Internal Audit Function Research Articles

Implikasi Peran Auditr Internal Dalam Tata Kelola Perusahaan

The internal audit function continues to evolve in line with changes in the business environment. In Europe, the challenging business environment is closely related to risks and corporate governance issues. As a result, a shift in the internal audit function in addressing corporate governance issues demands greater independence from the function. Responding to the need for a more independent internal audit function, a decision regarding the appointment and dismissal of the head of the internal audit and his remuneration is required, which must be approved by the supervisor. These changes indicate that the role of internal audit in the governance management relationship has changed. This research provides an overview of these changes, the trends toward an increasing role of internal audit in corporate governance, the expected benefits of internal audit independence organizations, and the future challenges in European countries.

Evaluation of the performance of the internal audit function in Libyan banks: A study on Libyan commercial banks.

This study aimed to evaluate the performance of the internal audit function in Libyan banks and to explore the role of demographic information in determining this evaluation. It provides an insightful look into the performance and this relationship through the opinions of the respondents. The study utilized a quantitative descriptive-analytical approach to collect data and answer the posed questions. The study population consisted of employees in the Libyan commercial banking sector. The study distributed 350 questionnaires to Libyan banks, and after about three weeks, 345 were collected, of which 333 were valid for analysis. Survey results indicated that respondents largely agreed that the performance of the internal audit function was high, as most scores were rated high. However, there were some items that respondents indicated as average, meaning they did not agree with their content. Hence, it should be noted that internal auditing should provide recommendations to improve the internal control system when necessary, tables of committee meeting agendas and related key information should be circulated before meetings, and the audit committee should monitor the selection of accounting policies and principles. The study also revealed that there was no statistically significant effect of demographic information on the evaluation of the performance of the internal auditor, with the exception of the age variable. Thus, the study recommends addressing the challenges faced in adopting the International Financial Reporting Standards (IFRS) by providing a high-quality set of internationally recognized accounting standards that achieve transparency, accountability, and efficiency for financial markets worldwide.

Making internal audit count

Abstract In recent years the role of the internal audit function has gained increasing prominence and is now seen as a cornerstone in the overall governance of public sector bodies. This article explores the experience of 127 public sector bodies and illuminates key insights for public sector bodies seeking to realise more meaningful results from the efforts currently directed towards the internal audit function. Among the most significant research findings is the evidence that the function is not viewed by its most key stakeholders as a primary driver of continuous improvement. This finding identifies a disconnect between the real-world practice of internal audit function and the definition of the function across relevant academic literature, public policy and practitioner guidance. The author concludes that an overemphasis on assurance activities can be to the detriment of the other value-add functions which the internal audit function can deliver. While currently widely viewed as a divorced function, the real value of internal audit will only be realised by integrating it within the organisation. Such integration will allow the sharing of enterprise-wide learning, thus enabling the function to become a primary driver of a permanent culture of continuous improvement.

Impact of Digital Transformation on Internal AuditAn Applied Study on The Egyptian Central Bank

The world is currently witnessing a widespread digital revolution, which is having a profound impact on all aspects of life, including the financial sector. In this context, digital transformation has become a necessity for financial institutions, including banks. This research aims to test the impact of digital transformation technologies on the internal audit function and financial inclusion in Egyptian banks. To achieve this goal, a field study was conducted on a sample of Egyptian government-owned commercial banks. The study found that there is a strong impact of the application of digital transformation mechanisms in banks on the development of internal audit procedures, through the following: (a) Improvement of the efficiency and effectiveness of internal audit activities: Digital transformation technologies help to analyse data faster and more accurately, which contributes to the faster and more effective detection of potential risks. (b) Increased transparency and accountability: Digital transformation technologies help to provide easier and faster access to financial and administrative information, which contributes to the enhancement of transparency and accountability in financial institutions. (c) Support for achieving financial inclusion: Digital transformation technologies help to provide banking services in a simpler, faster, and more efficient manner, which contributes to achieving financial inclusion. Keywords: Digital transformation, banking sector, Egyptian Central Bank

