Governance Audit Research Articles

A Comparative Analysis of the Scope and Content of External Audit of Financial Reports Concerned with Spanish Regional Governments: Are the Existing Differences Related with their Financial Position and the Degree of Compliance with Budgetary Stability Ru

The external audit of financial reports concerned with Spanish Regional Governments is characterized by a high degree of heterogeneity. The scope of the reports, their content and their structure present significant differences. In some regions, the audit reports are issued by regional audit institutions, while in others, that have not yet developed those audit regional bodies, reports are approved and issued by the Central Government Audit Supreme Court of Accounts .This paper pursues a double purpose. On the one hand, to classify Spanish Regional Governments according to the development of their auditing systems, taking into account the scope and content of the reports issued by the different audit institutions. On the other hand, the aim to establish a relationship between (a) the degree of development of the different external audit systems and (b) the financial position of each region and their degree of compliance with budgetary stability rules.

Natural resources and assets accountability audit of local officials and government subsidies: evidence from China

ABSTRACT In 2014, the Chinese central government required implementing natural resource and asset accountability audit for local officials to promote environmental governance. From the perspective of government subsidy allocation, this paper examines whether and how the new government audit policy influences the strategy of local governments to high-polluting firms. We adopt a multi-period difference-in-difference research design and find that after the policy implementation, local officials pay more attention to local ecological performance, thus, reducing the government subsidies to high-polluting enterprises. They also reduce support for high-polluting by reducing tax incentives. These findings document that the implementation of government audit policy weakens the collusion between local officials and high-polluting firms, which enriches the intercross investigation between government audit and environmental governance.

Research on the path of national audit in anti-corruption governance

Since its establishment, national audit has assumed the role of standardizing the financial and economic order and promoting the integrity and efficiency of the government. National audit has a natural function of corruption control. With the change of economic environment, the complexity of audit business is increasing, and the audit content and scope are also gradually expanding, followed by the continuous improvement and updating of audit methods and technologies, which also leads to the increasingly prominent role of national audit in corruption governance. National Audit and other mechanisms not only have common aspects in promoting corruption governance, but also have unique advantages different from other mechanisms. Therefore, it is necessary to start with the analysis of the current situation and causes of corruption governance by national audit, and use the unique advantages of national audit to build a multi-level national audit anti-corruption path, so as to give better play to the national governance function of national audit.

INTERNAL AUDIT AND CORPORATE GOVERNANCE IMPACT AT THE REAL ESTATE INDUSTRY IN GREECE AND THE UK

The purpose of this paper is to examine the importance of Corporate Governance and Internal Audit at the Real Estate, Investment Properties and Construction sector in Greece and the United Kingdom. We conducted a survey to a large number of Greek and UK publicly listed firms operating at the Real Estate Sector based on their turnover and the accessibility of data such as numbers of employees and Internal Audit Department Structures. Specifically, we distributed a large number of structured questionnaires to Audit Committee and Internal Audit members to assess the impact of Corporate Governance best practices and Internal Audit operations at the Real Estate Industry. Our conclusion was that Internal Audit and Corporate Governance play a significant role to the Real Estate industry as they are positively associated with the sustainable development of the Real Estate Industry. Moreover, improved Corporate Governance and Internal Audit is associated with less development costs.

The Materiality of Corporate Governance Report Disclosures: Investigating the Perceptions of External Auditors working in Egypt

This study investigates the external auditors working in Egypt perceptions regarding the materiality of the corporate governance report (CGR) disclosures. All external auditors working in Egypt were surveyed to determine whether disclosures are materially important to this group while they are performing their audits. The final sample consists of 247 auditors who work in Big 4 auditing firm, private auditing firms affiliated to foreign auditing firms, private auditing firm not affiliated to foreign auditing firm and governmental auditors. Through hypotheses testing the main findings reveal that all external auditors perceive CGR disclosures as materially important. Moreover, there was significant difference in some of their perceptions, these differences were explained through psychological engagement (i.e., experience, educational level, and work exposure) throughout the analysis. The findings show that respondents consider information related to internal control, governance and compliance to laws and regulations to be significantly material in auditing decision. While information regarding transparency and disclosure were the less important when compared to other sections of the CGR. The current study extends and enriches the ongoing academic and practical debate on the usefulness of narrative disclosures. The study findings suggest that regulators should seek more communications to the current requirements as the results shows that direct knowledge of the auditors made a big difference in their perceptions. The current investigation touched a blind spot in the literature and provided evidence for the materiality level of CGR disclosure in auditing decision, as previous studies investigated how governance report affect the firm value.

