INTERNAL AUDIT

Assessing the Reliability of Internal Audit Functions: The Issues, 2019

Abstract: The paper examined the issues in internal audit reliability. It specifically provided conceptual and practical insights into some of the consequential issues worth pondering about when assessing the reliability of the internal audit functions. Particularly, the paper identified and discussed four (4) of such issues namely: competency of internal auditors, level of management support/influence, independence and objectivity of internal auditors; and regulatory issues. The paper took a conceptual approach and drew its basis from the Institutional and Protection Motivation theories. Based on literature and other documentary evidences, the paper took the position that the four identified factors would most likely influence the internal audit reliability. Among other policy implications, the paper, therefore, proposed a conceptual research framework to be empirically examined by future researchers.

Financial statements reflect the financial position of business transactions and events on such business entity, internal control system, if adequate, it will help in reducing the activities of fraudulent stakeholders. Forensic accounting’s focus is on both evidence of economic transactions and reporting which is as contained within an accounting system. Cases of financial statement misrepresentation have been reported, affected companies and their auditors have gone down while shareholders were greatly affected. This study examined the relevance of forensic accounting techniques in internal control functions of business organisations and how it can ensure the integrity of the financial statements. The dependent variable of this study is “Integrity of financial statement” with internal control system; sound ethical culture; competent management and staff as proxies. While forensic accounting techniques is the independent variable with the following proxies: fraud prevention, detection and deterrence skills; forensic audit, investigation, and interviewing skills; litigation, mediation and arbitration skills; computer assisted reviews and document reviews. Integrity of financial statements is important when bridging the communication and performance expectation gaps in the work of auditors of financial statement while expressing their audit opinion. Stakeholders who are members of the Institute of Chartered Accountants of Nigeria (ICAN) were requested to answer the research questions. This study adopts survey research method with the use of primary data and purposive random sampling techniques. Sample size was calculated with the formula by Krejceie and Morgan (1970). 350 copies of questionnaires were administered and 321 questionnaires were returned, representing 92% of the entire questionnaire. Nominal scale method was used in the demographic section while Likert scale was used in other sections of the questionnaire. Hypotheses were formulated, tested, and analysed using multiple regression analysis. It was found that forensic accounting techniques “FAT” (FPDDS, FAIIS, LMAS, and CARDR) have positive influence on the integrity of financial statements (IFS) of business organisations, as evidenced from the individual level of significance of 0.006, 0.045, 0.000, and 0.047 which are less than the 5% acceptable level of significance and the coefficient of determination of the main model of 0.23 meaning that about 23% variation of the IFS is attributable to FAT while the remaining 77% change in the IFS can be attributed to other factors not covered in the model. It was also found that the inclusion of forensic accounting techniques will strengthen the activities of internal control functions. This is also evidenced in the sign and size of the coefficients, that is β4 - 7 are +0.203, +0.256, +0.270, and +0.134 respectively > 0. In conclusion, this study established that forensic accounting techniques are; fraud prevention, detection and deterrence skills, forensic audit, forensic investigation, and forensic interviewing skills, litigation, mediation and arbitration skills, and computer assisted reviews and document reviews. The key recommendation is that business organisations should consider setting up forensic accounting unit within the internal control department; this will lend credence to the integrity of financial statement of business organisations.

2000

This study examines the impact of the scope of risk management and ethical environment on internal audit activities and the quality of accounting control procedures (ACPQ). The conceptual framework for the study is guided by COSO's frameworks on internal controls and enterprise risk management and data from a questionnaire survey of 64 Australian firms are analysed using a structural equation

This study aims to contribute to an understanding of politically connected audit committees on the audit process in an emerging market, namely Malaysia. The study seeks to examine whether politically connected audit committees have an impact on the audit process. An in-depth analysis of the interviews from the external auditor, audit partners and audit committees further reveal that political connections do affect the audit process. It appears that the existence of political connections leads to an increase in audit work such in a variety of ways, such as auditor-client negotiations, private meetings with audit committees, re-engineering the scope and planning of the actual audit work. One of the issues that emerges from these findings is that companies highly value political connections to obtain external resources given the uncertainties in the business environment. The findings highlight the need for stronger corporate governance to mitigate the higher audit risks in such companies.

This article reports on the challenges faced by the internal audit function in the South African public sector, as perceived by role players other than the internal audit function itself. This study implemented a qualitative research design, using a case study as a research method, in order to achieve the research objective. Semi-structured interviews were conducted to obtain participants" perceptions of the challenges faced by the internal audit function. Participants were selected based on their capacity to act on the findings and recommendations of the study. Participants selected were senior managers, operational managers, and members of audit committees. The biggest challenges facing the internal audit were identified as the lack of business knowledge; lack of management support; lack of audit action monitoring processes, and external auditors' preference not to rely on the work of the internal audit function. Based on these findings, the authors make recommendations that could benefit the public sector internal audit functions by helping them to better understand the public sector environment and to identify areas for improvement. Finally, the article suggests avenues for further research on the future of the internal audit in the public sector.