Audit Function Research Articles

Frontier AI developers need an internal audit function.

This article argues that frontier artificial intelligence (AI) developers need an internal audit function. First, it describes the role of internal audit in corporate governance: internal audit evaluates the adequacy and effectiveness of a company's risk management, control, and governance processes. It is organizationally independent from senior management and reports directly to the board of directors, typically its audit committee. In the Institute of Internal Auditors' Three Lines Model, internal audit serves as the third line and is responsible for providing assurance to the board, whereas the combined assurance framework highlights the need to coordinate the activities of internal and external assurance providers. Next, the article provides an overview of key governance challenges in frontier AI development: Dangerous capabilities can arise unpredictably and undetected; it is difficult to prevent a deployed model from causing harm; frontier models can proliferate rapidly; it is inherently difficult to assess frontier AI risks; and frontier AI developers do not seem to follow best practices in risk governance. Finally, the article discusses how an internal audit function could address some of these challenges: Internal audit could identify ineffective risk management practices; it could ensure that the board of directors has a more accurate understanding of the current level of risk and the adequacy of the developer's risk management practices; and it could serve as a contact point for whistleblowers. But frontier AI developers should also be aware of key limitations: Internal audit adds friction; it can be captured by senior management; and the benefits depend on the ability of individuals to identify ineffective practices. In light of rapid progress in AI research and development, frontier AI developers need to strengthen their risk governance. Instead of reinventing the wheel, they should follow existing best practices. Although this might not be sufficient, they should not skip this obvious first step.

The accountability system for operation and investment and audit quality of state-owned enterprises

Based on the accountability system for illegal operation and investment of state-owned enterprises (SOEs), this paper uses A-share listed companies in China from 2013 to 2021 as a research sample to empirically test the impact of operation and investment accountability on the audit quality of firms. The results show that after the implementation of the accountability system, the audit quality of SOEs is significantly improved, and the results hold after a series of robustness checks. Mechanism tests suggest that reducing misconducts of managers, inhibiting earnings management and improving the quality of internal control can explain the effects of operation and investment accountability. Heterogeneity analyses suggest that the positive effect of operation and investment accountability on the audit quality of SOEs is more pronounced for firms in poor business environment, with low level of digital transformation and low degree of mixed-ownership reform. Further tests on economic consequence suggest that operation and investment accountability increase economic value added of state-owned assets by improving the effectiveness of auditing supervision. This paper extends the stream of literature on SOEs' auditing from the perspective of accountability, and provides practical implications on improving the quality of government monitoring measures and promoting the update of governance capacity and governance system.

Problems and prospects of methodological features of accounting and audit of import operations

In the context of globalization and integration of world markets, import operations occupy an important place in the activities of enterprises, forming a significant part of their economic processes. Effective management of these operations requires accurate and timely accounting and high-quality auditing, which becomes especially relevant in modern conditions. The study of methodological features of accounting and auditing of import operations is a relevant and timely area that helps improve the quality of financial reporting and management decisions. The purpose of the study is to analyze the problems and prospects of methodological features of accounting and audit of import operations, as well as to develop recommendations for their improvement. The study examined the main methodological approaches, existing problems and challenges, and proposed solutions aimed at increasing the efficiency and reliability of accounting and auditing in a global economy. The improvement of methodological approaches to the accounting and auditing of import operations will improve the accuracy and reliability of financial reporting, reduce the risks of non-compliance with regulatory requirements, as well as improve management decision-making and the overall financial stability of companies. The development and implementation of effective accounting and auditing methods that comply with international standards and best practices will minimize financial risks and increase the competitiveness of enterprises in the global market. A study of the problems and prospects of methodological features of accounting and auditing of import operations has revealed a number of key issues that require attention and solutions. The main challenges are the complexity and diversity of regulatory requirements, currency fluctuations, the diversity of imported goods and services, difficulties in assessing and recognizing imported goods, and the lack of qualified specialists.

