Internal Audit Department Research Articles

A PROPOSED FRAMEWORK TO DEVELOP THE ROLE OF INTERNAL AUDITING AS AN APPROACH TO ENHANCE THE QUALITY OF HEALTH SERVICE AND ENVIRONMENTAL PERFORMANCE IN GOVERNMENTAL HOSPITAL A FIELD STUDY

The study aimed to develop a proposed framework for developing the role of the internal auditor in improving the quality of health service and environmental performance (in light of the promulgation of Law No. 4 of 1994 and amended by Law No. 9 of 2009 on the rules, procedures and controls to be followed to reduce pollution of the environment) The role of the internal auditor in evaluating the quality of service and the extent of compliance with environmental requirements and legislation in light of the recent trends in the standards of professional performance. The researchers adopted the theoretical and applied methods, The study used the SPSS program to test the study hypotheses and analyze the results. The study found that there is a strong correlation between the internal audit (Implementing an internal audit system - conducting internal audit in accordance with the applicable professional standards - independence of the internal audit department - following up the application and evaluation of internal audit systems and procedures) and the internal performance The importance of environmental performance in hospitals - the interest of government hospitals in assessing environmental performance - quality of health service). The study recommended that the work of the internal audit should increase attention to the personality of the internal auditor and that the internal auditor should perform the review according to the required professional standards, Improve employee performance.

Internal Audit in Malaysian Public Sector: Qualitative Approach

Internal audit is recognized as an important cornerstone in achieving good corporate governance. It should be considered as an integral part of an effective system of corporate governance. Among others, internal auditors play the role in evaluating the risk and monitoring the internal control system, as well as assisting the management in monitoring the effectiveness and efficiency of the operations. This paper examines the perception of the public agencies on the work done by their internal audit departments. Their perception on the audit itself, the improvements on operating efficiency after the audit, the effectiveness of the recommendations and the content of the report issued are sought. This study was conducted in one of the important ministries in Malaysia. This is a qualitative study where thirty public servants from ten government agencies were interviewed, ranging from supporting staff to managerial levels. The findings indicate that all the interviewees agree that their internal audit departments have contributed to the improvement of their internal control systems and it is an important department for their agencies. Among others, the internal audit department is seen as the party which encourages preventive actions, improves the transparency and the flow of their work processes and helps to bring positive changes to their agencies. However, they also highlight the constraints that they have to face in order to comply with the recommendations and rules and regulations in their agencies.

Turkish Listed Manufacturing Companiess Audit Structure and Its Effect on Earnings Management

Using a sample of 1,333 firm year observations during 2005-2013, this research focuses on Turkish listed manufacturing companies’ audit structures’ effect on their earnings management via accruals and business activities. Audit structure was divided into the internal audit function and audit committee. Provision of the internal audit (a department, parent company or both) and audit committee characteristics (size, independence and meeting frequency) are the independent variables of this research and the earnings management is the dependent variable which was calculated as a magnitude for discretionary accruals and manipulation of business activities with Kothari, Leone and Wasley (2005) and Roychowdhury (2006) respectively. The results revealed that manipulating the business activities are correlated with neither the internal audit nor the audit committee. Also, internal audit solely provided by the parent company has no effect on the earnings management via discretionary accruals but internal audit department and the department supported by the parent company’s internal audit decrease the earnings management via accruals. On the other hand, I didn’t find any statistical significance with the audit committee characteristics and discretionary accruals. Although it was not the main focus of this research, the results show that female Turkish auditors are more risk-averse than their male counterparts.

The Future of Knowledge in the Internal Audit

In the last years the focus of internal audit has shifted away from business toward financial controls. In the future internal audit departments need to align their contributions to the organization’s strategic objectives. The purpose of the internal audit which is organised within the entities is to provide counselling to the general management and to assess the functionality of the internal control system, activities by which it brings an additional value to the entity which is audited. The optimal functioning of the entities on the basis of an integrated internal control framework imposes the existence of a proper control environment which should promote the ethical values, be transparent, accept good practice standards and set responsibilities on the same line with the strategies and policies approved by the superior level management.

The Current State and Future Directions of Continuous Auditing Research: An Analysis of the Existing Literature

ABSTRACTAdvances in information technology, especially the rise of the real-time economy and massive fraud scandals of corporations such as Enron, WorldCom, and Xerox, have led to significant changes in the business and risk environment of companies. As a consequence, requirements for the auditing profession have changed, and call for the use of new auditing technologies such as continuous auditing. Previous empirical literature has identified a high acceptance of continuous auditing by practitioners within internal audit departments and external audit firms. We conduct a content analysis of 100 continuous auditing papers from 38 different journals published between 1983 and 2015. Our literature review summarizes and classifies the existing literature on continuous auditing, examines the current state of knowledge of continuous auditing in AIS research, and suggests future research opportunities.JEL Classification: M40; M42; G34; G32; M4; G3.

