internal auditors' assessment of their contribution to financial statement audits: the relation...

International Journal of AuditingInt. J. Audit. 10: 1–18 (2006)

ISSN 1090-6738© Blackwell Publishing Ltd 2006. Published by Blackwell Publishing, 9600 GarsingtonRoad, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.

Blackwell Publishing Ltd.Oxford, UK and Malden, USAIJAUInternational Journal of Auditing1090-67382006 Blackwell Publishing Ltd.2006101118Original ArticlesInternal Auditors’ Contribution to Financial Statement AuditsM. M. Zain et al.

Correspondence to: Dr. Nava Subramaniam, Griffith BusinessSchool, Department of Accounting, Finance and Economics,Griffith University, PMB 50 Gold Coast Mail Centre, Queensland9726, Australia. Email: [email protected]

Internal Auditors’ Assessment of their Contribution to Financial Statement Audits: The Relation with Audit Committee and Internal Audit Function Characteristics

Mazlina Mat Zain,1 Nava Subramaniam2 and Jenny Stewart2

1Multimedia University, Malaysia2Griffith University, Australia

This paper examines the relation between audit committeecharacteristics, internal audit function characteristics andinternal auditors’ assessment of their contribution to financialstatement audits. Using survey data from chief internalauditors of 76 Malaysian publicly-listed firms, we provideevidence of a positive relationship between internal auditors’assessment of their contribution to financial statement auditsand three audit committee characteristics: the proportion ofindependent audit committee members, their knowledge andexperience of accounting and auditing, and the extent of auditcommittee review of internal audit programmes, budget andcoordination proposals. Further, a positive relationship isfound between internal auditors’ evaluation of theircontribution to the financial statement audit and internal auditfunction characteristics including size, prior experience ofstaff in auditing, time availability and the closeness of thefunction’s relationship with the external auditor. The resultsindicate that more effective audit committees and well-resourced internal audit units tend to be positively associatedwith the internal auditors’ assessment of their contribution tothe external audit.

Key words: internal audit; audit committees; external audit;corporate governance; financial statement audits; Malaysia

SUMMARY

This study provides empirical evidence on theassociation between audit committee

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© Blackwell Publishing Ltd 2006 Int. J. Audit. 10: 1–18 (2006)

characteristics, internal audit functioncharacteristics and the internal auditors’assessment of their contribution to financialstatement audits.

We hypothesise that specific audit committeecharacteristics such as independence, members’knowledge and experience in accounting andauditing, and interactions with the internal auditfunction (such as frequency of meetings andreview of internal audit reports) are associatedwith internal audit’s propensity to contributetowards the external audit. We also predict thatquality aspects of internal audit, namely the sizeof the internal audit function and the level ofaudit experience among internal audit staff willimpact on the extent to which the internal auditfunction is able to contribute to financialstatement audits.

The study uses survey data from chief internalauditors of 76 firms listed on the Malaysian KualaLumpur Stock Exchange (KLSE).1 Consistentwith our predictions, our results indicate that auditcommittee characteristics are associated withinternal auditors’ assessment of their contributionto external audits. Specifically, positiverelationships are found between internal auditors’evaluation of their contribution to the financialstatement audit and three audit committeecharacteristics: (1) the proportion of independentaudit committee members, (2) the audit committeemembers’ knowledge and experience ofaccounting and auditing issues, and (3) auditcommittee reviews of internal audit programmes,budgets and their coordination with externalauditors. We also find positive relationshipsbetween internal auditors’ assessment of theircontribution to external audit and both the sizeof the internal audit unit and the level of auditexperience among internal audit staff.

The study adds to the growing body ofinternational literature concerned with linkagesbetween various corporate governancemechanisms. From a practical perspective, thestudy provides feedback to the regulators (i.e.KLSE) on the need for policies that support andenhance the link between the audit committee andthe internal audit function. The results also supportthe current debate on the appointment ofindependent audit committee members, and theneed for members to be knowledgeable inaccounting, auditing and finance. Further, issuesof appropriately resourcing the internal auditfunction also appear important to improve internal

audit participation in the financial reportingprocess.

INTRODUCTION

The contribution that internal auditors maketowards assisting external auditors in the financialstatement audit process has gained renewedattention (Elliot & Korpi, 1978; Felix et al., 2001;Wallace, 1984). Much of this interest has beenpropelled by two key factors. First, the continuingpressure on accounting firms to deliver servicesmore efficiently and to reduce audit costsmotivates a better understanding of how externalauditors may optimise work completed by internalauditors. Second, corporate governancedevelopments have increased the focus on internalcontrol systems, and have identified the internalaudit function as playing a key role in assessingand improving the quality of such systems(Securities & Exchange Commission (SEC), 2003;Cohen et al., 2002). Consequently, the internal auditfunction has greater potential to aid the externalauditors in their audit planning, thus justifyingfurther research on the link between internal andexternal auditors. Previous research suggests thata positive relation exists between external auditors’reliance on internal audit work and the strength ofthe internal audit function (Abdel-khalik et al.,1983; Brody et al., 1998; Maletta, 1993; Schneider,1985). Further, the focus of prior studies is alsopredominantly on understanding how variousattributes as prescribed by the auditing standards(e.g. ISA 610; SAS 65; AUS 604), namely internalauditors’ objectivity, competence and workperformance, affect external auditors’ assessmentof an internal audit function’s strength. In general,the findings indicate that the greater the objectivity,technical competence and quality of workperformance (i.e. the exercise of due professionalcare), the larger the potential for internal auditorsto contribute to the external audit(Krishnamoorthy, 2002).2

Our literature review, however, indicates thatprior studies have failed to examine the influenceof related corporate governance variables on thelink between the internal and external auditfunctions. In particular, with the growingrecognition of the influence that audit committeeshave on the financial reporting process (Beasleyet al., 1999; Carcello & Neal, 2000; Collier, 1993), akey research question is whether such committeesimpact internal audit contribution to financial

Internal Auditors’ Contribution to Financial Statement Audits 3


statement audits. The audit committee isconsidered to be an important self-regulatorygovernance mechanism with significant oversightresponsibilities over financial reporting, internalcontrol and audit activities (Blue RibbonCommittee (BRC), 1999; United States (US)Congress, 2002). In recent years, there has beenincreasing controversy over financial reportingproblems and inadequate audit committeeoversight, resulting in greater demand forunderstanding the impact that audit committeeshave on the financial reporting process (Abbottet al., 2004; DeZoort & Salterio, 2001).Recommendations by authoritative bodies suchas the Public Oversight Board (POB) (PAE, 2000),the BRC (1999), and the Malaysian Instituteof Corporate Governance (2000) have stressedthe importance of having independent,knowledgeable and active audit committees toenhance their financial reporting monitoring role.While several empirical studies have examined theimpact of audit committees on financial reporting-related outcomes such as audit quality and auditfees (Carcello & Neal, 2000; Beasley et al., 1999;Collier & Gregory, 1996), little work has been doneto examine how audit committees may affectexternal auditors’ reliance on the internal auditfunction.

