Abstract
Purpose: This study aims to critically analyse the independence of the internal audit function through its relationship with management and the audit committee. Design/methodology/approach: Results are based on a critical comparison of responses from questionnaires sent out to Australian chief audit executives (CAEs) versus existing literature and best practice guidelines. Findings: With respect to the internal audit function's relationship with management, threats identified include: using the internal audit function as a stepping stone to other positions; having the chief executive officer (CEO) or chief finance officer (CFO) approve the internal audit function's budget and provide input for the internal audit plan; and considering the internal auditor to be a "partner", especially when combined with other indirect threats. With respect to the relationship with the audit committee, significant threats identified include CAEs not reporting functionally to the audit committee; the audit committee not having sole responsibility for appointing, dismissing and evaluating the CAE; and not having all audit committee members or at least one member qualified in accounting. Originality/value: This study introduces independence threat scores, thereby generating analysis of the internal audit function's independence taking into account a combination of threats.
Original language | English |
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Pages (from-to) | 200-220 |
Number of pages | 21 |
Journal | Accounting, Auditing and Accountability Journal |
Volume | 22 |
Issue number | 2 |
DOIs | |
Publication status | Published - 26 Jan 2009 |
Externally published | Yes |
Keywords
- Audit committees
- Australia
- Corporate governance
- Internal auditing
- Managers