Abstract
I examine the effects of country institutional factors on the quality of Internal Audit Function. Using data from survey questions from Internal Auditors, Audit Manager and Directors from 36 countries, I find systematic differences in IAF quality across countries. The variation is attributed to country’s institutional characteristics. Specifically, the result demonstrate that countries with large stock market, dispersed ownership, strong shareholder protection, and with high quality of accounting standards are more likely to have a higher percentage of competent and independent IAF than other countries. Overall, the results are consistent with prior works that demonstrate that institutional factors play an important role in influencing international differences in corporate governance and financial reporting systems.
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