Audit committees assume importantresponsibilities with respect to internal audit, suchas reviewing the internal audit programme andensuring the adequacy of the scope of internalaudit activities. As such, audit committees havethe potential to enhance the effectiveness of theinternal audit function, and this, in turn, hasimplications for internal auditors’ contribution toexternal audit work. According to Krishnamoorthy(2002), ‘decisions to rely on the internal auditfunction and the resulting impact on auditplanning decisions form a complex process, andfuture research should attempt to address thisissue’ (p. 118). Thus, further research on therelationship between the internal audit functionand the audit committee and its implications forexternal auditors’ reliance on internal audit workis clearly warranted.

In this paper, we examine the relationshipbetween specific audit committee characteristics(i.e. independence, members’ knowledge andexperience in accounting and auditing, andinteractions with the internal audit functionincluding frequency of meetings and review ofinternal audit reports) and internal auditors’

assessment of their contribution towards financialstatement audits.3 An overarching rationale for thestudy’s hypotheses is that a more independent,competent and interactive audit committee is likelyto take actions within their span of control that mayresult in more effective internal audit outcomes.Consequently, improvements in internal auditeffectiveness and in the communication betweeninternal and external auditors are likely toengender greater trust and hence more relianceby the external auditor on the internal auditfunction. External auditors are potentially able toutilise assistance from internal auditors via twoapproaches. The first is to have the internalauditors work as assistants under their directsupervision; the second approach is to rely onrelevant work completed by the internal auditfunction on its own. Such assistance, in turn, islikely to save external auditors’ time and effortin their audit engagement. Prior studies by Felixet al. (1998), and Al-Twaijry et al. (2004) provideevidence of substantial interactions between theinternal and external auditors, including theplanning of audit work and assessing each other’sworking papers and reports.

The present study also extends previous researchin the area by examining the link between qualityaspects of an internal audit unit, namely the size ofthe internal audit function and the level of auditexperience among internal audit staff, and internalauditors’ assessment of their contribution tofinancial statement audits. While Felix et al. (2001)adopt a single measure of internal audit qualitybased on the external auditors’ subjectivejudgement of their clients’ internal audit units, wefocus on more objective aspects of an internal auditfunction that affect its quality. We argue that alarger sized internal audit unit is likely to be betterresourced, including having a broader work scope,higher organisational status and wider staff talentthan a smaller unit. Likewise, the quality ofinternal audit work is likely to be higher in internalaudit units with a larger proportion of staff withaudit experience than those with a lowerproportion of audit experience. By examining theeffects of these two distinct aspects of an internalaudit unit on the contribution that internal auditmakes towards financial statement audits, theresults of this study will be able to inform thedesign of such units.

Analysis of our hypotheses is based on datacollected from 76 publicly-listed companies fromMalaysia. Malaysia was chosen as the location for

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the study because evidence has been fragmentaryfrom newly industrialised economies and lessdeveloped capital markets. Whilst prior work inthis area provides evidence from a strong andsophisticated capital market environment (Edge& Farley, 1991; Felix et al., 2001; Gramling, 1999;Maletta, 1993; Maletta & Kida, 1993; Margheim,1986; Messier & Schneider, 1988; Schneider, 1984,1985), only a limited number of studies have beenconducted in countries where capital markets areless developed and where corporate governancemechanisms are still evolving (Al-Twaijry et al.,2004).

According to the Corporate Disclosure-ListingRequirement (Section 344A), as issued by the KualaLumpur Stock Exchange (KLSE) (2000), all publicly-listed companies in Malaysia are mandated toestablish an audit committee. Further, the auditcommittee should comprise a minimum of threemembers, the majority of whom must beindependent directors. The chairman of the auditcommittee is required to be an independentdirector and also a member of the MalaysianInstitute of Accountants (KLSE, 2000). The listingrequirements also advocate the establishment ofan internal audit function according to the bestpractices guidelines of the Malaysian Code ofCorporate Governance (MCCG) (FinanceCommittee on Corporate Governance, 2000). If acompany does not have such a function, the boardof directors is required to disclose this fact withreasons why the function has not been put intoplace.

Our results indicate that audit committeecharacteristics impact internal auditors’assessment of their contribution to external audits.Specifically, positive relationships are foundbetween the perceived internal audit contributionto the financial statement audit and three auditcommittee characteristics: (1) the proportion ofindependent audit committee members, (2) theaudit committee members’ knowledge ofaccounting and auditing issues, and (3) auditcommittee reviews of internal audit programmes,budgets and their coordination with externalauditors. Further, our results also indicate positiverelationships between aspects of internal auditquality, namely the size of the internal audit unitand level of audit experience among internal auditstaff, and internal audit contribution to externalaudit. These results provide further support toprevious studies by Felix et al. (2001) and Brodyet al. (1998), which suggest that internal audit

quality is a key determinant of external auditors’reliance on internal audit work.

The remainder of this paper is organised asfollows. The next section provides the backgroundof the current study, while the third sectiondiscusses the hypotheses development. The fourthsection delineates the research method while thefifth section reports and discusses the results ofthe study. The final section concludes the paper,notes the limitations of the study and discussesopportunities for further research.

BACKGROUND

When planning an audit engagement, the externalauditor assesses the risk of material misstatementin the client’s financial statements. This includesa review of the internal control system of theclient. The internal audit function is part of anorganisation’s internal control system and thus theexternal auditors will seek an understanding of thefunction as part of their overall audit planningprocess (ISA 610; SAS 65; AUS 604). Based on thisunderstanding, the external auditor evaluates thesuitability and extent of reliance to be placed onwork undertaken by the internal audit function, soas to minimise any duplication of audit work.Internal audit procedures upon which the externalauditors may rely include testing of internalcontrols and substantive testing procedures.

