			Home About us Contact

Internal Audit Function (internal + audit_function)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	100%

Selected Abstracts

Outsourcing and Audit Risk for Internal Audit Services,

CONTEMPORARY ACCOUNTING RESEARCH, Issue 3 2000
DENNIS H. CAPLAN
Abstract Some companies now outsource their internal audit function to public accountants. Internal auditors and accounting firms disagree about the merits of outsourcing. Each type of auditor claims to provide more cost-effective services and appears to claim superior expertise. This paper uses agency theory to examine outsourcing and reconciles the outsourcing debate without resorting to differential auditor expertise. Under the assumptions that public accountants' "deep pockets" provide incentives to outsource and their higher opportunity cost provides a disincentive, we characterize the optimal employment contract with each auditor. We find that public accountants provide higher levels of testing, but possibly for a higher expected fee. This result supports both the internal auditor's claim as the lower cost provider, and the public accountant's claim of higher quality. We also find that incentives to outsource generally increase in various measures of risk, including the risk that a control weakness exists and the size of the loss that can result from an undetected control weakness. [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]

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 Categories of Non-Audit Services and Audit Fees: Evidence from UK Companies

INTERNATIONAL JOURNAL OF AUDITING, Issue 1 2002
M. Ezzamel
Using survey data we examine the relationship between various categories of non-audit services and audit fees. Compared to previous research, we use a more refined classification of non-audit services both for incumbent and non-incumbent auditors, and control for the existence of an internal audit function and basis of disclosure. Our results suggest that the relationship between levels of audit fees and non-audit services varies by category of non-audit service. These results support explanations of the positive association between fees paid for non-audit services and audit fees in terms either of client specific differences, e.g. organisational complexity, or of events giving rise to the purchase of more audit and non-audit services rather than in terms of direct economic linkages between the cost functions for audit and non-audit services. We speculate that the presence of another auditing firm at the client in a consulting capacity may exert competitive pressure on the fee for external audit. [source]

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]