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External management auditing has links with — but is different from — external financial auditing, internal operational auditing and management consultancy. The reasons for conducting external management audits are considered, particularly in relation to the accountability of corporate management, and the interests of various potential user groups. To obtain empirical evidence, a random sample survey of UK credit managers was carried out; response was almost 50 per cent. Results of the survey are summarised. Essentially, the conclusion was that credit managers strongly favoured external management audit reports.

Internal auditing assumes an increased responsibility for the evaluation of entity operations as a service to management and the board of directors. Quality assurance review is the process through which assurance is obtained that the internal auditing department’s work is done in accordance with the Standards for the Professional Practice of Internal Auditing. This study examines the current practices of quality assurance review in South Africa. Although not all organisations surveyed do perform internal auditing quality assurance reviews, the organisations that do, benefit from them. Various methods are used in practice to perform internal and external quality assurance reviews. This study provides information on the processes and procedures used in quality assurance review programmes.

International Standards on Auditing (ISAs) require external auditors to communicate with the client’s governance body regarding significant matters which came to the auditors’ attention during the engagement. Similarly, the authoritative Practice Advisories (PAs), issued by the Institute of Internal Auditors (IIA), mandate that internal auditors discuss certain items with the board. Thus, the governance body/board should be receiving information from two groups of auditors. Compares and contrasts the requirements of the ISAs and PAs with regard to communications with the governance body/board. The differences in the communications to the governance body/board by the external and internal auditors derive mainly from the focus of each group. The external auditors serve those users external to the organization; in contrast, internal auditors serve the board, which is responsible for the internal aspects of the entity. Besides communication on financial issues, the board also desires information on operational and compliance matters. The comparison of the international external auditing and the internal auditing standards shows that some information received by the governance body/board is similar. However, much is unique. Both groups of auditors aid the governance body/board in achieving its objective of guiding the entity to carry out its mission effectively and efficiently

This paper uses questionnaires from and interviews to examine the level of co‐operation and co‐ordination between directors of internal audit departments, and partners and managers in external audit firms in Saudi Arabian companies. The results revealed that external auditors expressed concern about the independence, scope of work and small size of many internal audit departments. Internal auditors considered co‐operation between internal and external audits to be limited, although external auditors were more positive about the extent of co‐operation when the internal audit department was of high quality. The extent of reliance by the external auditor on the work of the internal auditor varied with the quality of the internal audit department. External auditors suggested that the objectivity, competence and work experience were important factors affecting the reliance decision. They felt that the internal audit function in many Saudi companies lacked professionalism and independence from management, which adversely affected its work and the potential for reliance thereon.

External auditors often rely on other professionals for the audit of the financial statements of their clients. Generally, external auditors rely on clients’ internal auditors. Reliance on internal auditors results in cost savings to the client. The objective of this study is to determine which of the criteria as mentioned by AI 610 will be used by the external auditors to evaluate the work of the internal auditors. Respondents of the study consist of those from the big four and non‐big four firms located in Kedah and Penang. A one‐quarter replicate of 2⁸ Kempthorne's design was used to determine the experimental task. The findings of the study indicate that technical competence and scope of function are the two most important criteria that external auditors consider in their reliance on internal auditors. Malaysian Institute of Accountants (MIA), being the standard setter of the auditing standards in Malaysia, will have to develop precise and operational criteria for these factors in planning the audits. The study also shows that there was consistency in audit judgement.

The purpose of this paper is to explore whether internal audit's reporting relationship with the audit committee and the client's business risk environment impact external auditors' reliance on the work of internal audit.

An experiment is conducted using a 2×2 between‐subjects design where we manipulate the above two factors at strong and weak levels. Participants are 66 audit partners, managers and seniors, all experienced with clients having internal audit functions.

The results indicate that both factors affect external auditors' reliance on work already undertaken by internal audit and their use of internal auditors (IA) as assistants. The results also indicate that external auditors are more likely to use internal audit for control evaluation tasks than for substantive tests of balances. The study does not find any significant interaction effects between the two factors.

