Internal Audit Practices and Standards: External and Internal Auditors' Perceptions on Compliance in an Emerging Economy

Abstract

Purpose – The purpose of this paper is to investigate differences in the degree of usage and compliance with the Institute of Internal Auditors (IIA) International Standards for the Professional Practices of Internal Auditing (Standards) by the Egyptian listed companies’ internal audit departments. This paper shows the differences among the external and the internal auditors’ perceptions concerning the level of use and compliance with these standards. Design/methodology/approach – Survey based on questionnaires sent to the internal auditors and the external auditors of the Egyptian listed firms registered in the Egyptian Institute of Directors indicator of corporate governance in 2010. This survey was conducted in March 2014 about various topics relating to internal auditing which were summarized in the Common Body of Knowledge 2006 database in relation to compliance with the IIA standards that are important to enhance its role in corporate governance. Findings – The research shows significant levels of variation in the responses concerning usage and compliance with Professional Practices standards of the internal and external auditors. Standards 1100 “Independence and objectivity” and 2100 “Nature of work” show variations in relation to compliance among survey respondents while Standards 1300, “Quality Assurance and Improvement Program” respondents indicated high levels of non-compliance. The findings provide evidence that there are no minimal qualifications level required to appoint the internal auditors and low levels of interactions between the internal auditors and the external auditors. Originality/value – According to the best of authors’ knowledge, this study is among the first that surveyed the status of the use of the IIA Standards in the Egyptian listed firms characterized by having good corporate governance practices from the perspectives of the internal and external auditors of the same companies. This study also investigated the importance of ensuring that the “spirit” of the IIA standards is adhered to rather than the mere compliance with their “letters”. Limitations – The research study relied on a sample of companies for investigating the level of compliance with IIAs standards as well as selected some of the IIA standards for usage and compliance assessments.