Professional auditing standards (e.g. ISA 610)suggest that, when assessing the work of internalaudit, an external auditor should consider (1) thecharacteristics of internal auditors such as theircompetency, objectivity and work performance,and (2) the nature of the assertion such as the levelof materiality, inherent risk, and subjectivity of theassertion, particularly at the account balance level.These factors have been the focal variables for astream of research, predominantly experimentalin nature, investigating their effect on externalauditors’ decisions to rely on internal audit work(Edge & Farley, 1991; Margheim, 1986; Schneider,1985; Brown, 1983). In general, consistent with theauditing standards, findings of prior studiessuggest that both the characteristics of internalauditors and the nature of the assertion impactexternal auditors’ perceptions of the reliability ofinternal audit work and hence the extent to whichinternal audit may contribute towards the financialstatement audit. Maletta & Kida (1993) and Maletta(1993) also found that inherent risk affects internalaudit reliance decisions by interacting with factors



such as internal auditor objectivity and workperformance.

A more recent study by Felix et al. (2001)indicates that external auditors’ reliance oninternal audit is influenced by their perceptions ofthe quality of the internal audit function, as wellas, conditional on the level of inherent risk, theavailability of internal audit staff to assist in theexternal audit and the extent of coordinationbetween internal and external auditors. Overall,the results suggest that clients can affect the extentof internal audit contribution to financial statementaudits by investing in internal audit quality,managing availability of internal audit time andfacilitating coordination between internal andexternal auditors.

In summary, the extant literature indicates thatexternal auditors’ reliance on internal audit workis a function of their assessment of internal auditeffectiveness. The internal audit function, however,is part of a larger system of governancemechanisms within an organisation. In particular,the audit committee is another key corporategovernance feature that has the potential to impactinternal audit effectiveness through its monitoringand oversight duties and responsibilities.According to corporate governance guidelinessuch as the Auditing and Assurance StandardBoard of the Australian Accounting ResearchFoundation (2002) and the MCCG (FinanceCommittee on Corporate Governance, 2000), theaudit committee has oversight responsibility forareas associated with preparing reliable financialstatements and this includes the internal auditfunction. In meeting its responsibility towardsinternal audit, the committee may undertakeseveral monitoring initiatives. First, auditcommittees can question and review internal auditprogrammes and reports. Second, they maydemand a greater coverage of work whereinadequate assurances are detected. Third, auditcommittees may also enhance the communicationbetween internal and external auditors.

However, previous research indicates that themere presence of an audit committee does notensure its effectiveness and that attributes such asits composition and diligence must be considered.For example, Scarbrough et al. (1998), based on asurvey of 72 chief internal auditors (CIAs) fromCanada, found that audit committees consistingsolely of non-employee (outside) directors meetmore frequently with CIAs and are more likelyto review internal audit reports than those

committees comprising at least one or more insidedirectors. Likewise, Raghunandan et al. (2001), in aUS study, report that audit committees with onlyindependent directors and at least one memberwith an accounting or finance background aremore likely to have longer meetings with theCIA, to provide private access to the CIA, and toreview internal audit proposals. Further, the resultsof a study by Goodwin (2003), using data fromAustralia and New Zealand, suggest thatindependence and accounting experience of auditcommittee members have a complementary impacton the committee’s relations with internal audit.

HYPOTHESES DEVELOPMENT

Figure 1 presents the conceptual model for thisstudy. In this section, hypotheses are developedbetween audit committee characteristics andinternal auditors’ assessment of their contributionto financial statement audits.

Independence of audit committees

Independence has been defined as having ‘norelationship to the corporation that may interferewith the exercise of their independence frommanagement and the corporation’ (BRC, 1999).4

Several empirical studies that have exploredthe association between audit committeeindependence and financial reporting outcomesindicate that firms with more independentmembers display better financial reporting quality.For example, Beasley et al. (2000) found thatcompanies committing financial statement fraudhave less independent committees than theindustry benchmarks. Likewise, Abbott et al.(2003), based on 78 matched pairs of fraud and no-fraud companies, found that no-fraud companiestend to have more independent audit committeesthan fraud companies.

We propose that audit committees consistingsolely of independent (or outside) directors will bemore effective and are likely to call for greaterdepth and scope of internal audit activities andprocedures, which in turn would enhance internalcontrols and the effectiveness of the internal auditfunction. There are two motivations forindependent directors to seek a more effectiveinternal audit function.

First, independent audit committee membersare more likely to demand higher audit qualityin order to protect their reputation (Abbott &

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Parker, 2000; Carcello & Neal, 2000). Accordingto reputational capital enhancement theory,independent directors generally hold a highreputation in the business community and theyview the directorship as a means of furtherdeveloping their reputation as experts in decisionmaking (Fama & Jensen, 1983). It is thus arguedthat independent directors are more likely tofear damage to their reputation as a result offinancial misstatements (Abbott & Parker, 2000).Consequently, we expect more independent auditcommittees to demand a higher level of auditquality in order to identify and avoid any financialmisstatements, and the resulting reputationaldamage.

Second, independent directors are noteconomically dependent on the company, andthus are arguably less biased over an entity’sfinancial outcomes (Beasley et al., 2000). Forinstance, they would have less incentive to acceptany mismanagement that may affect a firm’sfinancial performance due to their financialindependence. Consequently, when faced withfinancial reporting issues that may need furtherinvestigation, e.g. an accounting policy treatment,more independent audit committees are likely toseek in-depth audit coverage.

Thus, as more independent audit committeesare likely to promote higher quality internal audit

processes, the likelihood of external auditorsrelying more on an internal audit function wouldalso increase with the level of audit committeeindependence. Invariably, increasing externalauditor reliance will be reflected in internalauditors’ assessment of their contribution tofinancial statement audits. Hence, we predict thatinternal auditors perceive that their contribution toexternal audits is greater when the audit committeecomprises a higher proportion of independentmembers.

