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Internal Audit (internal + audit)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	86%

Terms modified by Internal Audit

internal audit department

internal audit function

Selected Abstracts

The Influence of Nonaudit Service Revenues and Client Pressure on External Auditors' Decisions to Rely on Internal Audit,

CONTEMPORARY ACCOUNTING RESEARCH, Issue 1 2005
WILLIAM L. FELIX Jr.
Abstract This paper investigates how external auditor provision of significant nonaudit services and client pressure to use the work of internal audit influence external auditors' use of internal auditors' work. More specifically, we study how external audit evidence gathering choices are influenced by nonaudit fees and client pressure. Our research is motivated by an observation that the magnitude of nonaudit services provided to audit clients introduces the risk that client management may leverage its position with the external auditor and potentially affect the audit process. We address this issue by extending prior research and focusing on the importance of various explanatory variables, including nonaudit service revenues, client pressure, internal audit quality, and coordination, to the external auditor's decision to rely on the work of internal audit. We use data primarily obtained through surveys completed by internal and external auditors. The survey responses represent 74 separate audit engagements. Our findings reveal that when significant nonaudit services are not provided to a client, internal audit quality and the level of internal-external auditor coordination positively affect auditors' internal audit reliance decisions. However, when the auditor provides significant nonaudit services to the client, internal audit quality and the extent of internal - external auditor coordination do not significantly affect auditors' reliance decisions. Furthermore, when significant nonaudit services are provided, client pressure significantly increases the extent of internal audit reliance. Thus, external auditors appear to be more affected by client pressure and less concerned about internal audit quality and coordination when making internal audit reliance decisions at clients for whom significant nonaudit services are also provided. [source]

The Relationship between Internal Audit and Senior Management: A Qualitative Analysis of Expectations and Perceptions

INTERNATIONAL JOURNAL OF AUDITING, Issue 3 2006
Gerrit Sarens
This study, based upon Belgian case studies, provides a qualitative assessment of the relationship between internal audit and senior management, analysing the expectations and perceptions of both parties. We found that senior management's expectations have a significant influence on internal audit and that internal audit, generally, is able to meet most of these expectations. Senior management wants internal audit to compensate for the loss of control they experience resulting from increased organisational complexity. Senior management expects internal audit to fulfil a supporting role in the monitoring and improvement of risk management and internal control, and wants them to monitor the corporate culture. Furthermore, they expect internal audit to be a training ground for future managers. On the other hand, internal audit expects senior management to take the first steps in the formalisation of the risk management system. They are looking for senior management support, as this benefits their overall acceptance. [source]

Some Things in Moderation: A Case Study of Internal Audit

INTERNATIONAL JOURNAL OF AUDITING, Issue 1 2000
A.J. Berry
Abstract The development of a system of moderation of assessment procedures in a new University is examined in this case study. Internal and external moderation are equated with internal and external audit and the relationship between the audit of content and the audit of procedures (Power, 1994) is examined in the light of differing modes of accountability (Sinclair, 1995). [source]

Internal audit, alternative internal audit structures and the level of misappropriation of assets fraud

ACCOUNTING & FINANCE, Issue 4 2008
Paul Coram
M42 Abstract In recent years, the importance of good corporate governance has received significant public and regulatory attention. A crucial part of an entity's corporate governance is its internal audit function. At the same time, there has been significant public concern about the level of fraud within organizations. The purpose of this study is to assess whether organizations with an internal audit function are more likely to detect and self-report fraud than those without. In this study, we use a unique self-reported measure of misappropriation of assets fraud for the first time. The fraud data are from the 2004 KPMG Fraud Survey, which reported fraud from 491 organizations in the private and public sector across Australia and New Zealand. The internal audit data are from a separate mail survey sent to the respondents of the KPMG Fraud Survey. We find that organizations with an internal audit function are more likely than those without such a function to detect and self-report fraud. Furthermore, organizations that rely solely on outsourcing for their internal audit function are less likely to detect and self-report fraud than those that undertake at least part of their internal audit function themselves. These findings suggest that internal audit adds value through improving the control and monitoring environment within organizations to detect and self-report fraud. These results also suggest that keeping the internal audit function within the organization is more effective than completely outsourcing that function. [source]

The Influence of Nonaudit Service Revenues and Client Pressure on External Auditors' Decisions to Rely on Internal Audit,

External auditors' reliance on internal audit: the impact of sourcing arrangements and consulting activities

ACCOUNTING & FINANCE, Issue 2 2010
Lois Munro
M42 Abstract This study examines the impact of internal audit outsourcing and involvement in consulting on external auditors' reliance on the work of internal audit. We test whether these factors influence reliance on internal audit work already undertaken and the use of internal auditors as assistants, distinguishing between control evaluation and substantive testing. Involvement in consulting impacts reliance on work undertaken and the use of internal auditors as assistants for control evaluation. External auditors make greater use of internal auditors as assistants for substantive testing when internal audit is provided in-house. Overall, external auditors use internal audit more for control evaluation tasks. [source]

Internal audit, alternative internal audit structures and the level of misappropriation of assets fraud

Relation between external audit fees, audit committee characteristics and internal audit

