The Influence of Relational Coordination on Audit Committee's Internal Control Oversight Quality

Abstract

An audit committee can improve the quality of information directly by overseeing the financial reporting process and indirectly through the oversight of internal control and external auditing. However research in understanding the effectiveness of the audit committee in its internal control oversight has been relatively neglected (Bedard and Gendron, 2010). The first objective of this study is to examine the association between audit committee characteristics (such as independence and expertise) and its internal control oversight quality. According to Hasnah, Daing, Jeyaraman and Ong (2009), the key oversight mechanisms on internal control in a publicly traded company are the audit committee and the internal audit function, hence the second objective of this study to examine the mediating effect of relational coordination on the relationship between audit committee characteristics and quality of internal control oversight. Relational coordination in this context, as drawn from the relational coordination theory, is coordination between the audit committee role and the internal audit function in carrying out the task of internal control systems oversight. This study is expected to contribute to the conception of audit committee effectiveness in its internal control oversight through the increased understanding of the linkage between the audit committee and the internal audit function in terms of its communication and coordination. The population for the study will be the publicly traded non-finance companies listed on the main board of Bursa Malaysia. Using a two phase method, the first phase will constitute data collection through survey questionnaire in order to generalize the results to a population, while the second phase will employ in person interviews with selected heads of internal audits to collect detailed views from the selected participants. Correlation, multiple regression and factor analysis techniques will be used in the analysis of quantitative data whereas techniques such as coding process will be used for qualitative data.