Investigation Factors Affecting the Effectiveness of Internal Auditors in the Company: Case Study Iran

Abstract

There are relatively fewer number of studies focused on internal audit effectiveness, than the number of studies on the effectiveness of external audit. Our focus in this paper is mainly on determinants of internal audit effectiveness. For this purpose we developed and tested five hypotheses using an investigation approach. We gathered our data using a questionnaire, filled out by 355 internal audit manager and 272 other internal audit staff.Our multivariate regression model estimates the relationships between the effectiveness of internal audit department and its five main determinants: competency of internal audit staff, size of internal audit department, communications between internal auditors and external auditors, management's support for internal audit department, and independent (outsourced) internal audit.Our results show that internal audit effectiveness has stronger relationships with management's support for hiring and experienced educated staff, providing the internal audit department with sufficient resources, and the size of internal audit department.

Extrinsic Factors Influencing Internal Auditors’ Effectiveness in Jordanian Public Sector

“…Various studies have been conducted to examine the internal auditors' effectiveness (Alzeban & Gwilliam, 2014;Badara & Saidin, 2013;Erasmus & Coetzee, 2018;Salehi, 2016). However, there is no a consensus regarding the measures used to evaluate internal auditors' performance.…”

“…The factors that influence the effectiveness of internal auditors have been seen as a controversial issue. In this regard, numerous factors have been addressed by several studies to investigate the ineffectiveness of IAF (Alzeban & Gwilliam, 2014;Salehi, 2016;Tackie et al, 2016). For example, Ahmad, Othman, Othman, & Jusoff (2009) found that lack of internal auditors' competence, understaffed departments and limited resources, lack of independence, negative view towards the role of internal audit by the auditees, and lack of the support from top management adversely impact on the effectiveness of internal audit.…”

“…For example, Ahmad, Othman, Othman, & Jusoff (2009) found that lack of internal auditors' competence, understaffed departments and limited resources, lack of independence, negative view towards the role of internal audit by the auditees, and lack of the support from top management adversely impact on the effectiveness of internal audit. Similarly, Salehi (2016), and Alzeban, and Gwilliam (2014) have agreed that lack of top management support, competency, independence, internal audit department size, and internal-external auditors' cooperation are significant factors that lead to the deficiency of IAE, which, in turn, cause many problems in organizations. The extrinsic factors that restrict internal auditors' works were neglected, especially in the public sector where the objectives are usually complex and not easy to be measured (Schillemans & Twist, 2016); the internal auditors are usually blamed and criticized when they fail to discover misuse of public resources or corruption cases.…”

“…On the other hand, auditors in under-sized internal audit department are likely to perform a wider variety of responsibilities and participate in various kinds of engagements (Prawitt, 2003). Hence, when there is enough number of internal audit staff, the effectiveness of internal auditors' performance will obviously increase (Brierley et al, 2001;Rogala & Wereda, 2015;Salehi, 2016). This is particularly true in the public sector which has been described as a sector with additional risks, extra complexity, and cases of corruption in several public entities (El-Tahan, 2016; Pilcher, 2014).…”

“…As for the public sector, the role of internal auditors is increasing in order to combat the corruption risk. In this regard, internal auditors should have the ability, resources, and the power to obtain all information in the entire organization (Salehi, 2016). Accordingly, stakeholders will serve from possessing an effective IAF which will give the other cornerstones of corporate governance more value (Smet & Mention, 2011).…”