Workplace Spirituality as a Moderator of the Influence of Task Complexity, Audit Experience and Audit Competence on Auditor Performance (Case Study of Public Accounting Firm of Bali Province)

Auditor performance is the result of work achieved by an auditor in carrying out his duties in accordance with the responsibilities given. This research was conducted at Public Accounting Firms (KAP) in Bali Province based on the Directory of Public Accounting Firms and Public Accountants published by the Indonesian Institute of Public Accountants (IAPI) in 2023. The subject to be studied is an auditor who is in a Public Accounting Firm (KAP) in Bali Province. The population in this study is all auditors in the Public Accounting Firm (KAP) of Bali Province which totals 148 people. The number of auditors was 148 people obtained by asking directly to the Public Accounting Firm (KAP) in Bali Province. The sample determination method used in this study is saturated sampling. The data collection method used in this study is a survey method with a questionnaire technique. The respondents' statement answers were measured using a 5-point likert scale. The data analysis in this study uses the Moderated Regression Analysis (MRA) approach. Moderated Regression Analysis (MRA) is a data analysis method that is devoted to analyzing moderation variables with the help of the Stata application. The results of this study prove that the complexity of tasks has a negative effect on the performance of auditors in Public Accounting Firms in Bali Province. Audit experience has a positive effect on the performance of auditors in Public Accounting Firms in Bali Province. Audit competence has a positive effect on the performance of auditors in Public Accounting Firms in the Province of Bali. In addition, this study also proves that Workplace Spirituality strengthens the negative relationship between task complexity and auditor performance in Public Accounting Firms in Bali Province. Workplace spirituality strengthens the positive relationship of audit experience to auditor performance in Public Accounting Firms in Bali Province. Workplace spirituality strengthens the positive relationship between audit competence and auditor performance in Public Accounting Firms in Bali Province.

MONITORING ACTIVITY IN THE RISK-ORIENTED INTERNAL AUDIT: A MODEL PROPOSAL

The purpose of this article is to make a proposal for process development for monitoring activities in a way that includes experiences gained from audits conducted in order to achieve the goal of risk-oriented internal audit function in institutions and to contribute a guiding study on the subject to the literature. In this study, first of all, the risk-oriented internal audit approach and monitoring process are explained with the document analysis method, and then a model for the monitoring process is presented and conclusions and recommendations are made. By using the document analysis method and the features of the risk-oriented internal audit approach, an original application process was compiled to test the risk and control processes for the internal audit activities required for an effectively functioning monitoring system. It is suggested that risk- oriented internal audit will be an important tool in increasing the added value for institutions with the monitoring system designed for risk- oriented internal audit activity, which examines the processes and offers suggestions for areas of development in order to ensure that all financial and non-financial resources are used effectively, economically and efficiently and to add value to the work of the organization.

Special audit examination of the coactiva courts of the central bank of Ecuador, period 2013 - 2014

Auditing is a fundamental tool in the management of entities, ensuring transparency and efficiency through adequate controls. This study analyzes the "Special Audit Review of the Coactiva Courts of the Central Bank of Ecuador" conducted by the Superintendency of Banks during the period 2013-2014. The objective is to evaluate the effectiveness of internal controls and administrative processes of the coactiva court. The results reveal significant deficiencies, including a lack of coordination between the areas of the Recovery and Liquidation Department, inconsistencies in the records of insolvency and bankruptcy judgments, and informal management of portfolio recovery. These deficiencies represent a high risk for the bank's operations, affecting approximately 70% of the processes reviewed. A set of practical recommendations are proposed, such as the implementation of an information filing and systematization system, the updating of the lawsuit registry and the creation of an annual operational audit plan. These measures are aligned with international best practices and seek to improve efficiency, effectiveness and transparency in the management of public resources.

Investigation of the Current Internal Audit Processes and Procedures within Morogoro Municipal Council

This study focused on investigating the current internal audit processes and procedures within Morogoro Municipal Council. A descriptive research design and quantitative approach were utilized, targeting Morogoro Municipal Council staff and internal auditors with a sample size of 74 respondents selected via simple random and purposive sampling methods, respectively. Data was gathered through questionnaires for staff and interviews for auditors, supplemented by secondary data from relevant documents. While most respondents agree that the internal audit processes are well-documented, effectively communicated, and robust enough to address risks, there are concerns about adherence, resource adequacy, and the independence of the audit function. To improve effectiveness, it is recommended that the Council enhance adherence to procedures, allocate adequate resources, strengthen the independence of the audit function, and ensure regular updates to audit procedures. These steps will better support governance, accountability, and overall organizational efficiency.