Family involvement in ownership and governance and internal auditing quality

PurposeThis paper aims to investigate the impact of family involvement in ownership and governance on the quality of internal auditing.Design/methodology/approachLeveraging a hand-collected data set of listed family firms from 2014 to 2020, this study uses regression analyses to investigate the impact of family ownership, family involvement on the board, family CEO and the generational stage of the family business on the quality of internal auditing.FindingsThe results provide evidence that family ownership is positively associated with the quality of internal auditing, while later generational stages of family businesses have the opposite effect. Additional analyses reveal that the presence of a sustainability board sub-committee moderates the relationship between generational stages of family businesses and the quality of internal auditing function.Research limitations/implicationsThis paper does not consider country-institutional factors and other potentially family-related antecedents or governance factors that may affect the quality of internal auditing.Practical implicationsThe results are informative for investors and non-family stakeholders interested in understanding under which conditions family-related factors influence the quality of internal auditing functions.Originality/valueThis study offers fresh evidence regarding the relationship between family-related factors and the quality of internal auditing and board sub-committees that moderate such a relationship in family businesses.

Outsourced internal audit function and audit report timeliness in an emerging economy: The moderating effect of client-specific expertise

Outsourced internal audit function and audit report timeliness in an emerging economy: The moderating effect of client-specific expertise

The role of internal auditors as a tool to boost competitiveness of Greek firms

The role of small and medium-sized enterprises (SMEs) in the modern economy is crucial, and they have emerged as the most alluring and inventive system. To investigate and assess SMEs’ operations, internal auditing was formed as an independent assessment. Internal auditors’ planning and implementation of a quality program of internal audits can result in several advantages to SMEs. The current study investigates how internal auditors might help SMEs become more competitive. To fulfill the study’s requirements, 200 employees of Greek SMEs who were relevant to the internal audit function in their business environment were invited to answer a questionnaire. Internal auditors are viewed positively by most of the (100) employees who responded. Ranging from 34% to 53% in part B of the questionnaire (the role of internal auditors), they strongly agree with the positive role of internal auditors in Greek SMEs. Regarding the evaluation of internal auditors, most respondents gave a relatively negative opinion. From 31% to 34% respondents in part C of the questionnaire (evaluation of internal auditors) agree a little with the positive evaluation of internal auditors in Greek SMEs. Furthermore, the results showed that internal auditors must be professionals, comprehend the audited activities in-depth, offer ways to remedy problematic activities, and voice their thoughts objectively to succeed in the competitiveness of Greek SMEs.

The Effect of Internal Audit Function Characteristics on Market Value Among Indonesian Public-Listed Companies

It is widely acknowledged that internal audits should have a value-adding component for all types of companies. This study systematically investigated the effect of internal audit function on the market value of public listed companies in Indonesia. The panel data technique used was based on the data extracted from 44 listed companies over five years (2015 -2021), with 308 observations. The empirical results revealed the Percent Audit Committee (PAC) has a significant and positive impact on market value. The Number of Certified Members (NCM) has no significant effect on market value, while the Percentage of Implemented Findings (PIF) has a significant and positive impact on the market value of companies. Size, leverage, and return on investment (ROI) have a significant impact on the market value of companies. The study offers extended implications in the empirical literature using a different measure of internal audit function characteristics from an emerging market perspective for different organisations. This study provides important implications for investors, managers, researchers, and auditors. Finally, the results of this research may be used by analysts, investors, and other strategic decision-makers in Indonesia to enhance the competitiveness and viability of the country's financial market. The findings will encourage policymakers to enact effective regulations, which could boost Indonesia's financial markets' efficiency and performance.