Red Flag Effectiveness in Public Sector Audit Using Fraud Pentagon Theory

Auditors in carrying out fraud detection do not always get a bright spot, because the perpetrators have many ways to commit fraud and various underlying motivations. This reason strengthens government auditors, and it is important to understand or recognize indicators or red flags in determining fraud risk assessments. The aim of this article is to gather empirical evidence on how public sector auditors perceive fraud detection. Partial Least Square analysis is the method used. The number of samples in this study was 96 government auditors consisting of 48 BPKP auditors and 48 BPK auditors. The findings demonstrate that gender, duration of employment, and education and training of auditors at BPKB have an impact on the effectiveness of red flags, whereas auditors at BPK have a different impact, with job position, education, and training having an impact on red flag effectiveness. The results of this study give attention to BPKP and BPK to provide opportunities for auditors to participate in continuing education and participate in training that supports auditors in carrying out their work, especially related to training in the use of IT to detect fraud. The perception theory can explain the usefulness of red flags in detecting fraud, according to the findings of this study. This means that in determining the ability to use red flags, it is influenced by individual characteristics (gender, position, length of employment), and the capacity of auditors (education and training).

Analysis of Audit Competencies and Internal Control on Detecting Potential Fraud Occurrences

It is stated that fraud in the government sector includes deceptive acts such as asset misappropriation, loss of state income, falsification of financial records and reports, and mark-ups in government financing. The purpose of this study is to investigate the potential impact of audit competences (professional skepticism and audit experience) and internal control on an auditor's capacity to detect potential fraud occurrences. Primary data were gathered via a printed questionnaire distributed to the 149 government auditors who work at Indonesia's Inspectorate Office. The findings, based on the Partial Least Squares of structural equation modelling, show that both audit competences have a significant impact on the capacity to detect probable fraud. Internal control, on the other hand, has no direct impact on the capacity to detect potential fraud. The findings show that internal control significantly moderates the link between audit competencies (professional skepticism and audit experience) and the auditor's ability to detect potential fraud occurrences. This research offers practical government suggestions for improving government auditors' professional audit competencies and abilities. Audit authorities should be able to create a more effective internal control structure that prioritizes feedback and learning. The limitations of the study as well as future research are highlighted.

AUDIT TATA KELOLA TEKNOLOGI INFORMASI COBIT 5 MANAJEMEN RISIKO

Conducting Information technology governance audits, which means conducting periodic checks on a system that has been built, now many audit models are emerging, but COBIT 5 is one of the relevant governance audits to use. The development of information systems goes hand in hand with the audit system, starting from reading a possible risk that will occur and preventing these risks, then in periodic checks can build a new innovation from the audit results itself, the lack of an information system is indeed a weakness of the system running, but with the evaluation, it means that the weaknesses of the system are minimized. This study discusses how to carry out risk management in an ongoing system with the APO12 domain on COBIT 5.

New trends in agile governance and systems audits

New trends in agile governance and systems audits

The Role of Law Enforcement on Moderating the Relationship between Government Size, Fiscal Decentralization, Audit Finding and Corruption

This study is based on Indonesia's high levels of corruption, as evidenced by the Corruption Perception Index's low level (CPI). In Indonesia, the bulk of corruption cases involve local government entities. The objective of this study is to empirically examine the factors that contribute to high levels of corruption in local governments of district or city in Indonesia and the role of enforcement in that influence. This study applied a purposive sampling method to obtain a sample consisting of 66 district governments and 15 municipal governments in Indonesia in 2019. The data were analyzed by utilizing multiple linear regression techniques using Statistical Package for the Social Sciences (SPSS) version 25. The results of the analysis revealed that fiscal decentralization, government size, and audit findings have a significant positive with the level of corruption and law enforcement significantly moderates such relationship. This research contributes to auditing practices, government administration, law enforcement, and corruption control initiatives in the local government of Indonesia. Local government is also expected to be able to involve the role of the community to help oversee the running of a government which is free from corruption practices. Supervision also needs to be done by law enforcement officials, especially those dealing with corruption cases. Law enforcement officers are expected to be able to supervise and crack down on perpetrators of corrupt practices.

The UK government audit reforms fail to deal with the audit crisis

This paper is a brief commentary upon the recent auditing reforms proposed by the government and a number of state‐sponsored reports. It argues that the government proposals fail to tackle the recurring faultlines in external audits.