No prior studies have examined the influence of reporting relationship and client business risk on external auditors' reliance decisions in the current governance environment. Further, the paper examines the impact of these factors on reliance on work already undertaken by internal audit and on using IA as assistants, with respect to both control evaluation work and substantive testing of balances.

The purpose of the paper is to develop, test, and improve a structural equation model (SEM) of client satisfaction with the audit, and of client perception of the usefulness of the audit to external stakeholders.

A questionnaire was mailed to audit clients, i.e. managers of Swedish limited companies with 50 or more employees; 627 useable questionnaires were returned, giving a response rate of 43 percent. Data were processed using the SEM software LISREL.

The data suggest that auditors face difficulties in handling divided loyalties, as audit clients perceive a strong relationship between client satisfaction and usefulness to external stakeholders. Signing auditor competence is positively and auditor skepticism negatively related to both client satisfaction and usefulness to external stakeholders.

The paper focuses solely on the auditor and audit team levels and uses a limited number of independent variables.

The findings extend previous results, indicating that client relationships with both signing auditors and audit assistants affect client satisfaction positively, but have no significant connection with usefulness to external stakeholders. Consequently, it would be useful to consider organizing audit teams in which the various members have distinct roles.

The study addresses an issue most auditing research has not explicitly considered: the distinction between client satisfaction with the audit and client perceptions of the usefulness of the audit to external stakeholders.

Using 5,055 sample firm-years in Korea between 2009 and 2013, this paper aims to examine the association between the characteristics of the internal audit and the number of external audit hours as a proxy for audit efficiency.

This study is motivated by the International Standard on Auditing No. 610: “Using the work of internal auditors”. This auditing standard guides external auditors in using the work of internal auditors to obtain audit evidence and consult internal auditors for direct assistance. The authors expect that external audit efficiency will increase when the work of competent internal auditors is used.

The authors find that the number of internal auditors relative to the number of employees is associated with the number of external audit hours. This result suggests that the greater the availability of internal auditors, the greater their contribution will be to the financial statement audit and the more efficient the audit. The authors find evidence that external auditors use the work of internal auditors with accounting and legal expertise to improve audit efficiency. They also find some evidence that the work of internal auditors with greater availability is more effective during initial external audit engagements.

This study adds to the extant literature on the contributions of internal auditors to external audits by using archival data and by measuring audit effort using a large database of audit hours. In addition, our findings have practical implications for firms and external auditors who are evaluating the role and value of using the work of internal auditors. The authors also believe that the findings will be of interest to regulators or auditing standards boards.

Examines the role of professional associations, governmental agencies, and international accounting and auditing bodies in promulgating standards to foster auditor independence domestically and abroad. Focuses specifically on the role played by the American Institute of Certified Public Accountants, the Institute of Internal Auditors (IIA), the Securities and Exchange Commission and the US Government Accounting Office. Also looks at other professional associations in banking, industry, and manufacturing sectors dealing with sensitive issues of auditors′ involvement in such matters as management advisory services, operating responsibilities, outsourcing, opinion shopping, auditor rotation, and other conflicts of interest which may impair auditor independence.

This study aims to examine the structural power wielded by the audit committee (AC) and the various bases of its power, whilst also exploring the behavioural tactics used by the AC to leverage its power in the oversight of the external audit.

Empirical evidence was drawn from semi-structured interviews with external auditors and AC members in Malaysia.

The AC’s structural power is derived from its formal and network position in the organisation. The AC possesses three forms of organisational-based power (legitimate, coercive and informational) resultant from its formal position, and these combine with the AC’s personal power (will and expert). The AC uses its personal power base to develop trusting relationships and to promote the exchange of information with other key corporate governance actors in the network position. Furthermore, the AC applies at least four behavioural tactics (assertiveness, ingratiation, rationality and coalition formation) to exercise its bases of power.

This study attempts to describe the AC’s structural sources of power, its organisational and personal power bases, and the behavioural tactics it uses when exerting its power.