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Resourcing the Internal Audit Function: How Effective is the Audit Committee?

Author

Listed:
  • Shir Li Ng
  • Dennis W Taylor

Abstract

The aim of this study is to investigate the extent to which an Audit Committee (AC)’s own governance characteristics impact on its role effectiveness in achieving enhanced resourcing and by extension, improved the scope and quality of the Internal Audit Function (IAF). Sample is drawn from top 300 companies listed on the Australian Stock Exchange (ASX). This study combines data from a questionnaire administered to the Internal Audit Executive (IAE) with information from annual reports and financial databases. Hypotheses are developed and tested using multiple regression analysis. This analysis is supplemented by insights from a comparative case study for two companies in the sample. Results reveal that AC size is significantly positively related to the financial resources (budget) allocated to IAF, while both AC financial expertise and AC size are significantly positively related to IAF labour hours. Results also confirm that IAF’s with higher resourcing are able to concentrate those resources on areas expected of a high quality IAF. Further, comparative case study analysis gives insights to the superior ways a larger size AC can be effective in fulfilling its oversight role, building its working relationships and obtaining resources for the IAF. Study contributes to current auditing-related governance literature by introducing a comprehensive empirical model of AC effectiveness in facilitating the scope and quality of the IAF’s work. Also, the findings have implications for regulators and the Institute of Internal Auditors (IIA) in terms of the composition and functioning of ACs.

Suggested Citation

  • Shir Li Ng & Dennis W Taylor, 2017. "Resourcing the Internal Audit Function: How Effective is the Audit Committee?," Asian Journal of Finance & Accounting, Macrothink Institute, vol. 9(2), pages 161189-1611, December.
    • Handle: RePEc:mth:ajfa88:v:9:y:2017:i:2:p:161189
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    References listed on IDEAS

    as
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    4. repec:eme:mfppss:03074350010766990 is not listed on IDEAS
    5. Harjinder Singh & Rick Newby, 2010. "Internal audit and audit fees: further evidence," Managerial Auditing Journal, Emerald Group Publishing Limited, vol. 25(4), pages 309-327, April.
    6. repec:eme:maj000:02686901011034153 is not listed on IDEAS
    7. Harjinder Singh & Rick Newby, 2010. "Internal audit and audit fees: further evidence," Managerial Auditing Journal, Emerald Group Publishing, vol. 25(4), pages 309-327, April.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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