A survey on firms' implementation of COSO's 2013 Internal Control–Integrated Framework

Many firms began implementing COSO's 2013 Internal Control–Integrated Framework in 2014. This study surveys U.S. accounting professionals, primarily from large publicly-traded firms, to examine views concerning the framework and its impact on key areas related to internal controls. The analyses provide insight into five specific topics important to the framework. First, results indicate that respondents view the 2013 Framework and its 17 principles as an overall improvement to the 1992 Framework. However, benefits and costs from implementing the framework appear mitigated because firms already had effective internal control structures in place. Second, respondents view the 17 principles as a set of rules for achieving effective internal controls, but believe the principles still provide adequate flexibility and allow for sufficient management judgment. Third, most respondents indicate changes in at least one of the five components of internal controls, as well as across information technology-related controls. Fourth, in addition to external financial reporting objectives, firms are applying the framework to non-financial, operational, and compliance objectives. Last, results indicate greater expected external audit effort related to SOX Section 404 testing but not audit fees, perhaps due to external auditors' reliance on internal audit departments' work.

Examining CAATTs Implementation by Internal Auditors in the Public Sector

Computer Assisted Audit Tools and Techniques (CAATTs) are not new for auditors, and it needs to be adopted to gain the audit efficiency and effectiveness especially in a current era of technology. This paper examined the implementation of CAATTs by internal auditors in the public sector. Accordingly, this research reports the results from 12 interviews made with internal audit departments in public sector in both federal and state level in Malaysia. This research found that the implementation of CAATTs by internal auditors in public sector is still low due to lack of expertise, high implementation and maintenance cost, limited access of auditee’s data, and most of them prefer to conduct the audit manually. Furthermore, it is not mandatory for them to use CAATTs. The evidence is a contrast with the encouragement made by the government to improve the IT usage in public sector. The results implied that training for future auditors in CAATTs to ensure the successful implementation is crucial. For CAATTs to be a success, the head of internal audit also must have the awareness about the importance of CAATTs as well as enforcement of its implementation.

Preface to the Second Issue of Indian Pacific Journal of Accounting and Finance

Preface to the Second Issue of Indian Pacific Journal of Accounting and Finance

PENGARUH PERAN KOMITE AUDIT, PENGENDALIAN INTERNAL, AUDIT INTERNAL DAN PELAKSANAAN TATA KELOLA PERUSAHAAN TERHADAP PENCEGAHAN KECURANGAN

The needs for good corporate governance in the last ten years have been evidenced, especially after the failure of some big companies. In Indonesia, the good corporate governance become more important since this country experienced a multi dimension crisis at the middle of the 1997, where all government agents and private enterprises were required to implement the corporate governance. The purpose of this research is to explore the influence of audit committee role, internal control, internal audit, and good corporate governance implementation simultaneously and partly on the fraud prevention over the state-owned companies. This research was conducted by census methods over 13 public BUMN in Indonesia. The data used in this research were primary data collected by questioners. The research respondents were audit committee chairman, financial director, internal audit department chairman, and corporate secretary. The validity and reliability of the data was tested before hypothesis testing. The data analysis for hypothesis testing was the path analysis. This research concludes the of audit committee role, internal control, internal audit, and good corporate governance implementation influential significant to Fraud prevention the state-owned companies in Indonesia. From this research expressed that optimal from audit committee role, internal control exercise, internal audit and good corporate governance implementation can prevent the happening of fraud prevention over the state-owned companies in Indonesia.

Fighting Corruption by Means of Effective Internal Audit Function: Evidence from the Ghanaian Public Sector

Using structural equation modelling (SEM) we analysed the link between corruption and effective internal audit function (EIAF) in Ghana through a survey of directors and managers of selected public sector organizations. A decade after the promulgation of the Internal Audit Agency Act (IAAA), 2003 (Act 658) as an instrument to fight administrative corruption in Ghana, there is little empirical evidence to show its impact on corruption, though anecdotal evidence suggests it has played a critical role in maintaining financial discipline and public sector accountability and transparency. We established that full implementation of Act 658, size of the internal audit department and independence of the audit department significantly affect the effectiveness of the internal audit function which negatively impact on corruption. We conclude that strict adherence to and the implementation of regulations and laws as well as independence of the internal audit function will help fight administrative corruption in Ghana.

