Determinants of Internal Audit Effectiveness

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Abstract
This study extends the literature by building a conceptual understanding of the determinants of the effectiveness of internal audit in organization. This finding specifically investigates five determinants of internal audit effectiveness which are in-house internal audit vs. outsources internal audit, independent and objectivity of internal audit, staff competency, management support and tone at the top and scope of services and planning.

Toward this end it confirms the five determinants of the effectiveness of internal audit are needed in ensuring the well-being of an organization and for it to achieve its objectives.

Key words: In house internal audit vs. outsources internal audit, independent and objectivity of Internal audit, staff competence, management support and tone at the top, scope of services and planning  

Chapter 1 Introduction

Internal auditing (IA) serves essentially crucial in connecting and linking the business and financial reporting processes of corporations and not-for-profit providers (Reynolds 2000). Control mechanism is needed to be set up to monitor and direct, promote or even restrain the various activities of an organization for the very purpose of achieving its objective. (Sawyer 1988: Coram, Ferguson and Morney 2008). As so, internal auditors play a vital role in ensuring the company’s risk profile is under monitoring and areas to improve risk management is improved. In an economy that relies highly upon independent process information, internal audit has since become an indispensable control mechanism in both public and private organization. At the end of it, the purpose of internal auditing is to improve organization efficiency and effectiveness through constructive criticism. In order for Internal auditing to be effective in a holistic manner, we will need to look at the five determinants of an effective internal auditing.

Problem statement
The role of internal auditor has been enhanced and widen ever since the Asian financial crisis in 1997 and the global audit scandal such as Enron in 2001 and WorldCom in 2002 that have since caught worldwide attention. This is in view of the ineffective of the traditional role of an internal auditor which was essentially just emphasizing on the accuracy and reliability of the financial statement. But now, the essence of effective internal audit comes to the function of reviewing current performance of the organization and to also recommend improvements to ensure the well-being of the organization. However, there are no specific guidelines on which determinant is able to provide an effectiveness of internal auditing in ensuring the entire objective is achievable.

Research objective
To investigate the influence of in house internal audit vs. outsources internal audit on the effectiveness of internal audit. •To investigate the influence of independent and objectivity of internal audit on the effectiveness of internal audit. •To investigate the influence of staff competency on the effectiveness of internal audit. •To investigate the influence of management support and tone on the top on the effectiveness of internal audit. •To investigate the influence of scope of services and planning on the effectiveness of internal audit.

Research question
Is there any significant influence of in house internal audit vs. outsources internal audit on the effectiveness of internal audit? •Is there any significant influence independent and objectivity of internal audit on the effectiveness of internal audit? •Is there any significant influence of staff competency on the effectiveness of internal audit? •Is there any significant influence of management support and tone on the top on the effectiveness of internal audit? •Is there any significant influence of scope of services and planning on the effectiveness of internal audit?

Significant of study
Internal audit in Malaysian public and private sector organizations...
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