UA25 Newsletter, Vol. 1, Issue 1

Newsletter regarding the office of Internal Audit, the new auditor and procurement card compliance

Quality Auditing Services : Quality Assessment

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Internal audit department characteristics/activities and audit fees: Some evidence from Hong Kong firms

This study provides preliminary support for the notion that internal audit function assists in reducing external audit effort and fees. Data on internal audit characteristics and activities are obtained from survey respondents of Hong Kong companies and audit fee model data are acquired from their annual reports. The results of this study suggest that the external auditor of firms in Hong Kong rely on the internal audit function and subsequently charge a lower fee. Lower external audit fees are associated with a larger internal audit department and certain activities carried out by the internal audit. Specifically, lower external audit fees are associated with more internal audit effort spent on activities relating to financial statements, systems development and maintenance, operating efficiency and effectiveness, fraud investigations and unlimited access to internal auditors’ working papers. The results of this study suggest that the contribution of the internal audit may substitute for some substantive external auditing processes and lower monitoring costs

Internal Audits at Local Governments. Audit Experiences of the State Audit Office of Hungary

Internal audit applied by local government does not fulfil its functions and in reality does not contribute to the proper, regulated, economical, efficient and effective management of local governments. In the majority of local governments internal audit has a systemic attitude, which consistently fails to assess and to develop the effectiveness of the risk management and controlling procedures of local government. This situation partly results from the contradictions between the Act on Local Governments and the Act on Public Finances and partly from the misapplication of internal audit and the misinterpretation of its role. The State Audit Office (SAO), also taking into account international standards, has put particular emphasis on the assessment of the operation of internal audit in local governments for many years. On the basis of the experiences resulting from such audits, well founded proposals can be submitted for reasonable amendments to statutes, with particular regard to the comprehensive reform of the Act on Local Governments.internal audit, local government, audits performed by the State Audit Office, internal control system, performance audit

PUBLIC INTERNAL AUDIT LAW - A NEW BRANCH OF LAW IN ROMANIA

In Romania, the introduction of internal audit is relatively recent fall in the overall effort to modernize financial management in both private and public sectors. Also, note that the introduction of public sector internal audit is not transposed in the Romanian economy features of the acquis communitarian, for the simple reason that there is no internal audit. At the same time, there is no legal framework and procedures to adapt to one of our member countries, since it does not correspond to current concepts of internal auditing and internal controls.Internal audit, public law, management control systems

INTERNAL AUDIT - A KEY ELEMENT OF CORPORATE GOVERNANCE IN CREDIT INSTITUTIONS

The world has always been in constant change and evolution, but the rate atwhich changes and the evolution of humanity take place has dramatically increased over thepast 70 years. Corporate governance and internal audit profession were no exception, bothevolving with great speed. All changes on the global financial markets in the last 10-15 yearsand the multiple crises that the global economy went through during this period producedmultiple mutations both in the internal audit activity and the role that this activity and theaudit committees have in corporate governance. There are several aspects that willsignificantly mark internal audit in the 21st century, and the organizations that will takeaccount of these issues will have an internal audit service that will truly bring them addedvalue.internal audit, corporate governance, risk management, credit institutions.

Internal Auditor Participation in Systems Development Projects

There are differing viewpoints in the internal auditing literature regarding the role of internal audit in systems development projects. One argument is that internal audit should act as consultants for such projects. A counter argument is that if internal auditors act as consultants this could impair in dependence. This study surveyed chief audit executives to determine their perceptions of the role of internal audit in systems development projects as well as the actual involvement of their departments in such projects. The findings show that chief audit executives place more importance on internal audit acting as consultants and less importance on independence in these projects. The results also suggest that internal audit has limited involvement in the different phases of the Systems Development Life Cycle of these projects

INTERNAL AUDIT FOR FINANCIAL INVESTMENT COMPANIES – ASSURANCE FOR ADEQUATE SUPERVISING OF CORPORATE GOVERNENCE PRINCIPLES

In the risk assessment process, financial auditors often rely on internalauditors when establishing the control risk level. Therefore, adequate internal auditfunction, as part of a solid corporate governance is a factor of lowering control risk,when assessing audit risks for Financial Investment Companies. The paper intends toapproach issues related to internal audit as a relevant source of added value for listedcompanies and the main objectives related to internal audit engagements forFinancial Investment Companies. The authors are trying to answer how internal auditcontributes in an effective manner in the process of supervising corporate governanceprinciples that Financial Investment Companies as listed companies, must complywith.investment companies, corporate governance structures, internal control,management policies, tests and procedures

Governance factors affecting internal auditors' ethical decision making: an exploratory study

Purpose This paper explores the ethical decision making of internal auditors and the impact of corporate governance mechanisms thereon. It also explores whether ethical decision making is influenced by years of experience in internal auditing. Design/methodology/approach Sixty-six internal auditors were presented with five ethical dilemmas. For each scenario, a key element of corporate governance was manipulated to assess its impact on ethical decision making. These were audit committee support; management integrity regarding accounting policies; management integrity regarding pressure on internal audit; external auditor characteristics; and organisational code of conduct. Findings Participants were generally sensitive to ethical dilemmas but were not always confident that their peers would act ethically. A higher quality external audit function was positively associated with internal auditors’ ethical decision making. However, the strength of other governance mechanisms did not appear to influence ethical decision making. Finally, more experienced internal auditors adopted a more ethical stance in some cases. Research limitations/implications Our sample was self-selected and may not be representative of internal auditors in general. Our lack of significant results may be due to insufficient variability in our manipulations and/or an oversimplification of reality in our scenarios. Practical implications The study has implications for the internal audit profession with respect to training and the provision of support mechanisms to strengthen the ability of internal auditors to withstand pressure when dealing with ethical dilemmas. Originality/value This paper is the first to study whether the strength of other governance mechanisms influence internal auditors’ ethical decision making

Auditor independence, audit committee quality and internal control weaknesses

In this paper we investigate the relation between auditor independence, audit committee quality and the disclosure of internal control weaknesses. We begin with a sample of firms with internal control weaknesses and, based on industry, size, and performance, match these firms to a sample of control firms without internal control weaknesses. Our conditional logit analyses indicate that a relation exists between audit committee quality, auditor independence, and internal control weaknesses. Firms are more likely to be identified with an internal control weakness, if their audit committees have less financial expertise or, more specifically, have less accounting financial expertise and non-accounting financial expertise. They are also more likely to be identified with an internal control weakness, if their auditors are more independent. In addition, firms with recent auditor changes are more likely to have internal control weaknesses.internal control weakness; audit committee financial expertise; auditor independence