An Exploratory Study on Management Support Services and Its effects on the Quality Service Delivery of Internal Auditors in the Northern Ghana

The Internal Audit Department is a cornerstone for effective corporate governance. However, its effectiveness largely depends on the support of management. Therefore, this paper examines Management Support Services and its effects on the performance of Internal Audit Department in the Public Sector of Ghana. An exploratory research approach was deployed for this study. The respondents include Management, External Auditors and Heads of Internal Audit Departments in the three regions of the Northern Ghana. A total sample size of 170 was used. It was discovered that the Internal Auditors were not satisfied with the support services that management provide. There was strong positive correlation between Management Support Services and the Internal Audit performance. The key support services that influence Internal Audit performance were management commitment to working with Internal Auditors to develop Internal Auditor Charter and providing adequate logistics. On the basis of these findings, the paper recommends that Management should see internal audit unit as a strategic business unit in creating value and give it the necessary support. The Internal Audit Agency should be restructured with constitutional powers to recruit, train, determine condition of service and post internal auditors to all public institutions.

Kingdom of the Netherlands-Netherlands: Financial Sector Assessment Program:: Technical Note-Insurance and Pension Sectors

This Technical Note discusses the findings and recommendations in the Financial Sector Assessment Program for the Netherlands on the insurance and pension sectors. The governance, accountability, and internal processes of the supervisors, operating under a well-functioning twin-peaks model, are robust. With two-tier boards that include independent members, and an internal audit department, the governance structure of both supervisors is vigorous. Detailed documentation supports the internal processes. Discussions are underway to determine a new structure for the pension system, which may include shifting risks to the participants.

Empirical Research Concerning the Impact of the Public Internal Audit on the Accounting System and its Reliability in Romanian Universities

Abstract The present paper is materialized in an empirical study concerning the impact of the internal audit on the accounting system and its reliability, in case of public universities in Romania. In order to achieve the study, it was necessary to know the different points of view of the representatives of the accounting departments of public institutions of academic education, using a statistical survey based on questionnaire. The research objectives were focused on obtaining conclusions regarding: the importance of internal auditing of the accounting system and its reliability; the extent to which the internal audit manages to provide reasonable assurances regarding the accounting and financial activity; the importance in auditing of the items related to the accounting activity; the assurance and the adequacy of the human resources allocated to the internal audit departments; the frequency with which the internal audit reports projects are modified in order to follow the audited structure recommendations; the extent to which the audit reports reflect the reality; the internal audit activity contribution in improving the accounting systems and their reliability in the Romanian universities.

أثر إنعکاسات الدور الحدیث للمراجعة الداخلیة على تعزیز مراحل إدارة المخاطر:دراسة نظریة ومیدانیة

