Internal Audit Activities Research Articles

Extending corporate accountability: A survey and framework for analysis

This paper has three objectives: to review the state of the art with regard to the literature on corporate internal audit activities; to report on a research study of recent developments in the scope and organization of the internal audit function in major companies in U.S.A.; and to propose an analytical framework which may be used in future research to describe the scope, procedures and responsibilities of the corporate internal audit function. Although there appears to be some confusion in the extant literature regarding the definition and scope of certain internal audit efforts, this research provides new evidence that major U.S. companies are engaging in unprecedented experiments into the use of auditing as a tool for enforcing management and social accountability. This is a movement away from the traditional financial audit which is frequently assumed to fully circumscribe the internal audit function. The implications for implementing heightened standards of corporate accountability should be of interest to audit committees of boards of directors, corporate management, investors, consumers, and future researchers.

Are Corporate Audit Committees Meeting Their Objectives?

4 The primary responsibility of a corporation's audit committee is to review external and internal audit activities. It meets with the independent auditors before the audit to discuss the scope of the auditor's engagement and after the audit to review earnings releases before publication, discuss the impact of regulatory bodies' pronouncements on the company's financial statement, review the auditor's management letter and discuss staffing of the corporation's internal accounting and financial departments. In addition, the committee meets with the corporation's financial officers to review alternative accounting policies, discuss the simplification of auditor's recommendations, discuss internal controls and nominate an independent auditor. Although this heavy emphasis on audit activities argues for the presence of accountants on audit committees, the authors' survey reveals that in practice men with accounting backgrounds are rarely included. Are audit committees, as currently constituted, any more competent to discharge their responsibilities than a random selection of outside members of the board of directors? >