Therefore, based on the preceding discussion thefollowing hypothesis is suggested:

Hypothesis 1: There is a positive relationshipbetween the proportion of independent memberson audit committees and internal auditors’assessment of their contribution to financialstatement audits.

Audit committee members’ financial knowledge and experience

Audit committee members’ knowledge andexperience relating to accounting, auditing and/orfinance have been regarded as an importantdimension affecting audit committee effectiveness(DeZoort, 1998; Kalbers & Fogarty, 1993). A keyrecommendation of The Treadway Commission(1987) and the BRC (1999) in the US is for audit

Figure 1: The conceptual model

Audit Committee Characteristics

Composition• Independence• Financial knowledge and

experience

Interaction activities • Frequency of meetings • Involvement in CIA dismissal • Reviewing IA programme and

processes Internal auditors’ assessment

of their contribution to financial statement audits

Internal Audit Function Characteristics

• Unit size • Internal audit staff expertise



committee members to be financially literate. Thisis not surprising as some of the common oversightduties of audit committees include developing anunderstanding of the entity’s risk management,financial decisions, and cost–benefit analysis ofoperational decisions. Financial knowledge andexperience, particularly in accounting, auditingand finance is important for audit committeemembers because many oversight judgementsare subjective and such knowledge will help indiscerning internal auditors’ review of financialdecisions. In other words, in the absence ofobjective criteria, members lacking in financialknowledge and experience are more likely to makesub-optimal decisions in primary oversight areassuch as the implications of accounting policychanges on financial reports (DeZoort, 1998).

In addition, the internal control systemsand reporting procedures within organisationsare becoming increasingly complex andtechnologically advanced. Audit committeemembers with the requisite financial knowledgeand experience are thus more likely to ask the‘right’ questions and therefore should more easilydetect any mis-information or incongruity inthe financial reports. Also, results from priorstudies suggest that audit committee memberswith oversight experience and knowledge inaccounting, auditing and finance makejudgements more similar to external auditorsthan less experienced audit committee members(DeZoort, 1998). In a similar vein, DeZoort &Salterio (2001) found that, relative to auditcommittee members with less experience, thosewith more experience are able to sympathise andbetter relate to the risks undertaken by theexternal auditors.

Thus, compared to a less financially literate auditcommittee, a more financially literate committee islikely to better enhance internal audit structuresand processes, which in turn increases theprobability of internal audit work being adoptedby external auditors and/or external auditorsusing internal auditors to assist with their auditprocedures. Consequently, such reliance is likelyto be reflected in the internal auditors’ assessmentof their contribution to financial statement audits,i.e. the higher the audit committee financialknowledge and experience, the greater the internalauditors’ evaluations of their involvement in theexternal audit.

In sum, the foregoing arguments lead to thefollowing hypothesis:

Hypothesis 2: There is a positive relationshipbetween the knowledge and experience ofaudit committee members in accounting,auditing and finance and internal auditors’assessment of their contribution to financialstatement audits.

The extent of interaction between the audit committee and the internal audit function

The BRC (1999) emphasises the importance ofstrong working relations between auditcommittees and internal audit in preventingmaterial misstatements in financial reports.Likewise, the Guidelines on Internal Audit Functionfor Directors of Public-Listed Companies in Malaysia(KLSE, 2000, p. 9) state that ‘internal audit servesas a corporate resource in support of the auditcommittee, thus a close relationship between thetwo enhances the internal audit function and itsability to contribute to corporate success’. Auditcommittee interaction with internal auditing,however, is a broad concept and encompasses avariety of activities (Raghunandan et al., 1998). Inthis study, guided by previous studies, we focuson three main aspects: (1) frequency of meetingsbetween the audit committee and the CIA, (2) auditcommittee involvement in the dismissal of the CIA,and (3) review of internal audit programmes andprocedures including the internal audit budget,and their reports on internal controls, coordinationof activities with external auditors, and riskmanagement processes.

Frequency of meetings with the chief internal auditor

The audit committee and the internal auditfunction can benefit from regular meetings as thisallows exchange of relevant information on atimely basis (Raghunandan et al., 1998; Scarbroughet al., 1998). As a result of frequent meetings, theaudit committee will remain informed andknowledgeable, enabling it to assist the internalauditors to resolve any problems identified. Morefrequent meetings also provide opportunities toexplore and undertake in-depth discussions onways to improve an organisation’s financialreporting system. Thus, it can be argued thatthe frequency of meetings between the auditcommittee and the CIA is likely to enhance theeffectiveness of the internal audit function, andconsequently motivate external auditors’ reliance

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on the internal audit function. This, in turn, shouldhave a subsequent impact on internal auditors’views on their contribution to financial statementaudits.

Involvement in the dismissal of the chief internal auditor

The status of the internal audit unit has significantimplications for its effectiveness. Specifically, thegreater the independence of internal auditors,including freedom from management pressure, thegreater is the likelihood that they can remainobjective and free from bias (Raghunandan &McHugh, 1994). It is argued that when the auditcommittee is involved in key decisions such as thereplacement of the CIA, there will be greaterempowerment of the internal function. In otherwords, management influence over the internalaudit function decreases and consequently internalauditors would feel more confident in undertakingaudit investigations, particularly when dealingwith more sensitive issues that may involve seniormanagement. Prior studies indicate that externalauditors assess internal audit as being morereliable and effective when it is independentof management influence (Schneider, 1985;Margheim, 1986). Thus, we argue that a positiverelationship exists between audit committeeinvolvement in the dismissal the CIA and internalauditors’ assessment of their contribution tofinancial statement audits.

Involvement in reviewing internal audit programme and processes

One of the responsibilities of an audit committeeis to ensure that management has designed andimplemented a proper and effective internal auditprogramme (BRC, 1999). In order to fulfil thisresponsibility effectively, audit committees arerequired to review the internal audit programmeand ensure that its scope and the allocatedresources are acceptable. Further, the auditcommittee also has a responsibility to review theresults or outcomes of the internal auditprogramme and activities, including the extent towhich such activities are coordinated with theexternal audit programme. It can be argued thatthe greater the extent of audit committee reviewof the internal audit programme and processes,the greater the probability of identifying anyweaknesses in the internal audit activities, and

consequently of improving the internal monitoringfunction.