The Mediating Effect of Information Technology Usage on the Relationship of Internal Audit Processes and Internal Auditor Competence towards Internal Audit Effectiveness: Evidence from the Chinese Financial Sector

The effectiveness of internal auditing is determined by various factors, such as the independence of the internal audit function, auditors’ competence, effective audit planning, efficient audit processes, and support from senior management. The digitalization and informatization of modern enterprises have transformed the way companies are managed and have similarly impacted internal audit practices. Informatization not only alters traditional internal audit processes but also changes auditors’ ways of working and thinking. From the perspective of resource-based theory, the effective allocation and full utilization of human, technological and organizational resources can enhance the effectiveness of internal audit. Therefore, the purpose of this study is to examine the impact of internal audit processes (IAP) and internal auditor competence (IAC) on internal audit effectiveness (IAE), as well as the mediating effect of information technology usage (ITU) on the relationship between IAP and IAC and IAE. To test the proposed hypotheses, a questionnaire survey was conducted within Chinese financial enterprises, yielding a total of 133 valid responses. Statistical data analysis was performed using the partial least squares structural equation modelling (SEM-PLS) method. The results indicate that both IAP and IAC have a significant impact on IAE and ITU. Furthermore, ITU serves as a mediating factor, enhancing the positive contributions of IAP and IAC to IAE.

The Influence of Culture Related Factors on Auditor Performance in Indonesia

This paper aims to explore the influence of cultures on auditor performance. The qualitative case study used key respondents representing clients, auditors and users of audited financial reports. The data were gained through in-depth qualitative interviews. The data analysis used thematic analysis approach. The research findings show that there are different types of cultural values influences on auditor performance. The impact of cultures may impact both positively and negatively on the auditor performance. The finding of the research has practical implication for future research, policy makers, auditors and clients. This research contributes to the extension on the knowledge of cultures and auditing since there is still limited publication on the influence of national cultures in auditing especially on auditor performance. This research fills the current gap. Further, this research adds empirical findings to the literature on cultures and auditing. In summary, the result of the study identifies the influences of local cultures in auditing: prioritizing seniority, maintaining the culture of family, and cultural compromise. These key findings can be seen as the extension of the knowledge debate on the influence of cultures in auditing. The finding can be used as a reference for future research and a guide for policy makers in auditing process. This qualitative finding can provide an understanding of the local cultures and the impact on auditing in a collective society.

Analysis of foreign practice of forming indicators for auditing the efficiency of government agencies' activities

The article highlights the topical problem of analysing and managing the effectiveness of public bodies' performance on the basis of international experience. The introduction argues the significance of effective public administration to ensure socio-economic stability and security of national resources. The aim of the study is to adapt foreign methodologies and practices to optimise the use of public funds in Kazakhstan. The literature review presents performance audit as a result of the development of result-oriented budgeting and a factor contributing to the efficiency of public bodies. Key aspects are considered: the role of publicity and transparency in governance, the effectiveness of public audit bodies and the reduction of irregularities in budget spending. Special attention is paid to international standards and practical experience of performance audit, emphasising adaptation to the specifics of Kazakhstani legal regulation and national traditions. The article analyses the challenges faced by Kazakhstani authorities in implementing a system of performance audit indicators, including the choice and methodological justification of indicators, as well as their role in assessing the performance of state structures.

The impact of internal audit system on performance: evidence from emerging markets

This paper examines the impact of internal audit (IA) practices on the performance of commercial banks. Six factors were investigated, including the application of international IA standards, the independence and objectivity of the IA, the quality and professionalism of IA members, gender diversity within the IA department, the size and frequency of meetings, and management support for IA. Using questionnaires, data were collected from 34 commercial banks in five Arab countries: Saudi Arabia, Yemen, Sudan, Somalia, and Djibouti. Structural equation modeling (SEM) was performed using SmartPLS 3.3.3. The results demonstrate the significant and direct influence of the examined factors on the performance of commercial banks, except for the professional competence of internal auditors. Additionally, the study reveals that the performance of internal auditors, as a mediating variable, does not significantly affect the relationship between the internal audit system (IAS) and bank performance. This paper makes a significant contribution to the field of auditing as it is the first study to examine IA in Arab countries using multiple factors. The findings of this study can be utilized by regulators, such as the Institute of Internal Auditors (IIA), bank owners and managers, government agencies, and central banks.

