Identifying and Ranking the Obstacles of Internal Controls Evaluation in the External Audit Process

Javad Ardi,Mohammad Nazaripour

doi:10.5901/mjss.2015.v6n6s2p613

Abstract

Internal control evaluation is a risk-assessment process utilized by both a firm and its auditor to assess various aspects of the firm’s accounting information system. Accounting internal control systems which are affected by an entity’s board of directors, management, and other personnel are designed to provide reasonable assurance regarding the effectiveness and efficiency of operations, the reliability of financial reporting, and compliance of the organization with laws and regulations. The purpose of this study is to identify the most important obstacles of internal control evaluation in the external audit process from the viewpoint of companies’ managers and external auditors in Iran. The research period was fall 2014 and the research data was gathered through a questionnaire. In order to test validity and reliability of questionnaire, factor analysis and cronbach’s alpha were used respectively. Kolmogorov-Smirnov test, T-test and Chi-square test were used to test hypotheses. Friedman test was used to rank the identified obstacles. According to the research findings, from the managers’ viewpoint issues such as lack of higher education, being traditional accounting systems and lack of proper auditing guidelines were the most important obstacles. From the external auditors’ viewpoint, issues such as lack of affordable of internal control evaluation, lower audit fees and lack of professional training were the most important obstacles. DOI: 10.5901/mjss.2015.v6n6s2p613

Highlights

Improvement and complexity of economical units, continuous technological progress, increased turnover, lack of resources, increased competition, variety of dangers treating the goals and policies of organizations were the cause to capture the mind of management in to the many problems.so direct and individual control of these units became impossible
Since management is responsible for the financial statements and internal control system, implementation of internal audit to assess the performance of the internal control system, has grown increasingly
Most of the respondents to the questionnaire from the view of education are university graduates, and in terms of work experience are more than 20 years. 75 respondents were unit production managers and other 75 were partners of audit farms

Summary

Introduction

Improvement and complexity of economical units, continuous technological progress, increased turnover, lack of resources, increased competition, variety of dangers treating the goals and policies of organizations were the cause to capture the mind of management in to the many problems.so direct and individual control of these units became impossible. For this reason, need to establish effective internal control systems have been considered as an integral component of an efficient management system. This recognize is used to identify types of distortions, verifying potential factors affecting the risk of important distortions and designing the content test (preparation committee for standard accounting, 2010)

Methods

Results

Conclusion