The Relationship between Internal Audit Factors and the Audit Quality: Insights from External Auditors of Bangladesh

Abstract

The purpose of this study is to investigate the perceptions of external auditors regarding internal audit factors on audit quality to ensure the effectiveness of the audit process. This study also measures the influence of different internal and external audit attributes on audit quality. The study is descriptive in nature and both quantitative and qualitative data have been collected and analyzed to examine the insights of external auditors concerning the impact of internal audit competency, objectivity, and work performance on the effectiveness of audit quality. This study considers a convenience sampling method in collecting data and a semi-structured questionnaire referring to possible attributes of auditing has been given to the external auditors and requested to provide their valuable judgments with seven response choices on the level of importance of each indicator for audit quality. The results of the study highlighted that audit attributes like standardization, work performance, timeliness, objectivity, and competency are highly important measures of audit quality. The results also reveal external auditors prefer educational qualifications with professional certification of internal auditors can enhance the competency function while auditors' accountability, freedom to access all financial aspects, and unconstrained communication with management will ensure the objectivity of internal auditing. According to the findings, external auditors believe that proper documentation, adequate staffing, a well-defined audit plan can improve the work performance of internal auditing. The study also recommends that the concerned shareholders and other policymakers of organizations improve the effectiveness of internal auditing for strengthening their decision-making capability to make the financial reporting accurate and error or bias-free. Keywords: Internal auditing, External auditing, Audit quality. DOI: 10.7176/RJFA/13-6-08 Publication date: March 31 st 2022