ACCOUNTING & FINANCE, Issue 3 2006
Jenny Goodwin-Stewart
M42; G34 Abstract This study examines whether the existence of an audit committee, audit committee characteristics and the use of internal audit are associated with higher external audit fees. Higher audit fees imply increased audit testing and higher audit quality. We find that the existence of an audit committee, more frequent committee meetings and increased use of internal audit are related to higher audit fees. The expertise of audit committee members is associated with higher audit fees when meeting frequency and independence are low. These findings are consistent with an increased demand for higher quality auditing by audit committees, and by firms that make greater use of internal audit. [source]

Internal audit outsourcing in Australia

ACCOUNTING & FINANCE, Issue 1 2006
Peter Carey
M42 Abstract The present study investigates the determinants of internal audit outsourcing using survey data on 99 companies listed on the Australian Stock Exchange, where 54.5 per cent fully rely on in-house facilities and 45.5 per cent outsource some or all of their internal audit function. Results from logistic regression analyses suggest that internal audit outsourcing is associated with perceived cost savings and the technical competence of the external provider. For a subsample of firms that have previously undertaken internal audit activities before outsourcing, contrary to expectations, the larger the organization the greater the propensity to outsource. In addition, smaller firms are found to be adopting internal audit for the first time, through outsourcing. These results suggest that internal audit outsourcing is an expanding business opportunity for professional accountants; but with 75 per cent of firms outsourcing to their external auditor, there are implications for external auditor independence. [source]

The Relationship between Internal Audit and Senior Management: A Qualitative Analysis of Expectations and Perceptions

Two Factors Affecting Internal Audit Independence and Objectivity: Evidence from Singapore

INTERNATIONAL JOURNAL OF AUDITING, Issue 2 2001
Jenny Goodwin
This study examines two factors that may influence the independence and objectivity of internal audit. The first, affecting the organizational independence of the internal audit function, is its relationship with the audit committee. The second is the use of the function as a management training ground. It is argued that this practice might affect individual objectivity because internal auditors may be reluctant to withstand pressure from an auditee who could be their future supervisor. A survey of chief internal auditors in Singapore was undertaken to establish current practice in these areas and to identify relationships between these variables. A strong relationship between the audit committee and the internal audit function was found, with the level of interaction being greater when the audit committee was comprised solely of independent directors. The use of the internal audit function as a management training ground was also found to be quite widespread in Singapore. [source]

Optimal auditing in the banking industry

OPTIMAL CONTROL APPLICATIONS AND METHODS, Issue 2 2008
T. Bosch
Abstract As a result of the new regulatory prescripts for banks, known as the Basel II Capital Accord, there has been a heightened interest in the auditing process. Our paper considers this issue with a particular emphasis on the auditing of reserves, assets and capital in both a random and non-random framework. The analysis relies on the stochastic dynamic modeling of banking items such as loans, reserves, Treasuries, outstanding debts, bank capital and government subsidies. In this regard, one of the main novelties of our contribution is the establishment of optimal bank reserves and a rate of depository consumption that is of importance during an (random) audit of the reserve requirements. Here the specific choice of a power utility function is made in order to obtain an analytic solution in a Lévy process setting. Furthermore, we provide explicit formulas for the shareholder default and regulator closure rules, for the case of a Poisson-distributed random audit. A property of these rules is that they define the standard for minimum capital adequacy in an implicit way. In addition, we solve an optimal auditing time problem for the Basel II capital adequacy requirement by making use of Lévy process-based models. This result provides information about the optimal timing of an internal audit when the ambient value of the capital adequacy ratio is taken into account and the bank is able to choose the time at which the audit takes place. Finally, we discuss some of the economic issues arising from the analysis of the stochastic dynamic models of banking items and the optimization procedure related to the auditing process. Copyright © 2007 John Wiley & Sons, Ltd. [source]

Improving the effectiveness of process safety management in small companies

PROCESS SAFETY PROGRESS, Issue 4 2008
Joseph F. Louvar
Abstract Major accidents are continuing to injure people, and damage facilities and the environment. About 50% of these accidents are in plants that are covered by process safety management (PSM) and 50% are in smaller plants that are not covered. However, the damage is the same. Clearly the OSHA PSM regulation and recommendations by CSB, CCPS, PSP, etc. are not being used as specified. The objective of this paper is to express an enthusiastic support for these major excellent recommendations and to make a few additional recommendations that should enhance those previously listed. This article describes (a) specifically designed methods to improve the implementation of PSM and the above-mentioned recommendations and (b) additional plant practices for preventing accidents. The methods and practices presented in this article are especially important for smaller plants; most of the larger companies already have good systems to prevent accidents. However, since many of the large accidents are in PSM-covered plants, some of these larger plants may also benefit from these additional recommendations. One recommendation is that small companies, although not covered by PSM, should practice the intent of the regulation. At a minimum, companies should develop a document that is at least similar to the PSM documentation. However, this article emphasizes that this documentation is not enough because the management of the requirements is extremely difficult. Companies need to have a system that includes the PSM documents, communication, delegation, and follow-up to insure that the requirements are practiced as intended. Based on the author's experience, the use of additional plant practices such as an effective management system, internal audits, walk-the-line, and checklists will enhance the utilization of PSM. These practices are easy to use and will prevent accidents. More of these methods and practices are needed and should be shared between companies. © 2008 American Institute of Chemical Engineers Process Saf Prog, 2008 [source]