Influence of audit committees on internal audit conformance with internal audit standards

Abstract

Purpose -This study aims to provide empirical evidence of the association between audit committee characteristics and internal audit conformance with the International Standards for the Professional Practice of Internal Auditing (ISPPIA). Design/methodology/approach -Seventy-four usable responses were received from a survey of chief internal auditors (CIAs) from Saudi companies listed on the Saudi Stock Exchange. Findings -The results indicate that audit committee characteristics (the presence of independent members on the committee, members' expertise in auditing and accounting and meeting with the CIA) influence internal audit conformance with the ISPPIA. Additionally, they demonstrate that such conformance is also influenced by CIA tenure. Practical implications -The findings of this study also have significant implications for audit committees wishing to improve their overall effectiveness, by identifying the impact of the committee's characteristics on internal audit conformance with the ISPPIA. Originality/value -The results add to the literature on internal audit standards by introducing a Middle Eastern perspective and simultaneously providing insights for companies in their attempts to adhere to the international standards, hence, supporting efforts towards good corporate governance.

Breaking the silence: An empirical analysis of the drivers of internal auditors' moral courage

“…Supporting that, audit committees act as agents of the organization and are responsible for guiding and assessing internal auditors' performance (Alzeban, 2015;Khelil et al, 2016), we believe that internal auditors view their audit committees' favorable or unfavorable orientation toward them as a signal of the organization's support.…”

“…Recognizing that both moral courage (Harbour & Kisfalvi, 2014) and internal auditing activity (Alzeban, 2015) involve normative elements and cultural differences, our study opens the door to further experimental investigations to examine the effect of positive states (self-efficacy, state hope, and resilience), PSS, and the independence of IAF on internal auditors' moral courage in cultures different from the Tunisian one and thus permitting one to compare the findings emerging from different contexts.…”

“…In parallel, a considerable amount of literature has supported an association between greater audit committee oversight and greater independence for the IAF (Abbott et al, ; Abbott et al, ; Alzeban, ; Goodwin & Yeo, ), as the former permits shielding auditors from possible managerial pressure (Abbott et al, , 2015).…”

“…In parallel, a considerable amount of literature has supported an association between greater audit committee oversight and greater independence for the IAF (Abbott et al, 2012;Abbott et al, 2016;Alzeban, 2015;Goodwin & Yeo, 2001), as the former permits shielding auditors from possible managerial pressure (Abbott et al, 2012(Abbott et al, , 2015. James (2003) proves that internal auditors related to the audit committee are viewed as more likely to report fraud than those related to senior management.…”

“…Stewart and Subramaniam (2010) add that the audit committee can create a "tone" permitting internal auditors to have a degree of influence and power in their organizations. Furthermore, Alzeban (2015) claims that hiring and firing the CA, which is a significant responsibility arising out of this reporting relationship, can affect internal auditors' independence. He argues that hiring/firing decisions should be made without managerial influence to ensure the impartiality of the internal auditor so that they report poor managerial deeds without a fear of reprisals.…”