Money Laundering Prevention through Regulatory Technology and Internal Audit Function in Indonesia Banking Sector

Money laundering poses a significant challenge globally, involving using cash to conceal the origins of funds. With the rise of digitalisation and the adoption of financial technology (FinTech), the financial sector has been compelled to adapt to these changes. The COVID-19 pandemic has further accelerated the use of FinTech services, including digital banking, to address social distancing concerns and enhance customer convenience. Despite having an index of risk considered moderate for money laundering, Indonesia continues to be a destination for these types of illegal activities. Anti-money laundering (AML) and counter-terrorism financing (CFT) programs must be implemented, especially in all financial service providers that Bank Indonesia oversees.Additionally, the internal audit function is crucial in identifying money-laundering activities within banks. However, there needs to be more research regarding integrating RegTech and evaluating internal audit functions in preventing money laundering in Indonesian banks. This paper aims to address this gap by examining the benefits of RegTech solutions and the role of internal audit functions in preventing money laundering. The findings can be used to enhance regulations and implement effective measurement to combat money laundering and illicit activitivities. Furthermore, the study highlights the importance of Indonesia's membership in the Financial Action Task Force (FATF) to strengthen the country's AML framework and contribute to global policies on AML and countering the financing of terrorism.

The effectiveness of internal audit functions and their impact on the performance of external and internal auditors

This study explores the relationship between the internal audit function's efficiency and the degree to which external auditors rely on its output. To gather data, a sample of 70 senior external auditors of publicly traded companies in the Republic of Yemen was chosen on purpose. Data was gathered via a questionnaire, and least partial structural equation modeling was utilized to evaluate it. The outcome shown that the degree to which external auditors rely on the work of the internal audit function is significantly positively impacted by the efficiency of the internal audit function. According to the audit risk model, this argues that external auditors should modify their audit efforts in reaction to the internal audit function's efficacy. The effectiveness and adoption of the internal audit function, as a result, adds a new dimension to the audit risk model. By acknowledging the impact of internal audit operations on external audits, the research has practical implications for customers and external auditors aiming to acquire a cost-effective audit of financial statements.

UNIQUE CHARACTERISTICS OF INTERNAL AUDITS IN THE PUBLIC SECTOR AND GLOBAL INTERNAL AUDIT STANDARDS

The IIA’s new draft Global Internal Audit Standards™ highlight the public sector’s unique characteristics, which distinguish it from the private sector and affect how the internal audit function does its work. Distinctive issues of the public sectors are reffered to the definition, purpose, governing the internal audit function, managing the internal audit function and performing internal audit services.

ISSUES OF INTERNAL AUDIT DEVELOPMENT

Internal audit receives different interpretations among professionals. Currently the functions of internal audit have expanded so much that they have penetrated into the field of consulting, management and evaluation of business results. As a result, operational, managerial and performance audit functions have been put into practice, which in their objectives are sometimes mixed, cross with each other and give rise to different opinions.
 The article attempts to clarify the scope and objectives of each of the types of internal audit. In particular, the features and unique functions of operational, managerial and performance audits within the framework of internal audit are recorded, emphasizing their development stages and the tools used. The development directions of internal audit are analyzed based on the changing goals of entrepreneurship and the requirements of effective development.
 

Pengaruh Risiko Perusahaan, Fungsi Audit Internal, Independensi Dewan Komisaris Terhadap Fee Audit

The auditor will charge the audited firm a fee, called the "audit fee," in exchange for doing the audit. the fee charged by the auditor for conducting an audit is impacted by diverse aspects like the intricacy of the assignment, the expertise required to carry it out, the fee structure of the knowledge acquisition program (KAP) and other pertinent professional elements. the objective of this inquiry is to recognize the influence in audit fees on banking sub sector on the indonesia stock exchange between 2017 and 2021 in relation to corporate risk, the internal audit function, independence of the board of commissioners. the population comprises of orporations sub sector banking and indexed at the indonesia stock exchange at some point of the duration spanning from 2017 to 2021. in this research, a purposive selection technique was utilized. twenty company, and data from 100 units on the banking sub sector registered on the indonesia stock exchange were utilized for the sample. quantitative methods were employed for the analysis. the analysis in this paper is conducted through the utilization of eviews 12 software is used for the analysis in this paper. based on the results of this study, it shows that the company's risk. the internal audit function, and the independence of the board of commissioners simultaneously affect the audit fee. while the results of the partial test of company risk and the independence of the board of commissioners have no effect on the audit fee, while the internal audit function has an effect on the audit fee.