The Moderating Powers of Internal Audit Function on the Relationship between Corporate Governance and Financial Reporting Quality of Publicly Listed Companies in Developing Countries: A Propose Framework

The Moderating Powers of Internal Audit Function on the Relationship between Corporate Governance and Financial Reporting Quality of Publicly Listed Companies in Developing Countries: A Propose Framework

PENGARUH STRUKTUR AUDIT, KOMITMEN ORGANISASI DAN EFEKTIVITAS PENGGUNAAN TEKNOLOGI SISTEM INFORMASI AKUNTANSI TERHADAP KINERJA AUDITOR

This research aims to determine the influence of audit structure, organizational commitment, and the effectiveness of using accounting information system technology on auditor performance at the Tangerang public accounting firm. The type of research used in this research is quantitative research. The data source used in this research is primary data. The population in Tangerang is 2 Public Accountants with 33 auditors. Determining the sample in this study used the total sampling method because the total population was less than 100, so the entire population was used as a sample. The analysis technique uses multiple linear regression analysis, classic assumption tests consisting of normality tests, multicollinearity tests and heteroscedasticity tests. Hypothesis testing uses the coefficient of determination test, F test, and T test. Data analysis uses SPSS version 29 software. The results of this research show that audit structure, organizational commitment, and the effectiveness of using accounting information system technology influence auditor performance.

LITERATUR REVIEW: SUATU TINJAUAN FUNGSI AUDIT INTERNAL TERHADAP TATA KELOLA PERUSAHAAN

Along with increasingly rapid economic development, the role of internal audit in companies is becoming increasingly important, especially for corporate governance. The trend of globalization is intensifying, and trade between countries is increasingly dense. This brings economic benefits to the company while increasing risks. In order to survive and thrive, companies must face more challenges. On the one hand, enterprises should increase investment in internal governance management, and establish institutions such as shareholder meetings, boards of directors, manager levels and supervisory boards, and gradually standardize corporate governance structures. On the other hand, strengthening the company's internal audit can not only improve the company's operational conditions, but also discover problems within the company in a timely manner and control them effectively. However, compared to other developed countries in Indonesia, the internal audit system was established too late, so these units have different experiences in learning from abroad, thus causing many problems in establishing internal audit institutions in Indonesia, and many companies do not do so. pay attention to internal audits. The purpose of this research is to provide an overview of the relationship between the internal audit function and corporate governance in companies.

Evaluasi Prosedur Audit atas Persediaan Obat-Obatan pada Rumah Sakit X Oleh Kantor Akuntan Publik ZYX

Inventory of medicines in hospitals is an important and significant asset. The inventory of medicines must be adjusted to meet the substantial treatment needs of the hospital, as inadequate pharmacy efficiency can prevent healthcare services in the hospital. The inventory of medicines in hospitals hold significant importance as it impacts the quality of service delivery. Therefore, auditors perform inventory audit procedures to verify that the inventory reported in the financial statements is consistent and accurate with the actual conditions in the field. The purpose of this research is to evaluate the performance of auditors in auditing financial statements, especially focusing on inventory accounts. The method used is a qualitative descriptive method with primary data sources from interviews with auditors at the Public Accounting Firm (KAP). Advices for auditors at KAP ZYX are improving their skills and knowledge regarding the audit process or the latest regulations through training and experience that can increase their insight.

Development of environmental auditing in Vietnam

In recent times, environmental auditing has played a very important role in gradually assessing environmental management, assessing the economy, efficiency, effectiveness and paying attention to environmental aspects. However, environmental auditing conducted by the State Audit is currently mainly integrated into financial statement audits and compliance audits. There are few environmental audits that are operational audits or are conducted independently, so the audit results have not been as expected. Keywords: Audit, Environment, Vietnam

Determinants of Internal Audit Effectiveness in Local Government Authorities (LGAs): Evidence from Morogoro Region of Tanzania