THE GOVERNMENT AUDIT IN THE CONTROL OF PUBLIC RESOURCES IN MEXICO

This paper presents an approach of the Government Audit used for the control of public resources in Mexico, by the Superior Audit of the Federation. It is a documentary investigation with an exploratory and descriptive scope, the method of which will obtain the information from the results of the audits of the public account 2020 carried out by the Superior Audit of the Federation, where the number of audits carried out and the scal resources are observed.

Social Ties impacting Audit Quality Exploring Government Entities

Purpose: The purpose of the study is to analyze the first hand data regarding intimacies between government entities and government audit institution of Pakistan, to see its impact on the quality.
 Design/Methodology/Approach:
 Qualitative research design is used to explore the concept base on theoretical saturation technique.
 Findings: The results revealed by default presence of social ties among interactive agents. It further explores indirect relationship between audit quality and social interactions in the presence of petty corruption due to familiarity, unwarranted mutual trust and favoritism however this relationship is shifted toward direct relationship in the presence of material corruption due to fear of losing good reputation, loss of job, fear of departmental inquiry, threat of floating your weaknesses before your rival clique.
 Implications/Originality/Value: The results presented in this paper should therefore be of great interest to government, regulators and standard-setters charged with developing accounting standards to improve the audit quality of reporting information related to existing government auditing setup.

The Strategy to Optimize the Role of Government Internal Supervisory Apparatus (APIP) in Procurement Fraud Risk Management in Industry 4.0

Many challenges confront the efforts to build procurement fraud risk management in Industry 4.0. This study aims to assess the risk of procurement fraud in industry 4.0 and disclose strategies to optimize the role of internal auditors in mitigating these risks. The mixed-method has been conducted with data on procurement fraud risks generally accepted by government agencies. A survey involving 140 respondents and interviews with five experts have been completed. The risk assessment in the research findings involved seven procurement fraud risks, with "collusion between providers in e-tendering" ranking the highest. Procurement management must detect and prevent fraud by creating anti-hacker applications, conducting data analytics on business ownership, and ongoing monitoring. Internal auditors must undertake fraud prevention by improving their ability in data analytics, encouraging probity plans, and procurement assistance. Fraud detection is carried out through performance audits using computer-assisted audit techniques, probity audits, information technology governance audits, continuous audits, data analytics, and internal auditor integrity assessments through surveys to the auditee.

Corporate Governance and Internal Audit at Société Générale Group and ING Group

Corporate Governance and Internal Audit at Société Générale Group and ING Group

The Role of Internal Shari'ah Audit in Enhancing Governance and Shari'ah Compliance in Islamic Banks

This research aims to determine the role of internal Sharīʿah audits in enhancing Sharīʿah governance and compliance in Islamic banks. The paper also seeks to provide a vision of risk-based internal Sharīʿah audit based on professional standards and international best practices. The ultimate goal of the internal Sharīʿah audit process is to assist the institution in fulfilling its duty of Sharīʿah compliance. It is therefore necessary to search for the best methods and professional practices for adoption to improve the internal Sharīʿah audit process and evaluate the effectiveness and efficiency of the internal Sharīʿah control system and to monitor its operation. The research adopted the descriptive analytical approach by describing the role of internal Sharīʿah audit in strengthening governance and Sharīʿah compliance in Islamic banks. After that, it analyzes the results in order to provide a vision for risk-based internal Sharīʿah audit in accordance with the best international practices and professional standards. The findings of this research are as follows: The role of the internal Sharīʿah supervisory system is to translate the concepts of Sharīʿah governance and compliance from theory to implementable procedures. The most crucial role of an internal Sharīʿah auditor is to evaluate the effectiveness and efficiency of the internal Sharīʿah supervisory system, to monitor its operation, and to recommend necessary improvements to the system. The recommendation of this paper to supervisory bodies is to adopt the approach of risk-based Sharīʿah audit in order to further develop the governance standards for Islamic financial institutions related to internal and external Sharīʿah audit.

Bayesian inference of local government audit outcomes.

