Informal interactions between audit committees and internal audit function. Evidence from Greek listed firms

George Drogalas,Nikolaos Vagenas,Michail Pazarskis,Alkiviadis Karagiorgos

doi:10.22495/cbv15i1art3

Abstract

During the last decade, corporate irregularities created an unstable economic environment, which highlighted the importance of internal audit function (IAF) and audit committee (AC) in the context of corporate governance worldwide. However, a small number of researches have dealt with informal interactions between the audit committee and the internal audit function in Greek entities. In this context, this article investigates, on the one hand, the existence of informal interactions between the audit committee and the internal audit function, whereas on the other hand, it emphasizes on the determination of the factors associated with their existence. In particular, an empirical survey was conducted with the distribution of a questionnaire to Greek entities listed on the Athens Stock Exchange and a logistic regression analysis was used to illustrate the information gathered. This study indicates the existence and the factors influencing informal interactions between the audit committee and internal audit function in Greece. More particularly AC independence, AC chair characteristics and CAE characteristics (independent and objective) were found statistically significantly associated with the informal interaction between the two functions.

Highlights

In a constantly changing economic environment, the utmost importance of corporate governance has become paramount, and sprung many discussions among academics, executives, investors and policymakers (Koutoupis & Pappa, 2018)
The increasing need for transparency led entities to revaluate the framework of corporate governance regarding both internal audit and the audit committee
According to the IIA (2002b), a strong working relationship between the audit committee and internal audit function is essential for each sanction to fulfil its responsibilities

Summary

Introduction

In a constantly changing economic environment, the utmost importance of corporate governance has become paramount, and sprung many discussions among academics, executives, investors and policymakers (Koutoupis & Pappa, 2018). In an intensive effort to adopt corporate governance, an increasing emphasis is placed on the supervision of internal audit functions by the audit committees. The audit committee's requirement for improved internal audits may lead to a more conspicuous focus on internal control and its characteristics, thusly increase the interactions between the audit committee and the Internal audit function (Abbott et al, 2010). Both the formal and informal interactions are important for the audit committee and for the fulfilment of its supervisory role

Methods

Results

Conclusion