Factors Affecting Internal Audit Effectiveness: A Research in China SMES

Abstract

The purpose of this study is to examine the factors that influence the effectiveness of internal auditing of unlisted SMEs in China. The research design of this paper is a questionnaire-based quantitative research method used to collect empirical data from 26 internal auditors. The findings show that firm size, independence of internal audit, level of communication with external auditors, support from management, and competence of internal auditors have significant positive impact on internal audit effectiveness. Among them, MS and IND have relatively the greatest impact on IAE. At the same time, in order to improve the effectiveness of internal auditing of small and medium-sized enterprises, enterprises are more inclined to strengthen communication and cooperation with external auditors, rather than improving the ability of internal auditors. The current research has some value for policy makers in SMEs. This provides a new way of thinking for enterprise decision-making in order to improve the effectiveness of internal audit - to implement outsourcing of internal audit. To the best of the authors' knowledge, this study is the first to examine the factors that influence the effectiveness of internal auditing in Chinese non-listed SMEs. But it also has its limitations: the survey sample is too small. The current study is helpful for further in-depth research in the future.