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The role of internal auditors is changing from a traditional audit approach to a more proactive value‐added approach where internal auditors are taking up partnerships…
The role of internal auditors is changing from a traditional audit approach to a more proactive value‐added approach where internal auditors are taking up partnerships with management. The debate of internal auditors needing to expand their repertoire has been around for many decades, though now, the evidence of more internal auditors changing their practices has began to emerge and examples are visible. Internal auditors are seen to be accepting change to keep up with the demands of the market place and are doing so in order to provide a service of value to the organisation that employs them. Southcorp, Qantas and KMPG Consulting are a few providing their internal auditors with opportunities to undertake assurance based services and are finding this new branch of practice to be most valuable in assisting their managers to execute the objectives of the organisation
Marks the 50th anniversary in 1991 of the Institute of InternalAuditors (IIA). Established in 1941 by a group of forward‐lookinginternal auditors, the IIA has given great…
Marks the 50th anniversary in 1991 of the Institute of Internal Auditors (IIA). Established in 1941 by a group of forward‐looking internal auditors, the IIA has given great impetus to the professional upgrading of internal auditors. Provides an overview of the evolving role of the internal auditor: tracing the ancient roots of the internal audit function; examining in detail the role played by the IIA in advancing the interests of the profession, and providing an outlook for the future. Concludes by observing that the role of the internal auditor will continue to expand at a rapid pace in the coming decades and beyond.
Internal auditing has transformed over the past twodecades from its beginnings as a financial enforcerto a respected member of the managementdecision‐making process…
Internal auditing has transformed over the past two decades from its beginnings as a financial enforcer to a respected member of the management decision‐making process. Internal auditors now are providing management with information of a broader range of company activities than they are used to. This transformation is far from over because of the nature of the auditor′s work and the perceptions of management and the public concerning audits. The function of internal auditors is not only to measure and evaluate the effectiveness, efficiency and economy of organisational activities and controls but also to participate with management in high‐level decision making. The partnership concept of internal auditing is needed to enhance the image and change the attitudes of management with regards to internal auditing in light of the increased demands and responsibilities of the new auditor. Students, internal auditors and management must be educated properly and trained for this partnership concept. By using the internal auditor as part of the management team and by offering more to management and assuming more risk, the goals of the organisation are more likely to be achieved effectively, efficiently and economically.
This paper outlines the results of a survey designed to compare the opinions of internal auditors to one class of audit customers – namely management accountants. To…
This paper outlines the results of a survey designed to compare the opinions of internal auditors to one class of audit customers – namely management accountants. To function effectively, internal auditors and the customers of audit services should possess a similar understanding of what makes internal auditing a value‐added activity. Failure to reach this understanding could result in the perception that internal audit is simply an obstacle to achieving production objectives. This can result in underutilized audit services and ignored audit recommendations. Fortunately, internal auditors and management accountants have similar views, but there are a few areas of difference that should be addressed by internal auditors.
Whistle‐blowing can play an important role in the internal control environment of an organization, and internal auditors are its natural outlets. This study examines whistle‐blowing complaints received by internal auditors based on survey responses from 129 chief internal auditors of US manufacturing companies. Within the past two years, 71 percent of chief internal auditors received whistle‐blowing complaints, 65 percent of which were found to be true upon investigation. The receipt of whistle‐blowing complaints was positively associated with involvement of internal auditing in monitoring compliance with the corporate code of conduct, and with audit committee support of internal auditing (as evidenced by audit committee involvement in decisions to dismiss the chief internal auditor). These results are consistent with recent calls by the Committee of Sponsoring Organizations and others for public companies to maintain and enforce a code of conduct, and by the Blue Ribbon Committee and others about the need for audit committees to deal proactively with internal and external auditors.
Statement on Auditing Standards (SAS) 65 was issued in April 1991 toclarify various aspects of the working relationship that should existbetween external and internal…
Statement on Auditing Standards (SAS) 65 was issued in April 1991 to clarify various aspects of the working relationship that should exist between external and internal auditors. Describes the historical development of this relationship as viewed through the promulgation of authoritative literature, reports of official committees and commissions, and prior research. Presents a survey which describes various aspects and characteristics of this relationship in the light of the provisions of SAS 65.
International Standards on Auditing (ISAs) require external auditors to communicate with the client’s governance body regarding significant matters which came to the…
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
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…
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.
The approach used is a behavioral experiment where audit planning decisions are made by internal auditors for three hypothetical scenarios.
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.
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.
The results imply that the reliability of an expectation about deficiencies is more influential than the authority of the source.
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.
Gives examples of a number of organizations, committees, andcommissions which have promoted both internal auditing and auditcommittees during the past two decades…
Gives examples of a number of organizations, committees, and commissions which have promoted both internal auditing and audit committees during the past two decades. Explores the need for a close working relationship between the internal auditor and the audit committee. Examines: (1) the evolution of both internal auditing and audit committees; (2) the Treadway Commission recommendations regarding the importance and role of audit committees and internal auditors; (3) ways in which internal auditors can work with audit committees; and (4) benefits gained from this relationship. Shows how, recently, internal auditors have been transformed from a financial enforcer to a respected member of the management decision‐making process, and audit committees have also assumed more oversight responsibilities in the areas of financial reporting and internal control. Thus, a close and effective working relationship between the audit committee and the internal auditor will be beneficial not only to the company which they serve but also to society as a whole.
There is an increased emphasis on internal control in the governmental sector. We compare finance officer assessments of internal control to auditor assessments for a…
There is an increased emphasis on internal control in the governmental sector. We compare finance officer assessments of internal control to auditor assessments for a sample of Michigan municipalities. On average, the finance officers' assessments of their control systems were more favorable than the assessments made by auditors from a regional CPA firm with a large governmental practice, suggesting that auditor reports on internal control may result in a more conservative evaluation of the control system than reports provided by management. One measure of the effectiveness of the internal control system is its ability to prevent errors. We compare the finance officer and auditor assessments of internal control to the number of audit adjustments as an objective measure of the accuracy of the control assessments. The internal control assessments made by auditors were significantly more highly correlated with the number of audit adjustments than those made by finance officers. This suggests that the accuracy of internal control reports may be improved if the reports are prepared by auditors.