The effect of internal auditor competence and objectivity, and management support on effectiveness of internal audit function and financial reporting quality implications at local government

Purpose The purpose of this paper is to demonstrate the relationship between internal audit functions (IAF) and financial reporting quality (FRQ) and whether such a relationship is moderated by senior management support (SMS) in listed companies in Nigerian Stock Exchange (NSE). Design/methodology/approach This research is a cross-sectional study, using primary data in the form of a survey sent to 175 listed companies in NSE. A total of 149 questionnaires have been collected and analysed out of which 97 were found to be useful and used in the final analysis. Findings The findings indicate a positive and significant relationship between internal audit qualities of work performed, internal control activities, coordination between internal and external auditors and FRQ and this finding was also supported by SMS as a moderator. However, the results show a negative and insignificant relationship between internal audit competency, organisational status and FRQ. Research limitations/implications The findings support the assumption with regard to agency theory. The board should support the IAF to serve as an effective monitoring mechanism in minimising opportunistic management actions. Regulators should also ensure adequate structures that will strengthen the organisational status of the internal auditors to perform towards improving FRQ. Originality/value The study contributes to the existing literature by assessing the effect of IAF on FRQ as moderated by SMS.

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Effective association between audit committees and the internal audit function and its impact on financial reporting quality: Empirical evidence from Omani listed firms

International Journal of Auditing ◽

10.1111/ijau.12113 ◽

2018 ◽

Vol 22 (2) ◽

pp. 197-213

Author(s):

Elias Gebrayel ◽

Hajer Jarrar ◽

Charbel Salloum ◽

Quentin Lefebvre

Keyword(s):

Empirical Evidence ◽

Financial Reporting ◽

Internal Audit ◽

Reporting Quality ◽

Audit Committees ◽

Financial Reporting Quality ◽

Listed Firms ◽

Internal Audit Function

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CEO INVOLVEMENT IN SELECTING CAE, INTERNAL AUDIT COMPETENCY AND INDEPENDENCE, AND FINANCIAL REPORTING QUALITY

Journal of Business Economics and Management ◽

10.3846/jbem.2018.6264 ◽

2018 ◽

Vol 19 (3) ◽

pp. 456-473 ◽

Cited By ~ 4

Author(s):

Abdulaziz Alzeban

Keyword(s):

Financial Reporting ◽

Stock Exchange ◽

Internal Audit ◽

Reporting Quality ◽

Chief Executive ◽

Discretionary Accruals ◽

Financial Reporting Quality ◽

Annual Reports ◽

Internal Audit Function

The purpose of this study is to explore the argument that Chief Executive Officer (CEO) involvement in the appointment of the Chief Auditing Executive (CAE) is detrimental to efforts to achieve good financial reporting quality (FRQ). The study is original in that to date, this precise link has not been investigated. Data are obtained via survey and annual reports relating to 307 UK companies listed on the London Stock Exchange, and the working capital and discretionary accruals are used as proxies for financial reporting quality. The findings support the contention that the benefits to FRQ of an independent and competent internal audit function are not realized when there is CEO involvement in the appointment of the CAE, since management is able to override IA controls. Indeed, high FRQ is only evident when the CEO is not involved in the appointment. The results are found to be robust after using two different methods of estimation, and carry the implication regulators concerned with FRQ and quality of internal audit function that the CEO should not be party to the appointment of the CAE since this will depress FRQ.

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