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Factors associated with the internal audit function's role in corporate governance

Author

Listed:
  • Gerrit Sarens
  • Mohammad J. Abdolmohammadi
  • Rainer Lenz

Abstract

Purpose - The purpose of this paper is to investigate several variables that are theoretically associated with the internal audit function (IAF) having an active role in corporate governance. Design/methodology/approach - The paper uses responses from 782 US Chief Audit Executives (CAEs) in the CBOK (2006) database for the investigation. The paper makes the assumption that an IAF has only one CAE, thus the dataset represents 782 US IAFs. Findings - It is found that an IAF having an active role in corporate governance is significantly and positively associated with the use of a risk‐based audit plan, existence of a quality assurance and improvement program, and audit committee input to the audit plan. Control variables such as stock exchange listing, firm size, the existence of an internal control framework, and a CAE with an internal auditing qualification also are positively associated with the IAF having an active role in corporate governance. Research limitations/implications - A limitation of this study is that CAE perceptions may deviate from actual practice. Also, the sample is limited to the US CAEs who are also IIA members, thus it may not reflect the views of non‐members and the CAEs from other countries. Practical implications - The results have implications for CAEs who wish to increase the chance for their IAFs to play an active role in corporate governance. The IIA may benefit from these results in its supporting role for the internal auditing profession. Originality/value - The study is complementary to the literature on the existence and size of the IAF and reveals several avenues for further research.

Suggested Citation

  • Gerrit Sarens & Mohammad J. Abdolmohammadi & Rainer Lenz, 2012. "Factors associated with the internal audit function's role in corporate governance," Journal of Applied Accounting Research, Emerald Group Publishing Limited, vol. 13(2), pages 191-204, September.
    • Handle: RePEc:eme:jaarpp:v:13:y:2012:i:2:p:191-204
    DOI: 10.1108/09675421211254876
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    References listed on IDEAS

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    Cited by:

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    2. Slapničar, Sergeja & Vuko, Tina & Čular, Marko & Drašček, Matej, 2022. "Effectiveness of cybersecurity audit," International Journal of Accounting Information Systems, Elsevier, vol. 44(C).
    3. Christina Vadasi & Michalis Bekiaris & Andreas Andrikopoulos, 2021. "Internal Audit Function Quality and Corporate Governance: The Case of Greece," Multinational Finance Journal, Multinational Finance Journal, vol. 25(1-2), pages 1-61, March - J.
    4. Wan-Hussin, Wan Nordin & Fitri, Hadiati & Salim, Basariah, 2021. "Audit committee chair overlap, chair expertise, and internal auditing practices: Evidence from Malaysia," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 44(C).
    5. Krane, Ronja & Eulerich, Marc, 2020. "Going global: Factors influencing the internationalization of the internal audit function," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 41(C).
    6. Mihret, Dessalegn Getie, 2014. "How can we explain internal auditing? The inadequacy of agency theory and a labor process alternative," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 25(8), pages 771-782.
    7. Kogilavani Apadore & Siti Subaryani Binti Zainol, 2014. "Determinants of Corporate Governance and Corporate Performance among Consumer Product Industry in Malaysia: A Theoretical Model," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(2), pages 159-165, April.
    8. Steven DeSimone & Giuseppe D’Onza & Gerrit Sarens, 2019. "Correlates of Internal Audit Function Maturity," Working Papers 1905, College of the Holy Cross, Department of Economics.
    9. Halis Kiral & Hakan Karabacak, 2020. "Resolution of the Internal Audit-Based Role Conflicts in Risk Management: Evidence from Signaling Game Analysis," Group Decision and Negotiation, Springer, vol. 29(5), pages 823-841, October.

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