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The Agency Model as a Predictor of the Size of the Internal Audit Function in Belgian Companies

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  • G. SARENS

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    Abstract

    This study contributes to the literature by using an agency model to explain the size of internal audit functions in a non-Anglo-Saxon environment. Data to test this model were collected from annual reports and a questionnaire sent to Chief Audit Executives. The results show that the agency model has high explanatory power and reveals that the more diffused the ownership structure of the company, the larger the company and the more reporting levels within the company, the larger the internal audit function. The results of this study confirm the growing monitoring role of internal auditing in contemporary corporate governance.

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    File URL: http://www.feb.ugent.be/nl/Ondz/wp/Papers/wp_07_458.pdf
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    Bibliographic Info

    Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 07/458.

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    Length: 30 pages
    Date of creation: Apr 2007
    Date of revision:
    Handle: RePEc:rug:rugwps:07/458

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    Related research

    Keywords: internal auditing; Belgium; agency theory; questionnaire; annual report;

    This paper has been announced in the following NEP Reports:

    References

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    1. Patrick Bolton & Jose A. Scheinkman & Wei Xiong, 2003. "Executive Compensation and Short-termist Behavior in Speculative Markets," Levine's Working Paper Archive 506439000000000124, David K. Levine.
    2. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    3. JS Armstrong & Terry Overton, 2005. "Estimating Nonresponse Bias in Mail Surveys," General Economics and Teaching 0502044, EconWPA.
    4. Watts, Ross L & Zimmerman, Jerold L, 1983. "Agency Problems, Auditing, and the Theory of the Firm: Some Evidence," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 613-33, October.
    5. San Miguel, Joseph G. & Shank, John K. & Govindarajan, Vijayaraghavan, 1977. "Extending corporate accountability: A survey and framework for analysis," Accounting, Organizations and Society, Elsevier, vol. 2(4), pages 333-347, October.
    6. DeAngelo, Linda Elizabeth, 1981. "Auditor size and audit quality," Journal of Accounting and Economics, Elsevier, vol. 3(3), pages 183-199, December.
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    Cited by:
    1. G. Sarens, 2007. "A Research Note on the Relationship between the Control Environment and the Size of the Internal Audit Function in Belguim," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 07/441, Ghent University, Faculty of Economics and Business Administration.

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