to the audit committee; the audit committee not having sole responsibility for appointing, dismissing and evaluating the CAE; and not having all audit committee members or at least one member qualified in accounting.
Originality/value
This study introduces independence threat scores, thereby generating analysis of the internal audit function's independence taking into account a combination of threats.
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Ahmed Atef Oussii and Mohamed Faker Klibi
The purpose of this paper is to investigate whether chief audit executive (CAE) gender has a significant impact on the internal audit function (IAF) effectiveness as proxied by…
Abstract
Purpose
The purpose of this paper is to investigate whether chief audit executive (CAE) gender has a significant impact on the internal audit function (IAF) effectiveness as proxied by the extent to which the internal audit function uses quality assurance techniques.
Design/methodology/approach
This study uses a multivariate regression model to analyze the association between CAE gender and the use of quality assurance techniques in fieldwork as a proxy for IAF effectiveness. Data were collected using a survey of 74 internal auditors from Tunisian listed companies.
Findings
The results indicate that IAFs run by a female CAE are more likely to incorporate quality assurance techniques into fieldwork than IAFs run by male CAEs. Therefore, internal audit departments managed by women tend to be more effective.
Practical implications
Findings highlight to regulators and reform advocates the importance of having women on the CAE position will improve internal audit practices’ quality. Thus, the gender difference in internal auditing should be more strongly emphasized in different cultural and economic contexts.
Originality/value
This study provides new insights which add to the existing gender literature by introducing a North African perspective and simultaneously providing new insights that highlight the importance of having women on top management positions in internal auditing and the positive effects which come with it.
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Luciano Oreste Dal Mas and Karin Barac
The purpose of this paper is to investigate the relationship between the leadership style of a chief audit executive (CAE) and the perceived effectiveness of the internal auditing…
Abstract
Purpose
The purpose of this paper is to investigate the relationship between the leadership style of a chief audit executive (CAE) and the perceived effectiveness of the internal auditing (IA) function that he/she leads. Perceived IA effectiveness is based on identified attributes in the literature influencing IA effectiveness. The aim of this paper is thus to expand the IA effectiveness debate by adding individual differences in CAEs’ leadership styles as a research focus.
Design/methodology/approach
A quantitative approach is followed. A survey was conducted on a sample of 58 IA students enrolled in a master’s degree programme at a South African university; all students hold senior positions in IA.
Findings
The study confirms that the CAE leadership style significantly influences the identified attributes of perceived IA effectiveness. It further shows that the traditional conceptualisation of leadership (as transformational, transactional and/or laissez-faire) might not be appropriate for or compatible with leaders of professional teams in a regulated environment.
Practical implications
Practically, the study identifies and explores attributes influencing IA effectiveness that are within the purview of the CAE’s leadership style and within his/her ability to influence. This information could (re)direct leadership development training programmes presented in industry and by the Institute of Internal Auditors (IIA), and at organisational level, it could inform appointment and retention and succession practices for heads of and senior management in IA.
Social implications
CAEs are cautioned about the limitations imposed by laissez-faire leadership on IA effectiveness. They should strive to become both transformative and transactional leaders as it has a significant influence on the effectiveness of their IA functions, and by being more effective, they can demonstrate the value proposition of IA. Organisations need to create the environment in which CAEs can act as transformational and transactional leaders. The IIA, as the pre-eminent professional body, could become involved in developing leadership skills of its members. The IIA could provide guidance on leadership styles for CAEs and could also offer formal training initiatives to internal auditors on skills needed to lead IA teams.
Originality/value
This paper may open a new research area in IA effectiveness by focussing on the role and leadership qualities of the CAE.
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Patricia M. Myers and Douglas E. Ziegenfuss
This study of audit committee effectiveness, performed in the period immediately preceding the Enron collapse, seeks to determine whether audit committees were beginning to accept…
Abstract
Purpose
This study of audit committee effectiveness, performed in the period immediately preceding the Enron collapse, seeks to determine whether audit committees were beginning to accept more responsibility for corporate governance before such behavior became mandatory.
Design/methodology/approach
The period studied was approximately two years prior to the Sarbanes‐Oxley Act of 2002 and roughly one year after the Blue Ribbon Committee published its recommendations on audit committee effectiveness. The efforts of 296 audit committees to improve their effectiveness as reported by Chief Audit Executives (CAEs) to the Global Audit Information Network (GAIN) database maintained by the Institute of Internal Auditors (IIA) were investigated.
