The effectiveness of internal audit functions and their impact on the performance of external and internal auditors

Abstract

This study explores the relationship between the internal audit function's efficiency and the degree to which external auditors rely on its output. To gather data, a sample of 70 senior external auditors of publicly traded companies in the Republic of Yemen was chosen on purpose. Data was gathered via a questionnaire, and least partial structural equation modeling was utilized to evaluate it. The outcome shown that the degree to which external auditors rely on the work of the internal audit function is significantly positively impacted by the efficiency of the internal audit function. According to the audit risk model, this argues that external auditors should modify their audit efforts in reaction to the internal audit function's efficacy. The effectiveness and adoption of the internal audit function, as a result, adds a new dimension to the audit risk model. By acknowledging the impact of internal audit operations on external audits, the research has practical implications for customers and external auditors aiming to acquire a cost-effective audit of financial statements.