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

Ho, Sandra; Hutchinson, Marion

doi:10.1016/j.intaccaudtax.2010.07.004

Cited by 52 publications

(60 citation statements)

References 37 publications

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“…Prior empirical evidence indicates that the extent to which external auditors rely on the internal audit work will be greater when the IA department possesses the characteristics associated with competency (Messier & Schneider, 1988; Ho & Hutchinson, 2010). These studies focus on specific criteria used to assess the competency of the IA function, including how long the IA function has been present in the organization (Arena & Azzone, 2009), IA training programs and professional certification (Brown, 1983; Mat Zain, Subramaniam & Stewart, 2006; Ho & Hutchinson, 2010) and IA experience in auditing and accounting (Messier & Schneider, 1988; Suwaidan & Qasim, 2010).…”

Section: Background and Hypothesesmentioning

confidence: 99%

See 1 more Smart Citation

Internal Audit Attributes and External Audit's Reliance on Internal Audit: Implications for Audit Fees

et al. 2012

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This study aims to examine two aspects of internal audit quality, namely internal audit competency and internal audit contribution to financial statement audits. Consistent with the substitution view, this study predicts a negative relationship between the competency aspects of internal audit (the tenure of the existence of internal audit in the organization, internal audit staff expertise in IT and computer skills, training hours, internal audit staff professional certifications in accounting and auditing, and internal audit staff experience in auditing) and audit fees. Second, this study tests whether the contribution of internal auditors to financial statement audit reduces audit fees. The data analysis is based on a cross‐sectional regression model with observations of 73 public‐listed firms in Malaysia, which include publicly available data matched with survey responses from their internal and external auditors. The results of the study suggest that the competency of internal audit, namely the tenure of the existence of internal audit in the organization, training, internal audit staff prior experience in auditing and accounting, and certifications are associated with lower audit fees. Our findings for both aspects of internal audit quality (competency and internal audit contribution) lend support to the substitution view for explaining the links between internal audit quality and audit fees.

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Section: Background and Hypothesesmentioning

confidence: 99%

“…7 7 Ho and Hutchinson (2010) utilized several proxies of IA including size, IA staff prior experience and certification. Their results also support a negative relationship between IA and audit fees. …”

mentioning

confidence: 99%

Internal Audit Attributes and External Audit's Reliance on Internal Audit: Implications for Audit Fees

et al. 2012

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“…Although we expect focus, expertise, and autonomy of IAFs to have an influence on the level of co-sourcing for internal audit activities, the associations we defined in our hypotheses may suffer changes depending on whether the IAF is voluntary or mandatory for specific organizations in a given institutional context. Though there is a wide range of empirical literature about the substitution or complementary effect between internal and external audit activities (Carey et al, 2000;Elliott & Korpi, 1978;Felix, Gramling, & Maletta, 2001;Hay, Knechel, & Ling, 2008;Hay, Knechel, & Wong, 2006;Ho & Hutchinson, 2010;Mohamed et al, 2012;Prawitt, Sharp, & Wood, 2011;Stein, Simunic, & O'Keefe, 1994), there are no studies, to our knowledge, examining the relationship between IAF characteristics and co-sourcing, depending on whether the IAF is voluntary or mandatory.…”

Section: Iaf Characteristics and Co-sourcing Fees To Support Internmentioning

confidence: 99%

Internal audit function characteristics and external auditors' co‐sourcing in different institutional contexts

Jokipii

Meo

2019

Int J Auditing

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We examine the association between several characteristics of an internal audit function (IAF) and fees paid to external auditors to support internal audit activities (co‐sourcing). We also analyze how this relation is influenced by the mandatory or voluntary implementation of IAFs. By using data from the Common Body of Knowledge (CBOK) study, which was conducted by the Institute of Internal Auditors Research Foundation in 2015, we find that more consulting‐oriented IAFs and more autonomous IAFs are likely to pay higher co‐sourcing fees, whereas IAFs with greater expertise are likely to pay lower co‐sourcing fees. Although results related to consulting activities hold regardless of the institutional context, the negative association between IAF expertise and co‐sourcing fees paid to support internal audit activities only holds in mandatory IAF environments, and the positive association between IAF autonomy and co‐sourcing fees paid only holds where IAF is voluntary.

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“…The relationship between the existence of an internal audit department and audit costs has been studied by Ho and Hutchinson (2010) in the Hong Kong market. The authors concluded that there is a relationship between these two variables, i.e., the higher the internal audit effort, the lower the external audit fees.…”

Section: Determinants Of the Costs Of Audit Servicesmentioning

confidence: 99%

Custos de auditoria e governança corporativa

Bortolon

Neto

Santos

2013

Rev. contab. finanç.

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The service provided by an independent audit is essential to the greater transparency and reliability of the financial reporting of public companies. The topics explored in the international literature include possible threats to the auditors' independence and the quality of their analysis, the cost of their services and their relationship with corporate governance mechanisms. The present study investigates this topic in the Brazilian context. This has become possible following CVM Instruction No. 480, which obligates the disclosure of the costs of audit and non-audit services contracted to independent audit firms. The information provided by 131 companies in the first half of 2010 was analyzed to determine the relationship between corporate governance and audit and non-audit service costs. The proxies for governance that were used are given as follows: the five largest shareholders rights mismatch, the participation in premium listing segments of the Brazilian Securities, Commodities, and Futures Exchange (Bolsa de Mercadoria e Futuros e Bolsa de Valores de São Paulo -BM&FBovespa), the existence of an audit committee and an internal audit department. The results point to a negative relationship between governance and audit costs, which suggests that the risk effect is predominant in the Brazilian market; that is, better governance practices reduce external audit's risks (legal and loss of reputation), thereby allowing them to charge less. Most studies in the international literature show a positive relationship in favor of the demand effect, but this is not consensual. According to this effect, better governance implies greater demands on the audit service, resulting in an increase in the fees charged. The relationship between non-audit service costs and good governance practices is also negative. Although studies have not shown that these costs can contribute to the loss of independence of the external audit, legislators and regulators tend to limit this practice.

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

Cited by 52 publications

References 37 publications

Internal Audit Attributes and External Audit's Reliance on Internal Audit: Implications for Audit Fees

Internal Audit Attributes and External Audit's Reliance on Internal Audit: Implications for Audit Fees

Internal audit function characteristics and external auditors' co‐sourcing in different institutional contexts

Custos de auditoria e governança corporativa

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