غرض البحث: يهدف هذا البحث إلى تحديد إنعکاسات الدور الحديث للمراجعة الداخلية وأثرها على تعزيز مراحل إدارة المخاطر بمنشآت الأعمال المصرية منهجية البحث: تم إجراء دراسة ميدانية من خلال توزيع قائمة استقصاء على عينة مکونة من (۱۳۸) مفردة من خلال استقراء وتحليل آراء ثلاث فئات تمثل الفئات ذات الصلة بموضوع البحث من المراجعين الداخليين ، المديرين الماليين، مراقبي الحسابات، وتم استخدام بعض الأساليب الإحصائية المناسبة وتطبيقها من خلال برنامج (22 SPSS)، ومن أجل تحقيق هدف البحث اعتمد الباحثون على المنهج المعاصر القائم على المزج بين المنهج الاستقرائي والاستنباطي لاختبار فروض البحث ، وتحليل البيانات، وتفسير النتائج. النتائج: تشير النتائج الرئيسية للبحث إلى أن تقرير المراجع الداخلي عن المخاطر يزيد من ثقة المستثمرين في مصداقية التقارير المالية للمنشأة، حيث يقدم الهم معلومات عن المخاطر المختلفة التي تواجهها أو التي من المحتمل أن تواجهها المنشأة وکيف تم إدارتها. واتضح من نتائج الدراسة الميدانية، توافر دليل ميداني حول الأهداف التي طرحتها الدراسة المتعلقة بالدور الحديث للمراجعة الداخلية فيما يتعلق بإدارة المخاطر بمنشآت الأعمال المصرية، علاوة على ذلک المساهمة الإيجابية لإنعکاسات الدور الحديث للمراجعة الداخلية في تعزيز مراحل إدارة المخاطر بمنشآت الأعمال المصرية واستنادا لهذه النتائج يوصى الباحثون بضرورة إعادة التأهيل العلمي والمهني والتطوير والتحسين المستمر لأعضاء إدارات المراجعة الداخلية لاکتسابهم مهارات يستطيعون من خلالها استيعاب التطورات الخاصة في مبادئ وآليات الحوکمة وإدارة المخاطر. الأصالة والإضافة: يعد البحث من أوائل الدراسات التي إقترحت إطارة علمية يوضح إنعکاسات الدور الحديث للمراجعة الداخلية على تعزيز المراحل الأساسية لإدارة المخاطر المتمثلة في مرحلة تحديد المخاطر- مرحلة تقييم المخاطر مرحلة اقتراح وتطبيق أسلوب الاستجابة للمخاطر - مرحلة التقرير عن المخاطر) بالإضافة إلى القيام بدراسة ميدانية لاختبار هذه الإنعکاسات في بيئة الأعمال المصرية. Abstract: This research aims to determine the implications of the modern role of internal audit and its impact on enhancing the stages of risk management in Egyptian business establishments. This research was conducted by a field study by distributing a survey list on a sample of (138) individual by extrapolating and analyzing the opinions of three categories representing the relevant categories of the employees of the internal audit department, financial managers, external auditors, The use of some appropriate statistical methods and their application through the (SPSS 22) program. In order to achieve the objective of the research, the researchers relied on the contemporary method of mixing the inductive and deductive approach to test hypotheses, analyze data and interpret the results. The main findings of the research indicate that the Internal Auditor's report on risk increases investor confidence in the credibility of the entity's financial reports, providing information on the various risks that the entity faces or is likely to face and how it has been managed. The availability of a field guide on the objectives set by the study regarding the modern role of internal audit in relation to risk management in Egyptian business establishments, in addition to the positive contribution of the implications of the modern role of the internal audit in enhancing the stages of risk management in the establishments Egyptian works, based on these findings. The researchers recommended at the end of the study, re-scientific and professional development and continuous improvement training for members of the internal audit departments to acquire skills through which they can accommodate special developments in the principles and mechanisms of governance and risk management. The study is one of the first studies to establish a framework that reflects the implications of the modern role of internal auditing on enhancing the basic stages of risk management (risk identification stage, risk assessment stage, Conducting a field study to test these implications in the Egyptian business environment.

Consulting Role of Internal Auditors: Exploratory Evidence from Malaysia

This paper discusses the added value that business can gain from the internal auditors via their consulting role. It is an explanatory study that provides an overview of the consulting activities within the business context. In the current complexity and constantly changing business issues, leveraging on the wealth of collective information about the business obtained by internal auditors in order to add value and improve organizational competitiveness would be a good strategy. In the stewardship perspective, internal audit would support the board and management team through consulting role and are expected to provide advice on the business improvement or future investment opportunities if the company is aggressive for new ventures etc. Fifteen (15) in-depth interviews with the Heads of Internal Audit departments from large Malaysian organizations were carried out. This is to investigate the nature, and extent of consulting activity in the companies analyzed. The results show that internal auditors provided consultation upon the request of management, board of directors or audit committee, on ad-hoc basis to help improve business operations and to achieve organizational objectives. This paper contributes to the literature by providing a deeper insight into nature and extent of consulting activity which internal auditors perform. It investigates an unexplored area of the role of internal auditors as consultants and opens several interesting avenues for future research.

A view from practice - What audit firm leaders expect from audit research and how they see their role in strengthening the bridge between practice and science

The eight largest audit firms in the Netherlands (Deloitte, EY, KPMG, PwC and Baker Tilly Berk, BDO, Grant Thornton and Mazars jointly) have taken the initiative to establish the Foundation for Auditing Research (FAR) by providing the necessary research funds and research data. Stichting Accountantsfonds has recenty joint them. Affiliation with FAR is furthermore open for all audit firms and departments, both large and small, public audit firms as well as internal audit functions and government audit departments. With that, FAR provides for a unique collaboration between practice and science, strengthening the learning curve of the audit industry and its stakeholders, feeding accountancy education, and bolstering the accountancy research community in the Netherlands and abroad. The affiliated firms will arrange access to relevant audit firm data for well-defined research projects. Audit firms have agreed to open up the “black box” of the audit in order to make significant steps forward.