Driving and Inhibiting Factors for Implementing Audit Analytics in an Internal Audit Function

ABSTRACT Internal audit function (IAF) effectiveness can be improved by embracing Audit Analytics (AA). However, despite its promises, AA implementation remains limited. Although there is research on AA implementation in general, there needs to be an overview of insight into inhibiting and driving factors for internal auditing. This paper examines those driving and inhibiting factors by exploring the literature on AA implementation. The initial search revealed 98 uniquely identified papers. Further filtering and the additional search returned 42 articles, which were analyzed in detail. The analysis resulted in 12 driving and 23 inhibiting factors, grouped into internal, regulation, data, infrastructure, and audit practice categories. The literature shows that IAF encounters multiple and intertwined factors in AA implementation and needs to anticipate those factors. Moreover, AA implementation affects IAF’s parts and stakeholders differently, requiring internal and external collaboration. Building on these insights, we provide recommendations for further research. JEL Classifications: M42; M49; O32.

Internal Auditing in the Arab World: A Systematic Literature Review and Directions for Future Research

This study provides a systematic review of the literature on internal auditing (IA) research in 17 Arab countries. It focuses on four key aspects, namely the quality and effectiveness of IA, the objectivity and independence of IA, the consequences of IA, and the challenges facing IA in Arab countries in order to provide insights and avenues for future research in this field. Ninety-one (91) articles collected from the Scopus database between 1996 and April 2022 were analyzed in this study. The results show that there has been an increase in the number of studies that discussed IA, especially in the last 6 years. Most of these studies have focused on the quality of IA and its functions. It also shows that Jordan and the Kingdom of Saudi Arabia dominate the literature published so far in terms of the number of studies. Also, most of the studies were based on agency and institutional theory evaluating the various aspect of IA. This study highlights the lack of in-depth qualitative research that allows researchers to challenge the theories developed in the auditing field, add nuances to the existing theoretical framework, and unpack new theoretical directions. Furthermore, the results also show that the IA literature did not contribute significantly to the knowledge of internal audit functions (IAFs) as specified by the Institute of Internal Auditors (IIA). This study contributes to the body of knowledge by determining future research directions and surveys by interested researchers and regulators, including IIA.

Evaluasi Penerapan Pengendalian Internal atas Proses Bisnis Pendapatan Jasa

Revenue business processes are the primary key for a company to generate profits as a financial performance target. In its implementation, it must be supported by a clear internal audit function and accounting information system with an effective level of control in all business processes to produce accurate and quality data or information, as well as increase the effectiveness of the company's operational activities. However, if these factors do not support it, all personnel will work by habit factor, and management will face the risk of loss. This study aims to analyze the condition of PT X’s internal control and aspect that can be improved in optimizing internal control over the performance and reporting of the company's revenue business processes. The research method used is descriptive qualitative with a case study approach at PT X, a container management company, that previous research on this field of business is still limited. The data sources were derived from observation, a series of interviews with the management, and an analysis of internal documents. The results show that there were weaknesses in the procedures for implementing revenue business processes caused by the absence of adjustments to clear and documented recording procedures, unstructured implementation of control activities, and not being supported by an adequate information system. Therefore, this study provides recommendations for corrective actions to optimize the performance and reporting of the company's revenue business processes.