Findings
It was found that audit committees' responsiveness to each of eight effectiveness steps was surprisingly high. For instance, almost all (w99.6 percent) audit committees meet with CAEs. It is recommended that audit committees focus more on big picture/strategic concerns in their discussions with CAEs.
Research limitations/implications
The study's chief limitation is that only companies with internal audit functions were studied and thus the results cannot be generalized to companies without internal audit functions.
Originality/value
This study was the first to utilize the GAIN database and provides specifics about 15 different topics that CAEs might bring to audit committees for discussion. Topics of communication more often focused on specifics such as “significant audit findings” (95.9 percent) and less often dealt with big picture/strategic concerns such as “overall corporate control environment” (68.9 percent).
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This study aims to explore the influence of internal audit (IA) reporting lines and the implementation of IA recommendations (IMPLEMENT) on financial reporting quality (FRQ).
Abstract
Purpose
This study aims to explore the influence of internal audit (IA) reporting lines and the implementation of IA recommendations (IMPLEMENT) on financial reporting quality (FRQ).
Design/methodology/approach
Data were obtained from the annual reports of 201 UK listed companies, and also from survey questionnaires completed by the chief audit executives working within those companies. Two measures are used as proxies of FRQ: abnormal accruals and accrual quality.
Findings
Findings indicate that when IA reports directly to the audit committee (AC), there is a significant positive influence upon FRQ. Conversely, when IA reports to the chief executive officer (CEO) or chief financial officer (CFO), there is a negative impact on FRQ. It is further shown by the results that lower income-increasing accruals are evident when there is greater IMPLEMENT, thereby showing an accompanying positive influence on FRQ. Moreover, the results indicate that greater adoption of such recommendations is also associated with internal reporting lines, i.e. when IA reports directly to the AC, FRQ results improved.
Originality/value
These findings contribute to the literature in the field of IA reporting, by introducing new insights regarding reporting lines and IMPLEMENT, and the influence of these on FRQ, and by establishing those insights through empirical work undertaken in the UK where little research on this issue has been reported.
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The main purpose of this paper is to examine whether the source of an expectation of finding deficiencies – the audit committee, the chief executive officer, or the internal…
Abstract
Purpose
The main purpose of this paper is to examine whether the source of an expectation of finding deficiencies – the audit committee, the chief executive officer, or the internal auditor's own assessment – affects the time budgeted by internal auditors for that audit area.
Design/methodology/approach
The approach used is a behavioral experiment where audit planning decisions are made by internal auditors for three hypothetical scenarios.
Findings
The paper finds that the source of the expectation makes a difference in some cases. In particular, internal auditors allocate more time when the expectation of deficiencies results from a self‐assessment than when it comes via communication from an audit committee member. The paper also finds that internal auditors do not generally increase audit time budgets if initial audit procedures find no reportable deficiencies when deficiencies are expected to be found.
Research limitations/implications
Internal auditors typically obtain more information about an audit scenario than is provided in the research questionnaire. As well, economic incentives such as being fired for making poor planning decisions are absent in the paper.
Practical implications
The results imply that the reliability of an expectation about deficiencies is more influential than the authority of the source.
Originality/value
No prior research study has addressed the issue of whether the source of an expectation of finding deficiencies affects the time budgeted by internal auditors for that audit area.
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– The purpose of this paper is to analyse and comment on recent enhanced pronouncements on internal auditing.
Abstract
Purpose
The purpose of this paper is to analyse and comment on recent enhanced pronouncements on internal auditing.
Design/methodology/approach
The paper uses content analysis of five 2012-2013 sources of guidance, set out in the tables of this paper and summarised within the text, together with conceptual interpretations.
Findings
Recent pronouncements respond, with considerable consensus, to stakeholder and public concerns and fill a partial vacuum left by The Institute of Internal Auditors' Standards. Principally this is about successfully enhancing the scope of internal audit and internal audit's independence from management.
Research limitations/implications
While the paper is conceptual rather than empirical, it builds on the processes followed by the parties who developed the examples of enhanced guidance reviewed in this paper. Those processes included careful development by leaders in the field, public consultation of preliminary proposals, and final amended guidance based on feedback received.
Practical implications
There are implications for staffing of internal audit functions and the seniority and calibre of chief audit executives.
Originality/value
There has been no other attempt to map these developments. It has been done with a view to identifying possible ways forward for internal auditing, especially those which have a high degree of support and which are still to be incorporated into generally accepted internal auditing.