Measuring the value of internal audit in the banking industry

The importance of the audit function in banking institutions has considerably increased during the financial crisis, the focus of the management moving to risk management and control processes. The role of internal audit is to help management in protecting the bank’s patrimony, reputation and ensuring the sustainable development of the organization, by providing an extensive analysis and a comprehensive insight on activities. Furthermore, just as each department must achieve the set objectives and add value to the organization, the same is true for the internal audit department. This study aims to examine the methods used to measure the value of internal audit in the banking industry and to identify the most significant methods that consider the effect of the internal audit results on the organization. We propose answers to questions such as: “Do audit functions in banking institutions confirm their value?” and “How can internal audit demonstrate its contribution to adding value to the organization?” In this regard, we approached the measuring the internal audit value from a theoretical point of view. Further, we investigated which are metrics (KPIs) and practices used to measure the value of internal audit and analysed the extent to which these metrics are likely to highlight the value added to the organization by the internal audit activity. The results of the study suggest that most organizations use methods that contain mainly quantitative and less qualitative elements. There are differences between banks and other types of organizations in terms of the methods and practices used, but also on the importance showed to measurement of internal audit value. In addition, the findings confirm that there is room for improving the methods and practices used, so that the audit function gains value and credibility.

Internal Audit Practices and Standards: External and Internal Auditors' Perceptions on Compliance in an Emerging Economy

Purpose – The purpose of this paper is to investigate differences in the degree of usage and compliance with the Institute of Internal Auditors (IIA) International Standards for the Professional Practices of Internal Auditing (Standards) by the Egyptian listed companies’ internal audit departments. This paper shows the differences among the external and the internal auditors’ perceptions concerning the level of use and compliance with these standards. Design/methodology/approach – Survey based on questionnaires sent to the internal auditors and the external auditors of the Egyptian listed firms registered in the Egyptian Institute of Directors indicator of corporate governance in 2010. This survey was conducted in March 2014 about various topics relating to internal auditing which were summarized in the Common Body of Knowledge 2006 database in relation to compliance with the IIA standards that are important to enhance its role in corporate governance. Findings – The research shows significant levels of variation in the responses concerning usage and compliance with Professional Practices standards of the internal and external auditors. Standards 1100 “Independence and objectivity” and 2100 “Nature of work” show variations in relation to compliance among survey respondents while Standards 1300, “Quality Assurance and Improvement Program” respondents indicated high levels of non-compliance. The findings provide evidence that there are no minimal qualifications level required to appoint the internal auditors and low levels of interactions between the internal auditors and the external auditors. Originality/value – According to the best of authors’ knowledge, this study is among the first that surveyed the status of the use of the IIA Standards in the Egyptian listed firms characterized by having good corporate governance practices from the perspectives of the internal and external auditors of the same companies. This study also investigated the importance of ensuring that the “spirit” of the IIA standards is adhered to rather than the mere compliance with their “letters”. Limitations – The research study relied on a sample of companies for investigating the level of compliance with IIAs standards as well as selected some of the IIA standards for usage and compliance assessments.

Effective Internal Control System and Fund Management Model (FMM): Solutions to Fraud, Errors and Irregularities in Nigeria

Internal auditing system is very crucial as one of the internal control mechanisms. The effectiveness of the internal audit department is tailored towards excellent fund management. Problem of information asymmetries, fraud errors and irregularities are controlled. This paper adopts the conceptual methodology. The article concludes that the effective internal auditing system and excellent fund management system will enhance organizations to achieve their goal. This paper examines the effect of excellent internal auditing system and fund management. The internal control mechanisms can lead to effective management of revenue generated by institutions. Errors, irregularities and fraud could be minimized if the FMM is adopted. This paper therefore recommends for public institutions to adapt or adopt the FMM as it is a medium for controlling of fraud by the administrator.

Model for dimensioning the audit structures in the public sector

This article proposes a solution to determine the size of the internal audit departments in public sector organisations. The conceptual model for determining the actual size of an internal audit department, as adopted by the Institute of Internal Auditors (IIA), is presented and the various factors used in dimensioning are analysed. The article also presents a computational model for the public sector, illustrated by means of a procedure which is based on the size of the organization and uses specific calculation variables and explicit (clearly defined) correction coefficients to determine the final number of internal auditors. The variables and the coefficients of the described model cover the significant factors that might influence the size of the internal audit department. At the same time, the requirements of adequacy and usefulness of the model for the various entities of the public sector are insured. The model proposed for the public sector entities constitutes also a supporting tool for the practical implementation of the legal, regulatory and normative requirements with regard to the sizing of the internal audit departments.