Prior studies (Goodwin, 2003; Goodwin &Yeo, 2001; Raghunandan et al., 2001; Scarbroughet al., 1998) suggest that the extent of theinteraction between audit committees and internalauditing, particularly the review of internalaudit’s involvement in risk management and otherprogrammes is important in supporting the statusof internal audit in the organisation. An internalaudit function that receives strong supportfrom the audit committee is likely to be moreobjective and forceful in implementing controlimprovements, and this should contribute moretowards the enhancement of internal audit quality.This should enhance external auditors’ reliance onthe internal audit function and internal auditors’assessment of their contribution to the financialstatement audit. Hence, the third hypothesis is asfollows:

Hypothesis 3: There is a positive relationshipbetween the extent of audit committee interactionwith the internal audit function and internalauditors’ assessment of their contribution tofinancial statement audits.

The characteristics of the internal audit function

For an internal audit unit to be effective, it needsto be well-resourced in order to meet thequantitative and qualitative demands of the auditprocess. Both the quantity of audit effort andthe quality of professional care exercised willdetermine the overall quality of the internal auditwork. In this study, we argue that both the size ofthe internal audit function and the extent of prioraudit experience of internal audit staff are likely toenhance the quality of the internal audit function.For instance, in a larger internal audit unit, therewill be more staff and consequently it can beexpected that the scope of internal audit workcovered would be much greater than in a smallersized unit. Empirical findings by Al-Twaijry et al.(2004), based on questionnaire and interviewresponses from internal and external auditorsworking in Saudi Arabia, suggest that externalauditors believe that internal audit function size isan important indicator of its quality. Furthermore,in larger sized functional units, there will be moreopportunity and flexibility to have a staff rotationschedule. Given that, over time, internal auditstaff are likely to develop familiarity with the



operational and other organisational employees,staff rotation is likely to promote a more healthyrelationship, resulting in more objective auditinvestigations. Empirical findings by Gul &Subramaniam (1994) likewise support staffrotation. Based on an experimental study ofinternal auditors, they found that internal auditorsin situations of high familiarity with operatingpersonnel were less objective when faced with anaudit conflict than those auditors in situations oflow familiarity.

At the same time, we argue that the largerthe proportion of internal audit staff with prioraudit experience, the higher the internal auditquality. It is expected that a functional unitwith experienced staff will undertake dutiesmore efficiently because they should be morecompetent and conversant in discharging theirresponsibilities based on prior work experience.For instance, when more experienced staffencounter difficult situations or complex multi-tasks, they will be able to deal with suchsituations more quickly and effectively thantheir less experienced counterparts. In addition,internal audit staff with prior experience andexpertise in auditing are also expected toprovide more valuable input towardsimproving the internal controls of theorganisation (Brody et al., 1998). As reported inAl-Twaijry et al.’s (2004) study, more than 50%of the external auditor respondents viewed thelevel of relevant experience of internal auditstaff to be a major and significant factoraffecting their decision to rely on the internalaudit function. Thus, it can be argued that ahigher proportion of staff with prior auditexperience should enhance the quality of theinternal audit function, leading to greaterpropensity for external auditors to rely oninternal audit work. Consequently, such reliancepotentially affects internal auditors’ assessmentof their contribution to the external auditprocess. The above discussion thus leads to thefollowing two hypotheses:

Hypothesis 4(a): There is a positive relationshipbetween the size of the internal audit functionand internal auditors’ assessment of theircontribution to financial statement audits.Hypothesis 4(b): There is a positive relationshipbetween internal audit staff audit expertise andinternal auditors’ assessment of theircontribution to financial statement audits.

RESEARCH METHOD

Sample selection

Data were collected through a mailedquestionnaire survey.5 A total of 504 questionnaireswere sent to the CIAs of public companies listedon the KLSE main board.6 In order to send amatched questionnaire to the external auditor, werequested respondents to enclose the name of thepartner in charge of the organisation’s financialstatement audit and the address of the company’sexternal audit firm.

We received 101 (20.03%) responses, of which76 (17.9%) were useable. Of the 25 non-useableresponses, 14 were eliminated due to the companieshaving fully outsourced their internal auditfunction and therefore information relating to thequality of the internal audit unit was unavailable.The remaining 11 responses were excluded dueto incomplete information. Upon receivingthe questionnaires from the internal auditorrespondents, we also sent a matching questionnaireto the partner of the external audit firm responsiblefor conducting the financial statement audit.7

However, we only received four (0.04%) responsesout of the 90 matched questionnaires sent to theexternal audit firm partners.8 Therefore, due to theunavailability of matching data, hypotheses testingis based on the responses from the CIA respondents.

Model specification

The regression model, as shown below, was usedto test our hypotheses.IACONTRB = b0 + b1AVAIL + b2COORD + b3IR +

b4OUTSIDE + b5ACEXP + b6FREQ+ b7DISMISS + b8REVIEW1 +b9REVIEW2 + b10REVIEW3 +b11IAQUAL1 + b12IAQUAL2 + e

where:

IACONTRB = Internal auditors’ assessment ofpercentage of internal auditcontribution to financial statementwork (0% = internal audit did notperform any of the work required tocomplete the audit to 100% = internalaudit performed all of the workrequired to complete the audit).

AVAIL = Extent to which internal auditorsagree that the internal auditdepartment has time available toassist in performance of the financialstatement audit (1 = strongly disagreeto 5 = strongly agree).

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The model is an adapted version of that used inFelix et al. (2001), with the three variables, AVAIL,COORD and IR included in the current model ascontrol variables. The following seven variables ofthe regression model relate to audit committeecomposition and interaction measures, withOUTSIDE testing hypothesis 1, ACEXP testinghypothesis 2, and FREQ, DISMISS, REVIEW1,

COORD = Internal auditors’ assessment of theirrelationship with external auditors(1 = coexistence, 2 = coordination,3 = integration, 4 = partnering).

IR = Risk of material misstatementoccurring in the client’s financialstatements, in the absence of controls(inherent risk), as reported bythe internal auditor (0 = low;1 = moderate/high).

OUTSIDE = Number of outside directors on theaudit committee as a percentage oftotal directors on the audit committee.

ACEXP = The extent of audit committeemember knowledge and experiencein accounting and auditing (1 = poor,2 = below par, 3 = good, 4 = verygood, 5 = excellent).

