The effect of internal audit effectiveness, auditor responsibility and training in fraud detection

George Drogalas,Michail Pazarskis,Angeliki Papachristou,Evgenia Anagnostopoulou

doi:10.24818/jamis.2017.04001

George Drogalas, Michail Pazarskis + Show 2 more

Open Access

https://doi.org/10.24818/jamis.2017.04001

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Abstract

The purpose of this study is to explore the relationship between internal audit effectiveness, internal auditor’s responsibility, training and fraud detection. During the last decade internal auditing has become an integral part of modern businesses since it is capable of detecting errors or offences which lead to fraud. In order to investigate the above relationship, we conducted a survey of companies listed in the Athens Stock Exchange. We used factor analysis to validate the survey instrument and to construct our variables measuring fraud detection, internal audit effectiveness, auditor responsibility and training. We used regression analysis to test for significance between the constructed variables. Our analysis shows that audit effectiveness, auditor responsibility and auditor training affect positively and significantly the detection of fraud. Our results highlight the importance of internal audit in detecting accounting fraud and the need of companies to invest on internal audit processes and training in order to achieve enhanced corporate performance. Finally, our research stresses the importance of internal audit and fraud detection for companies which operate in countries which are in a period of economic crisis.

Highlights

Worldwide, demand for fraud audit services has increased over the last years (Westhausen, 2017)
The aim of this study is to examine fraud detection and internal audit and namely whether it is positively influenced by internal audit effectiveness, internal auditor responsibility and internal auditor training in Greek companies
We can observe that detection of unauthorized transactions, employ fraud, and falsifying of financial statements are controlled at a high degree

Summary

Introduction

Demand for fraud audit services has increased over the last years (Westhausen, 2017). The financial crisis and instability have resulted in the increase of fraud scandals, making the use of internal auditing procedures of outmost importance for companies (Bekiaris et al, 2013). The effectiveness of internal auditing can improve from the quality of internal audit, the competence of internal audit team, the independence of internal audit and the management support (Drogalas et al, 2015). In this context, the internal auditor is responsible for detecting financial errors and by using the auditing standards (Bedard et al, 2015). It is worth to mention that the role of internal auditor depends on his practical abilities and professional training in detecting fraud (Petrascu & Tieanu, 2014)

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