Abstract
The current study examines the extent to which audit committees comply with the requirements of corporate governance in Jordan and describes the current status of internal audit function. In addition, the study examines empirically the relationship between the internal audit quality and the compliance of audit committees with the governance requirements. The results from 49 respondents indicate that audit committees comply with the requirement of corporate governance and no significant difference is found in such compliance due to sector. In addition, the internal audit quality attributes are met among Jordanian companies to a considerable extent. Further, the independence and objectivity dimension of internal audit quality has a positive and significant relationship with the compliance of audit committees with governance requirements. Internal audit competence and due professional care have no significant relationship with audit committees compliance. One important implication of the current study is the development of a scale to measure the compliance level of audit committees with the governance requirements that can be used by both academics and decision-makers in firms.
Highlights
A considerable attention has been given to internal auditing profession recently (e.g. Desai, Roberts & Srivastava, 2010; Karagiorgos, Giovanis, & Drogalas, 2011), due to the rapid change in the business environment (Savčuk, 2007), the appearance of corporate governance instructions and the role that internal audit plays in applying such instructions (Arena & Azzone, 2009)
Christopher et al (2009) conducted a study to investigate the extent of independence of internal audit function in respect to its relationship with management and audit committee in Australia and found that internal audit function is not complied with the requirements of the Institute of Internal Auditors (IIA) in reporting in that some reports are not directed to audit committees
The development of questionnaire based mainly on two main sources including; the 2017 Corporate Governance Instructions for Shareholding Companies Listed on the ASE, which issued by Jordan Securities Commission (JSC), and effective from May 22, 2017, and the 2016 International standards for the professional practice of internal auditing (Standards), which issued by IIA and effective from January 2017
Summary
A considerable attention has been given to internal auditing profession recently (e.g. Desai, Roberts & Srivastava, 2010; Karagiorgos, Giovanis, & Drogalas, 2011), due to the rapid change in the business environment (Savčuk, 2007), the appearance of corporate governance instructions and the role that internal audit plays in applying such instructions (Arena & Azzone, 2009). The current study focuses mainly on the role of internal audit in enhancing the governance practices The justification of such focus is based on the critical role that good corporate governance plays in protecting the rights of different stakeholders in any firm, which in turn decreases the conflict of interests among the different parties and contributes effectively toward a good performance as suggested by agency theory (Jensen, 1993). The current study contributes to current knowledge by developing new scale to evaluate the extent to which audit committee comply with corporate governance practices and offers an additional evidence on the effect of internal audit function on such practices. Section six discusses the results and section seven concludes the study
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