FREQ = The frequency of meetings betweenthe chief internal auditor and theaudit committee.

DISMISS = Audit committee involvement in thedismissal of the chief internal auditor(0 = no, 1 = yes).

REVIEW1 = Audit committee review of IAproposals related to: programme/plans, budget and coordination withexternal auditors (0 = nil reviews to3 = all three key areas reviewed).

REVIEW2 = Audit committee review of the resultsof internal auditing related to:financial reporting, internal controland compliance with law andregulation (0 = nil reviews to 3 = allthree key areas reviewed).

REVIEW3 = Audit committee oversight of:internal audit involvement in riskmanagement, management responsesto internal auditing/suggestions andany difficulties/scope restrictionsencountered by internal auditing(0 = nil reviews to 3 = all three keyareas reviewed).

IAQUAL1 = Natural log of the total number ofstaff in the internal audit departmentdivided by the natural log of totalassets.

IAQUAL2 = The proportion of staff with priorwork experience in auditing over thetotal number of staff in the internalaudit function.

REVIEW2, and REVIEW3 testing hypothesis 3.Further, instead of using a single measure ofinternal audit quality as adopted by Felix et al.(2001), our study tests two specific quality-relatedvariables of an internal audit unit. These are (1)IAQUAL1, being the size of the internal auditdepartment9 and (2) IAQUAL2, being theproportion of internal audit staff with prior workexperience in auditing divided by the total numberof staff in the internal audit function. These twovariables test hypotheses 4(a) and 4(b).

RESULTS

Table 1 provides a breakdown of the sample byindustry type. There are nine industryclassifications represented, with the majority ofcompanies coming from either the trading andservices sector or the industrial sector.

Table 2 provides descriptive statistics for thevariables in the regression model while Table 3reports the correlations between the variables.Table 2 indicates that the mean availability ofinternal audit to assist the external auditor isjust over the mid-point of 3 while the averagerelationship between the two functions fallsbetween coexistence and coordination. Onaverage, audit committees meet with the CIAabout four times per year and are involved inreviewing the work of internal audit. While themean percentage of independent directors on theaudit committee is only 73%, internal auditors’evaluation of members’ accounting and financeexpertise appears to be relatively high. FromTable 3 it can be seen that generally the variablesare not highly correlated with each other, withnone of the correlation coefficients exceeding 0.4.

Table 1: Sample by industry type

Industry classifications Samplefrequency

Samplepercent

Industrial product 19 25.0Consumer product 5 6.6Technology 4 5.3Trading and services 26 34.2Properties 10 13.2Plantation 6 7.9Construction 4 5.3Hotels 1 1.3Infrastructure project 1 1.3

76 100.0



Table 4 presents the regression results of theinternal auditors’ assessment of their contributionto the financial statement audit. The overall modelis significant (p < 0.001), with an adjusted R2 of0.343. Standard regression diagnostics wereperformed including tests for multicollinearity,auto-correlation and heteroskedasticity, and theresults appear to be within acceptable limits(Coakes & Steed, 2002).

The regression results support a significantpositive association between the proportion ofindependent audit committee members(Hypothesis 1) and internal auditors’ assessment oftheir contribution to the external audit (p = 0.005).This suggests that internal auditors believe thatthey make a greater contribution to the externalaudit when the audit committee is moreindependent. The regression results also indicate asignificant relation between internal auditors’assessment of their contribution to the financialstatement audit and the extent of audit committeemembers’ knowledge of accounting and auditingissues (p = 0.009), thus supporting Hypothesis 2. Apositive coefficient indicates the relationship is aspredicted, whereby the stronger the level of auditcommittee knowledge, the higher the perceivedcontribution of internal auditors to the externalaudit work.

Hypothesis 3 is only partially supported since,of the five aspects of audit committee interactionswith the internal audit function, only the review ofinternal auditors’ proposals related to the internalaudit programme/plans, budget and coordinationwith external auditors (REVIEW1) is significantly(p = 0.068) related to internal audit contribution to

the financial statement audit. None of the otherfour dimensions are significant, i.e. frequency ofmeetings and involvement in the dismissal of theCIA (FREQ and DISMISS), audit committee reviewof financial reporting, internal control systems andcompliance with law and regulation (REVIEW2),and audit committee oversight of internal auditinvolvement in risk management, managementresponses to internal auditing/suggestions andany difficulties/scope restriction encountered byinternal audit (REVIEW3).

Hypotheses 4(a) and 4(b) are both supportedwith the coefficients of IAQUAL1 and IAQUAL2significant in the predicted direction (p = 0.001 andp = 0.001). These results suggest that the largerthe size of the internal audit unit, the greater theinternal auditors’ perception of their contributionto the external audit. Likewise, the larger theproportion of internal audit staff with accountingand auditing experience, the greater the internalauditors’ assessment of their contribution to theexternal audit. Hence, it appears that internal auditcharacteristics in terms of size and staff expertisehave a significant effect on the assessment byinternal auditors of their contribution to thefinancial statement audit.

In terms of the control variables, the resultsof the present study are largely consistent withFelix et al.’s (2001) findings in that the controlvariable relating to the availability of the internalaudit department to assist external auditors inperforming the financial statement audit (AVAIL)is significant and positively related to internalauditors’ assessment of their contribution to thefinancial statement audit (p = 0.042). Likewise, the

Table 2: Descriptive statistics

Variable Minimum Maximum Mean Standard deviation Median

IACONTRB 00 80.00% 33.68% 21.14% 30.00%AVAIL 1 5 3.34 1.27 4COORD 1 4 1.80 0.86 2IR 0 1 0.78 0.42 1OUTSIDE 38% 100% 73% 12% 75%ACEXP 2 5 3.76 0.80 4FREQ 0 8 4.35 1.13 4DISMISS 0 1 0.8 0.4 1REVIEW1 0 3 2.48 0.77 3REVIEW2 0 3 2.77 0.62 3REVIEW3 0 3 2.78 0.56 3IAQUAL1 1 50 7.04 8.82 4.5IAQUAL2 0 0.22 0.79 0.28 1

Note: see model specification in text for definitions of variables.



Tab

le 3

: Pea

rson

cor

rela

tion

coe

ffici

ents

for

th

e va

riab

les

in t

he

mod

el

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)

(12)

(13)

IAC

ON

TR

B (

1)1.