This study examines the determinants of internal audit effectiveness in Local Government Authorities (LGAs), addressing the growing importance of robust Internal Audit Function (IAF) in public sector governance. The study employed the descriptive research design based on a mixed research approach integrating both qualitative and quantitative approaches. Data were collected from 45 purposively selected respondents with extensive auditing experience. A multiple linear regression model was used to assess the impact of these factors on internal audit effectiveness. The empirical results indicate that the four factors account for 65.7% of the variance in internal audit effectiveness, with IT utilization being the most significant contributor (R² = 0.657, Adjusted R² = 0.616). The ANOVA results further validate the model, showing a statistically significant F-statistic of 3.2976 with a p-value of 0.001, indicating the robustness of the findings. Top management support was found to be critical in fostering a culture of accountability, while the independence of internal audit ensures objectivity and unbiased assessments. IT utilization was identified as a key driver in enhancing the efficiency and reliability of audit processes. Finally, the competence of internal auditors was shown to significantly influence the quality and accuracy of audit outcomes. The study recommends the need for institutionalizing top management support, safeguarding auditor independence, advancing IT utilization, and promoting continuous professional development for auditors. These measures are essential for improving governance and accountability within LGAs, thereby contributing to more effective and reliable internal audit practices.

EP547 - Colorectal Surgery journey of a DGH

Abstract Colorectal cancer is the fourth most common cancer in the UK, and the management and practice have evolved over the years. A colorectal surgery performance audit was conducted at Pilgrim Hospital. The data collected was analysed and assessed against performance indicator set by NICE. The aim was to track progress and identify areas for improvement. Retrospective data collected from 2011-2020, paper and electronic. Data analysed with SPSS software. Total Anterior Resection. 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Open 18 41 16 12 3 13 10 11 7 13 Laparoscopic 1 4 13 22 26 23 18 27 24 12 Total 18 26 29 35 33 41 31 39 35 25 Length of Stay 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total 12 12 13 9 9 9 8 8 8 Enhance Recovery Program 9 9 8 7 7 7 7 8 7 Complications 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Return to Theatre 3 5 6 3 2 5 6 3 1 Surgical Site Infection (SSI) 7 7 11 3 6 4 4 4 5 Anastomotic leak 6 2 1 1 3 3 2 3 0 Wound dehiscence 2 3 5 1 4 2 1 3 2 LRTI 1 1 2 1 3 1 2 2 0 The audit showed that, majority of the surgeries performed were open, with the laparoscopies increasing as the years progressed. Length of stay is shorter with ERP. Common complications were surgical site infections, anastomotic leak, return to theatre. Less common complications were lower respiratory tract infections and wound dehiscence.

Enhanced Auditors Performance Through the Consequences of Management Control System

It is believed that Management Control System (MCS) is world-wide suggested as prerequisite key drivers on any performance to enable to make congruent decision based on holistic monitoring, focusing approach, legitimating-based as well as strategic decision making. Current study aims at investigating the impact of MCS on enhanced auditor’s performance mediated by audit and budgetary control capability. Deployed Structural Equation Modeling with AMOS to analyze data. A survey with questionnaires and Google forms method were used to collect data from 200 auditors with a non-purposive sampling technique. The statistical outputs demonstrated that the impact of the attention focusing approach and strategic making decision are insignificant on budgetary control capability, while the rest of hypotheses, holistic monitoring-based, work legitimating-based showed the positive and significant impact on audit and budgetary capability, more over the mediating variables also statistically proven as the antecedents of enhanced auditors’ performance.

MEDIATING EFFECT OF INTERNAL AUDITORS’ ETHICAL CONDUCT ON THE RELATIONSHIP BETWEEN USAGE OF INFORMATION TECHNOLOGY, MANAGEMENT SUPPORT FOR INTERNAL AUDIT DEPARTMENT, AND INTERNAL AUDIT EFFECTIVENESS: A CONCEPTUAL FRAMEWORK

Low level of internal audit effectiveness is practically increasing in the Nigerian ministries, department, and agencies. In proffering solution to this lingering issue, this present study proposed a framework to examine the degree of effectiveness of internal audit functions in Kano state, Nigeria MDAs. The proposed framework is motivated by agency theory with the mediating effect of auditor’s ethical conduct. This present study extends the already extant body of knowledge in the area of internal audit effectiveness by expanding agency theory with the mediating effect of auditor’s ethical conduct. Also, this study has implication to support management, shareholders and other policy makers in addressing ineffectiveness and corrupt practices in the Nigerian MDAs. If this framework is authenticated, it would provide more evocative insight on the extends of internal audit effectiveness in Kano Nigerian MDAs, the legislators and government official would benefit greatly from this study if eventually concluded as it would assist MDAs to enhance internal audit effectiveness and curb corruption. In the subsequent studies the proposed framework will be empirically tested through data collection and analysis of relevant data.