The scandals in publicly listed companies have highlighted the large losses that can result from financial statement fraud and weak corporate governance. Machine learning techniques have been applied to automatically detect financial statement fraud with great success. This work presents the first application of a Bayesian inference approach to the problem of predicting the audit outcomes of financial statements of local government entities using financial ratios. Bayesian logistic regression (BLR) with automatic relevance determination (BLR-ARD) is applied to predict audit outcomes. The benefit of using BLR-ARD, instead of BLR without ARD, is that it allows one to automatically determine which input features are the most relevant for the task at hand, which is a critical aspect to consider when designing decision support systems. This work presents the first implementation of BLR-ARD trained with Separable Shadow Hamiltonian Hybrid Monte Carlo, No-U-Turn sampler, Metropolis Adjusted Langevin Algorithm and Metropolis-Hasting algorithms. Unlike the Gibbs sampling procedure that is typically employed in sampling from ARD models, in this work we jointly sample the parameters and the hyperparameters by putting a log normal prior on the hyperparameters. The analysis also shows that the repairs and maintenance as a percentage of total assets ratio, current ratio, debt to total operating revenue, net operating surplus margin and capital cost to total operating expenditure ratio are the important features when predicting local government audit outcomes using financial ratios. These results could be of use for auditors as focusing on these ratios could potentially speed up the detection of fraudulent behaviour in municipal entities, and improve the speed and quality of the overall audit.

Corporate governance and sustainability reporting quality: evidence from Nigeria

PurposeThis study aims to examine the association between corporate governance and sustainability reporting quality of listed firms in Nigeria.Design/methodology/approachThe authors measure corporate governance using board governance variables (board size, board independence, board gender diversity and board expertise) and audit committee attributes (audit committee size, audit expertise and audit meeting). The authors measured sustainability reporting quality using a scoring system, which ranges between 0 and 4. The highest score is achieved when sustainability reporting is independently assured by an audit firm. The lowest score refers to the absence of sustainability reporting. The study emphasizes 120 listed firms on Nigeria Stock Exchange using the ordered logistic regression technique.FindingsThe results indicate that board governance variables (board size, board gender diversity and board expertise) and audit committee attributes (audit committee size, audit expertise and audit meeting) are significantly associated with sustainability reporting quality. Additional analysis reveals that external assurance contributes to the quality of sustainability reporting through corporate governance characteristics.Research limitations/implicationsThis study is restricted to a single country. Future studies should consider a cross-country study, which may help to establish a comparative analysis. Likewise, the future study could consider other regression techniques using a continuous measurement of the global reporting initiative in measuring sustainability reporting quality.Practical implicationsThis study’s findings have important implications for policymakers and practitioners, especially the corporate executives and top management. Companies are encouraged to restructure their board to enhance better monitoring and support towards better sustainability reporting.Social implicationsDisclosure on sustainability reporting helps corporate organizations advance the issues of sustainability both nationally and globally.Originality/valueThis current study adds to accounting literature by examining how corporate governance contributes to sustainability reporting practices within the Nigerian context. Drawing from the result, the study provides strong interconnectivity between the corporate board and audit committee in driving sustainability reporting quality within an organizational context.

Government auditing and environmental governance: Evidence from China's auditing system reform

Government auditing is an important mechanism for supervising the use of fiscal funds, preventing official corruption, and improving governance performance. The performance of government auditing is affected by its independence. Taking vertical management reform of government auditing institutions—an initiative China began to pilot in 2015—as the exogenous shock to government auditing and its incentive structure, this paper used the differences-in-differences method (DID) to evaluate the impact of government auditing on the performance of environmental governance. The reform was found to have significantly reduced the intensity of pollutant emissions and a series of robustness tests confirm the validity of this conclusion. The environmental effect of government auditing reform was mainly achieved by improving environmental performance, not by increasing environmental investment. Specifically, the reform had no direct impact on environmental fiscal expenditure; Rather, it improved environmental input–output performance and environmental governance capabilities. The research presented in this paper not only enriches the study of the relationship between (de)centralization and local environmental governance but also provides new evidence of and policy insights into the impact of government auditing on environmental governance.

Effects of Professional Skepticism, Competency and Workload Compression on the Ability to Detect Possible Fraud among Government Auditors

The purpose of this study was to investigate the impact of professional scepticism, competence, and workload compression on an auditor's ability to detect potential fraud. This sample consisted of 149 government auditors from the Indonesian Local Government Inspectorate. Data was gathered through the use of a questionnaire and analysed using the Partial Least Squares Structural Equation Modeling. The findings revealed that internal attribution (professional scepticism and competency) have a significant impact on an auditor's ability to detect the possibility of fraud. Workload compression as an external attribution, did not have a meaningful influence on an auditor's ability to detect probable fraud. Workload reduction was also found to be ineffective in moderating the relationship between internal attribution and an auditor's ability to detect probable fraud. The findings can guide local governments in developing policies aimed at enhancing the role of government auditors in detecting fraud. Keywords: government auditors, professional skepticism, attribution, workload compression