000.

302*

*0.

318*

*0.

074

0.28

6*0.

015

0.25

2*0.

302*

*0.

034

0.05

40.

199

0.15

10.

119

AVA

IL (

2)1.

000.

257*

0.14

5−0

.051

−0.0

800.

050.

107

0.08

0−0

.102

0.06

9−0

.011

0.01

4C

OO

RD

(3)

1.00

−0.0

510.

259*

−0.3

03**

0.09

70.

217*

0.20

20.

033

0.14

60.

176

0.20

1IR

(4)

1.00

0.15

80.

045

0.03

70.

263*

−0.0

57−0

.079

0.00

10.

090

0.06

3IA

QU

AL1

(5)

1.00

−0.3

63**

−0.0

810.

111

0.15

50.

207

0.06

30.

204

0.28

5*IA

QU

AL2

(6)

1.00

−0.0

64−0

.172

0.08

1−0

.129

0.00

9−0

.026

−0.1

12O

UT

SID

E (

7)0.

192

0.00

50.

041

0.19

60.

231*

0.08

4A

CE

XP

(8)

1.00

0.12

10.

063

−0.0

840.

272*

*0.

107

FRE

Q (

9)1.

00−0

.045

0.01

50.

115

0.06

9D

ISM

ISS

(10)

1.00

0.27

7**

0.35

2**

0.10

0R

EV

IEW

1 (1

1)1.

000.

143

0.30

4**

RE

VIE

W2

(12)

1.00

0.23

9*R

EV

IEW

3 (1

3)1.

00

**C

orre

lati

on is

sig

nific

ant

at t

he 0

.01

leve

l (tw

o-ta

iled

).*C

orre

lati

on is

sig

nific

ant

at t

he 0

.05

leve

l (tw

o-ta

iled

).V

aria

bles

are

as

defi

ned

in m

odel

spe

cific

atio

n in

tex

t.



effect of the relationship between internal andexternal auditors (COORD) is also significant andpositively related to internal auditors’ assessmentof their contribution to the financial statement audit(p = 0.010). The direct impact of inherent risk (IR),i.e. the risk of material misstatement occurring inthe absence of internal controls, on internalauditors’ evaluation of their contribution to theexternal audit, however, appears to be insignificant.A possible reason for this result may relate todifferences in the respondents in that externalauditors were the assessors of IR in Felix et al.(2001), while in the present study the respondentswere internal auditors. In particular, these twogroups may differ in their conceptualisation ofinherent risk. For instance, external auditors’assessment of inherent risk tends to be orientedtowards the traditional audit risk model, whileinternal auditors’ view of inherent risk is likely tobe based on a business risk approach to their audits(Colbert & Alderman, 1995).

DISCUSSION

Overall, our findings indicate that audit committeecomposition and the committee’s review of internal

audit plans and budgets both have a significantinfluence on internal auditors’ assessment of theircontribution to the external audit. In particular, amore competent and interactive audit committeeappears to have a positive effect on the internalauditors’ assessment of their contribution toexternal audit work. These findings provideempirical support for the Treadway Commission(1987) and KLSE (2000) recommendations for moreindependent, knowledgeable and diligent auditcommittees, suggesting that such committeesimpact the financial reporting process. The resultsof this study also provide additional support to thefindings of Felix et al. (2001) who focused onexternal auditors’ perceptions of internal auditcontribution to the financial statement audit.Factors relating to the management of the internalaudit function, such as the extent of coordinationbetween internal and external auditors and theavailability of internal auditors to assist the externalauditors, are found to have a significant effect oninternal auditors’ assessment of their contributionto financial statement audits. However, we do notfind any direct or interaction effects of inherent riskon internal auditors’ perceptions of theircontribution.

Table 4: Regression results: internal audit contribution model

IACONTRB = b0 + b1AVAIL + b2COORD + b3IR + b4OUTSIDE + b5ACEXP + b6FREQ + b7DISMISS +b8REVIEW1 + b9REVIEW2 + b10REVIEW3 + b11IAQUAL1 + b12IAQUAL2 + e

Variables Exp sign ß VIF t-value p-value*

Intercept −0.718 −3.319 0.002Control AVAIL + 0.034 1.389 1.753 0.042COORD + 0.070 1.485 2.388 0.010IR − −0.059 1.386 −1.017 0.156ExperimentalOUTSIDE + 0.494 1.238 2.665 0.005ACEXP + 0.072 1.292 2.425 0.009FREQ + −0.023 1.199 −1.126 0.264DISMISS + −0.075 1.444 −1.210 0.231REVIEW1 + 0.048 1.455 1.510 0.068REVIEW2 + −0.044 1.456 −1.041 0.302REVIEW3 + 0.014 1.399 0.314 0.377IAQUAL1 + 2.133 1.542 3.505 0.001IAQUAL2 + 0.249 1.337 2.897 0.001

*p-values represent one-tailed tests when direction of coefficient is consistent with expectations.R2 = 0.448Adjusted R2 = 0.343F-ratio = 4.267Signif. F < 0.0001n = 76Variables are as defined in model specification in text.



We find that internal audit quality factors, suchas the size of the function and the proportion ofinternal audit staff with audit experience, aresignificantly associated with internal auditors’evaluations of their contribution to external audits.These findings suggest that organisations thatchannel the appropriate level and type of resourcesinto their internal audit function may reap benefitsin terms of increasing the internal audit function’spotential to contribute towards external audits.Consequently, it can be argued that such factorshave implications for reducing external audit feesthrough external auditor reliance on internal auditwork and/or through improved audit coverage.For instance, both Felix et al. (2001) and Elliot &Korpi (1978) found a negative relationship betweenexternal auditors’ reliance on internal audit workand audit fees. Further, the results also suggestthat, with appropriately sized internal audit units,and the resultant positive impact on internalauditors’ potential to contribute to external audit,external auditors’ time may be freed up and theiraudit efforts therefore diverted to areas not coveredby the internal audit function. Consequently, withincreasing internal audit contribution to externalaudits, an organisation’s overall audit coverageand quality may be improved. Further researchto this effect, however, is needed to clarify theimpact of increasing internal audit contributionto financial statement audits on both audit fees andaudit quality.

