An Investigation of the Association between Cultural Dimensions and Variations in Perceived Use and Compliance with Internal Auditing Standards in Nineteen Countries

Using a large sample of chief audit executives and internal audit managers from 19 countries, we investigate potential associations between cultural dimensions and variations in perceived use/compliance with the internal auditing standards. We find uncertainty avoidance to be inversely related to both use and compliance. We also find assertiveness and human orientation to be positively related to compliance but not to use of Standards. Among control variables, we find positive associations for the length of Institute of Internal Auditors (IIA) membership, professional certification in internal auditing, and hours of continuing professional education (CPE) training on both perceived use and compliance. Finally, we find “Cost of compliance” and “Compliance not expected in my country” to be inversely related to perceived use/compliance. Implications of these findings are discussed

Monitoring effects of the internal audit function: agency theory versus other explanatory variables

This study investigates (1) whether agency variables are associated with the relative size of the internal audit function (IAF); (2) whether the IAF is complementary to other monitoring mechanisms such as independent board members and an active audit committee; and (3) the impact of the control environment on the relative size of the IAF. We use data from a sample of Belgian firms. We find evidence of a monitoring role for the IAF in corporate governance. Specifically, the relative IAF size is positively related to management share ownership. Also, we find evidence for a substitution effect between independent board members and the IAF. Finally, it turns out that a supportive control environment also has a positive impact on the relative size of the IAF. Our results can benefit companies interested in assessing the current size of their IAF and the role that it can play in corporate governance

CAE Strategic Relationships: Building Rapport with the Executive Suite

Chief audit executives (CAEs) intuitively know that building bridges with the executive suite is critical for performance effectiveness. This insightful collection of case studies shows CAEs how to build and leverage their relationship with the executive suite for better organizational outcomes. This report uses the relational coordination framework to uncover the core elements of successful business relationships for CAEs and their executive suite counterparts. Candid observations from CAEs and CEOs at large organizations in the United States and Europe reveal how to: Create shared goals about internal audit’s role and priorities. Build shared knowledge about the organization and internal audit’s role. Establish mutual respect for internal audit capabilities and leadership. Enable high-quality communication that anticipates and responds to organizational imperatives.https://ecommons.udayton.edu/books/1035/thumbnail.jp

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

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..

Corporate Governance Factors Associated with Financial Fraud

We identify a sample of 36 publicly-held companies with financial fraud in their 2003 financial statements. We use industry-specific summary corporate governance ratings (CGQ-Y) from RiskMetrics Group (formerly Institutional Investor Services), to select a sample of control firms with governance ratings similar to the fraud firms. We trace changes in CGQ-Y ratings as well as numerous governance mechanisms over the period of 2003-2006 to identify those with significant differences between the fraud firms and control firms. Specifically, we identify two corporate governance mechanisms with theoretical justification for their effects on differences due to fraud. The first is the extent of non-audit services, as proxied by the dollar magnitude of “audit-related” and “other” non-audit fees, provided by incumbent auditors. We hypothesize and find that significantly fewer fraud firms received substantial non-audit services compared to the control sample. The second governance variable is board election, where we hypothesize and find that fraud companies elect all directors annually, more often than control firms, which have more staggered terms for their directors. We used the Compustat data base to codify a number of control variables identified from prior literature as impacting governance and investigated differences by fraud and control firms. We do not find significant differences between fraud and control firms with respect to return on assets, the proportion of executive ownership of the firm, or firm size. However, we find that fraud firms have significantly more financial need, lower Z-scores, and more audit committee meetings in the fraud year than control firms. Finally, when compared with control firms, we find that fraud firms improve their overall governance rating in the year following the fraud, but revert to lower ratings in the following two years