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The work of internal auditors is relevant to their host entities' reporting processes; however, few researchers have examined how internal auditors’ competency and objectivity…
Abstract
Purpose
The work of internal auditors is relevant to their host entities' reporting processes; however, few researchers have examined how internal auditors’ competency and objectivity affect their resistance to pressure from host entities regarding their reports. Thus, the main objective of this study is to examine the influence of internal audit functions' (IAF) quality factors on chief audit executives' (CAEs) ability not to modify internal audit report.
Design/methodology/approach
This study uses data from the Global Internal Audit Common Body of Knowledge to investigate the relationship between IAF quality and auditor resistance to pressure related to changes in internal audit reports. IAF quality is calculated using a composite measure comprising four IAF quality components. Auditors' resistance is measured using the extent to which internal auditors experienced a situation wherein they were directed to modify a valid audit finding in a report.
Findings
The analyses provide evidence that CAEs experience, certification, training and objectivity were all significantly associated with resistance to pressure. In other words, a greater quality of IAF leads to a greater ability to resist pressure to change their reports.
Research limitations/implications
Despite the statistically significant results that confirm the impact of IAF competence and objectivity on the resistance of CAEs to pressure, some other factors should be considered simultaneously in future research. In addition, the study sample contains 2,193 CAEs from different regions, environments, sectors and business areas. Focussing on a particular environment, sector or organisation size may generate different results.
Practical implications
The following practical implications are proposed: First, internal audit regulators will find this study helpful in formulating strategies for creating balanced relationships between CAEs and other authorities and users. Second, CAEs can be encouraged to undergo constant training and complete professional development (as required by the Institute of Internal Auditors [IIA] standard). Finally, it would be interesting to apply this study to a particular environment, sector and size.
Originality/value
This study builds on the limited research that investigates the relationship between IAFs’ quality and the resistance of CAEs to pressure. It extends Calven’s (2021) study that investigates the impact of adherence to the IIA's Core Principles on the likelihood of IAFs modifying valid audit findings. This study examines the influence of IAF quality factors on CAEs' ability not to modify internal audit report.
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MaryAnne M. Hyland and Daniel A. Verreault
Presents a model for analyzing the potential for value creation of the internal audit (IA) function, the human resource management (HRM) function, and the IA‐HRM pairing. A survey…
Abstract
Presents a model for analyzing the potential for value creation of the internal audit (IA) function, the human resource management (HRM) function, and the IA‐HRM pairing. A survey of 161 chief audit executives indicated that virtually all IA functions are risk managing in their audit approaches, while a great majority of HRM clients are also moderately or strongly strategic in their outlook. Findings included that a productive working relationship was strongest when a risk m anaging IA function is paired with a strategic HRM function. Also, the IA planning process was found to be more strategic in the presence of the same pairing. Analysis of written examples of strategic findings related to HRM supplied by the respondents suggested that there may be a significant gap between auditors’ knowledge of strategic HRM practices as developed in the literature and their self‐reported examples. Future research should use both HRM and IA responses to reduce bias. Additonally, there is a need for case studies of the IA‐HRM partnership.
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Marc Eulerich, Jörg Henseler and Annette G. Köhler
The purpose of this study is to analyze how internal audit function (IAF) activities differ, depending on the impact of executive boards (EBs) and audit committees (ACs).
Abstract
Purpose
The purpose of this study is to analyze how internal audit function (IAF) activities differ, depending on the impact of executive boards (EBs) and audit committees (ACs).
Design/methodology/approach
This study is based on data collected from the Common Body of Knowledge (CBOK) study conducted by the Institute of Internal Auditors Research Foundation in 2010. Using 524 responses from US Chief audit executives the authors examine the direct and interaction effects of ACs and EBs on the probability to perform specific activities with a logistic regression model.
Findings
This manuscript shows that ACs and EBs have different direct and interaction effects on the portfolio of activities performed by the IAF. Furthermore, a varying prevalence among activities was identified, which pinpoints to the maturity of IAFs. All findings contribute to the prior and recent discussion about the position of IAFs between the stakeholders’ AC and EB.
Research limitations/implications
When the CBOK study was designed by the Institute of Internal Auditors, the investigators did not have the research questions in mind. The authors are therefore limited to those variables that have been collected as part of a larger questionnaire. Nevertheless, the new approach tries to open a new research direction, analyzing different activities performed by IAFs.
Practical implications
The identified portfolio of IAF activities can help practitioners to double-check their own work and to evaluate the impact of the EB and the AC on their activities.
Originality/value
This study provides the first empirical evidence of the influence of ACs and EBs on IAF activities.
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