Do Chief Audit Executives Able to Influence Real Earnings Management Practices? Evidence from Indonesia

Purpose : This study aims to investigate the relationship between financial expertise and tenure of the Chief Audit Executive [CAE] on real earnings management [REM] practices
 Method : This study uses a sample of 797 observations from companies in the manufacturing sector in Indonesia during the period 2012 – 2019. For data analysis, regression of feasible generalized least squares was used. Data related to financial expertise and tenure of CAE were manually collected from the annual report and financial data was obtained from Thomson-Reuters Database. 
 Findings : The results of this study indicate that CAE with better financial expertise is associated with lower REM. Conversely, this study also indicates that CAE tenure has an association with higher REM. This result is robust by using an alternative REM measurement. By breaking down the indicators of CAE’s financial expertise, namely CAE’s certification, experience in financial positions within/inside the company or outside the company, the results show that CAE certification has the largest effect on REM.
 Novelty : This study contributes to the real earnings management and internal audit literature by demonstrating the importance of attributes possessed by CAEs as leaders of the internal audit function in mitigating REM practices.
 Keywords : Chief Audit Executive, Financial Expertise, Tenure, Real Earnings Management

Quality of internal auditing in federal educational institutions: an analysis of the perception of internal audit members and senior management

PurposeThis paper aims to analyze the factors that influence the quality of internal audits in Brazilian federal educational institutions.Design/methodology/approachThe study consisted of a survey whose target participants were members of the internal audits and members of the senior management of Brazilian Federal Educational Institutions. The analyses included descriptive statistics of the sample, exploratory factor analysis and multiple regression analysis.FindingsThe results showed that the internal audit functions, continuous improvement practices and relationship between internal and external auditors as factors had a positive impact on the internal audit quality dependent variable. The internal audit functions and continuous improvement practices as factors influenced both models that were created (audit members and senior management), whereas the relationship between internal and external auditors was only relevant to senior management. Organizational support and internal audit autonomy, on the other hand, were not statistically significant.Originality/valueConsidering the recent Brazilian research on internal auditing in Educational Institutions, this study differs from others in that it covered all the Universities (63), Federal Institutes (38), Federal Centers of Technological Education (2) and Colégio Pedro II. Another relevant issue refers to the target audience, addressing both the members of the internal audits (supply side) and the Senior Management (one of the main parties impacted by the work of the internal audits).

Internal Audit Report Quality and Financial Statement Accuracy of Savings and Credit Cooperatives Societies in Kenya

The focus of this study is to examine the correlation between the caliber of internal audit reports and the precision of financial reporting within Kenyan savings and credit cooperative societies (SACCOs). The accuracy of financial reporting is of paramount importance as it influences investment decisions and market efficacy. In view of SACCOs' limited accounting expertise, this investigation aims to evaluate the impact of adept internal auditors on financial accuracy and the internal audit function's role in enhancing controls and preventing fraud. The study utilizes agency and stakeholder theories to probe into the SACCO management-shareholder relationship. By highlighting the significance of accurate financial statements and internal audit quality, the study employs theoretical frameworks to analyze the impact of audit reporting quality on financial accuracy. The ultimate objective of this study is to augment our comprehension of the role of internal audit quality in enhancing financial accuracy in Kenyan SACCOs. The theoretical basis of agency and stakeholder theories facilitates the analysis of intricate SACCO dynamics. In light of the criticality of SACCOs in Kenya's financial sector, the insights derived from this study support governance strengthening and the promotion of accurate financial reporting.

IMPROVEMENT OF THE METHODOLOGY OF INTERNAL AUDIT OF BUDGET EXPENSES

In the article, a study was conducted on the improvement of the methodology of internal audit of budget expenditures, the opinions of economists were studied, and the position of the author was cited. Improving the methodology of internal audit of budget expenditures is important for organizations seeking to improve financial management, strengthen budget control, and ensure optimal use of public funds. Based on the importance of internal audit functions in transparency, accountability and effective management of budget resources by continuously improving audit practices, applying technology-based approaches and adapting to emerging best practices, the final conclusion was formed at the end of the study.