Factors Associated with the Internal Audit Function's Role in Corporate Governance

Journal of Applied Accounting Research, Vol. 13 No. 2, 191-204, 2012

Posted: 26 Jan 2014

See all articles by Gerrit Sarens

Gerrit Sarens

Université Catholique de Louvain

Mohammad J. Abdolmohammadi

Bentley University - Department of Accountancy

Rainer Lenz

Louvain School of Management (UCL)

Date Written: 2012

Abstract

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.

Findings – It is found that an IAF having an active role in corporate governance is significantly and positively associated with the use of a risk-based audit plan, existence of a quality assurance and improvement program, and audit committee input to the audit plan. Control variables such as stock exchange listing, firm size, the existence of an internal control framework, and a CAE with an internal auditing qualification also are positively associated with the IAF having an active role in corporate governance.

Research limitations/implications – A limitation of this study is that CAE perceptions may deviate from actual practice. Also, the sample is limited to the US CAEs who are also IIA members, thus it may not reflect the views of non-members and the CAEs from other countries.

Practical implications – The results have implications for CAEs who wish to increase the chance for their IAFs to play an active role in corporate governance. The IIA may benefit from these results in its supporting role for the internal auditing profession.

Originality/value – The study is complementary to the literature on the existence and size of the IAF and reveals several avenues for further research.

Keywords: Internal auditing, Corporate governance, Audit committee, United States of America

JEL Classification: M10, M19

Suggested Citation

Sarens, Gerrit and Abdolmohammadi, Mohammad J. and Lenz, Rainer, Factors Associated with the Internal Audit Function's Role in Corporate Governance (2012). Journal of Applied Accounting Research, Vol. 13 No. 2, 191-204, 2012, Available at SSRN: https://ssrn.com/abstract=2384747

Gerrit Sarens (Contact Author)

Université Catholique de Louvain ( email )

Place des Doyens, 1
Louvain-la-Neuve, 1348
Belgium
+32 10 47 84 41 (Phone)
+32 10 47 83 24 (Fax)

Mohammad J. Abdolmohammadi

Bentley University - Department of Accountancy ( email )

175 Forest Street
279 Adamian Academic Center
Waltham, MA 02452
United States
781-891-2976 (Phone)

Rainer Lenz

Louvain School of Management (UCL) ( email )

Place des Doyens 1
Louvain-la-Neuve, 1348
Belgium

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