The Impact of Internal Audit Committees’ Practices on Enhancing the Independence of Internal Auditors in Jordanian Commercial Banks

Khalil Abu Saleem

doi:10.5539/ijbm.v13n5p156

Abstract

Purpose: This study aim to explain the impact of the audit committees' practices on enhancing the independence of internal auditors in Jordanian commercial banks from the perspective of external auditors.Design / methodology / approach: The statistical descriptive approach was used, the data were collected through a questionnaire designed by the researcher, which targeted the external auditors of (90) individuals. The study included four axes, three of which were allocated to measure the internal audit committees' responsibilities, functions and powers, while the fourth axis was devoted to measuring the independence of the internal auditing bodies.Results: The study found that there is a statistically significant relationship to the internal audit committees' practices in enhancing the independence of the internal auditing bodies; also the role of the audit committees has been the main impact in enhancing this independence.Recommendations: the study recommends enacting and modifying laws to enhance the independence of the audit committees to supervise all matters related to internal auditors.Originality / Value: According to the researcher, this study is one of the first studies that dealt with the practices of the audit committees combined, therefore it is useful for researchers that motivating them to conduct further research on the practices of audit committees in other economic sectors.

Highlights

Originality / Value: According to the researcher, this study is one of the first studies that dealt with the practices of the audit committees combined, it is useful for researchers that motivating them to conduct further research on the practices of audit committees in other economic sectors
As the internal auditor is considered as an employee of the bank’s staff, and he is not immune from the interventions of the management of his work, since he is under the authority of this management and executes its instructions as long as he is one of its employees, so there was an urgent need for a party that supports and monitors his work, and provides a kind of protection and independency from the bank's management, so that he can carry out his functions
The objective of this study aims at identifying the impact of the internal audit committees (IACs) practices on enhancing the independence of the internal audit services in the Jordanian commercial banks and achieving the following sub-objectives: 1. Identify the impact of the functions of the IACs on enhancing the independence of the internal audit services in the Jordanian commercial banks

Summary

Introduction

Commercial banks are considered an important source of the economy in the modern era through its role in steering the economic wheel for the societies they operate in, because in one hand, they provide funds from various sources and invest them in various economic activities on the other hand.there was a need for a party to monitor the work of these banks in order to ensure the preservation of these funds and protect them from manipulation, fraud and theft, and the need for a party that enjoys a certain level of independence from the management of the bank has emerged that works to perform that task, which is called the internal audit function.As the internal auditor is considered as an employee of the bank’s staff, and he is not immune from the interventions of the management of his work, since he is under the authority of this management and executes its instructions as long as he is one of its employees, so there was an urgent need for a party that supports and monitors his work, and provides a kind of protection and independency from the bank's management, so that he can carry out his functions.To ensure that the internal auditor performs his work efficiently and effectively away from any management interventions, most legislations and laws in different countries of the world, in addition that all bodies and professional complexes have committed and stipulated the necessity of the existence of internal audit committees (IACs) in all banks that enjoy many powers, responsibilities and functions to exercise their job thereby enhancing the independence of the internal auditor. ijbm.ccsenet.orgInternational Journal of Business and ManagementVol 13, No 5; 20182. There was a need for a party to monitor the work of these banks in order to ensure the preservation of these funds and protect them from manipulation, fraud and theft, and the need for a party that enjoys a certain level of independence from the management of the bank has emerged that works to perform that task, which is called the internal audit function. The importance of the study stems from the role that the IACs can perform in providing an appropriate level of independence to the internal audit services that monitor the bank's operations to prevent fraud and mistakes, as well as they are one of the most important parts of the internal control system in commercial banks.

Objectives

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Conclusion