CONCLUSION

This study extends the present literature byexamining the relationship between thecharacteristics of both the audit committee andthe internal audit function and the extent of theinternal auditors’ assessment of their contributiontowards the financial statement audit. The studywas motivated by the potential influence that auditcommittees have on the breadth and scope of theinternal audit function, which, in turn, may affectthe potential for internal auditors to contribute tothe financial statement audit. Furthermore,internal audit quality management, through thesize of the internal audit function and the level ofinternal audit expertise, was also expected to beassociated with internal auditors’ contribution tofinancial statement audits. The results of the studygenerally support our hypotheses.

In addition, the study adds to the growing bodyof international literature concerned with the

link between different corporate governancemechanisms. From a practical perspective, thestudy provides feedback to the regulators (e.g.KLSE) on the need for policies that support andenhance the link between the audit committeeand the internal audit function. The results alsosupport the current debate on the appointmentof independent audit committee members, andthe need for members to be knowledgeable inaccounting, auditing and finance. Nevertheless,as advocated by Turley & Zaman (2004), futureresearch needs to pay greater consideration to theorganisational and institutional contexts in whichaudit committees operate. In particular, futurestudies ought to adopt a more qualitative approachto more carefully examine the processes throughwhich audit committees impact internal auditquality, and hence internal auditors’ propensity tocontribute to external audits. The findings of thisstudy also reveal further issues of appropriateresourcing of internal audit units as beingimportant to improve internal audit participationin the financial reporting process.

The results of the study, however, should beinterpreted with caution. Besides the usual caveatsof survey research, there are several limitations tothis study. First, the study is wholly based onresponses from internal auditors. Due to a very lowresponse rate from external auditors in replying toa matched questionnaire sent to them regardingtheir client, the measures for the extent of internalaudit contribution to the financial statement auditand the assessment of inherent risk were derivedfrom internal auditors’ responses alone. As such,issues of perceptual differences between internaland external auditors arise and limit thegeneralisability of our results. However, whenusing internal auditors’ assessment of theircontribution to financial statement audits, Morrill& Morrill (2003) found strong and positivecorrelations between 69 external and internalauditors’ evaluations on the proportion of externalaudit work completed by the internal auditdepartment (Pearson’s r = 0.78), and on thenumber of external audit activities in whichinternal audit work is used (Pearson’s r = 0.62).Thus, such empirical support suggests that internalauditors’ assessment of their contribution to theexternal audit process is comparable to externalauditors’ evaluations of their contribution. Second,the problem of response bias exists given that boththe independent and dependent variable measureswere derived from the same respondent, i.e.



internal auditors. Third, the survey response rate,with only 17.9% useable responses, appears to berather low. As such, the representativeness of thestudy may be limited. However, prior studies inthe area also report low survey responses ratessuch as 12.6% by Felix et al. (2001) and 10.1% byCarey et al. (2000).

The findings of this study suggest opportunitiesfor further research. For example, the impact ofinternal audit contribution to external audit onboth audit fees and audit quality is an area thatneeds further examination. While Felix et al. (2001)found a negative relationship between internalaudit contribution and external audit fees, itis possible that the quality of internal auditors’work may also enhance overall external auditquality. Relatedly, in the present study, we did notdistinguish internal auditors’ prior auditexperience (IAQUAL2) as being internal or externalaudit experience, and it is possible that such adistinction may also have implications for internalaudit quality. For instance, those with priorexternal audit experience may be better able torelate to external auditors and thus enhanceinternal audit’s potential to contribute to theexternal audit process. Further, a related area forstudy would be to examine whether there aredifferences in the management of the internal auditfunction between developed and developingcapital markets and whether any differencesimpact internal audit contribution to externalaudit. Last but not least, more case-based studieson the level of audit competition and strategies forimproving the relationship between internal andexternal audit could be undertaken in order to gaina richer understanding of the processes involvedin producing high quality financial reports.

NOTES

1. In 2003, the KLSE was renamed Bursa Malaysia.2. Auditing standards recognise that internal

auditors may contribute to the external audit byeither working as assistants under the directsupervision of the external auditors orperforming independent work upon which theexternal auditor can rely (SAS 65; IAS 604).

3. In this study, internal auditors’ assessment oftheir contribution to financial statement is seento closely reflect external auditors’ evaluationsof internal audit’s contribution to such audits.This is based on two key points. First, priorstudies have found that the relationship

between the two types of auditor can be closeand highly interactive, suggesting internalauditors are highly familiar with externalauditors’ needs (Al-Twaijry et al., 2004; Felixet al., 1998). Second, based on a survey ofauditors from 69 firms, Morrill & Morrill (2003)provide further empirical data indicating a highcorrelation between both the internal andexternal auditors’ assessments of internal auditcontribution to the external audit (Pearsonr = 0.78).

4. The BRC (1999) states that directors should notbe considered independent if (1) the directoror a member of his/her immediate family is orhas been an employee of the company or itsaffiliates within the past five years; (2) thedirector receives compensation for work otherthan board service; or (3) the director serves asa partner or controlling shareholder or executiveof a business with which the company hassignificant business.

5. Before sending the survey questionnaire, theinstrument was pilot tested in Malaysia andAustralia, with five practitioners and tenacademics participating in the pilot study.Minor changes to the wording of somequestions were undertaken. In general,however, the respondents felt that theinstrument was clear and concise.

6. We excluded from our sample companiesclassified in the finance industry as suchcompanies are also governed by other bodiesand regulations, i.e. Bank Negara Regulationswhereby the requirements for internal controlsare more stringent.

7. In contrast to Felix et al.’s (2001) study, wedid not ask CIAs to forward matchingquestionnaires to their external auditor in orderto ease the process. We felt that this may putthem under pressure to complete the task, andhence lower the response rate. Therefore weonly asked them to enclose the name of thepartner in charge and their public accountingfirm, to whom we subsequently sent a matchingquestionnaire.

8. We undertook 25 random telephone calls to thenon-respondent external audit firms to enquireon the low response rate and most of theexternal auditor non-respondents stated thefollowing reasons for not replying: (i) concernsover the exposure of information proprietary tothe client company with respect to the qualityof clients’ internal audit departments, and the



related threat to their position as the clients’external auditor; (ii) lack of time to attend to thesurvey questionnaire, and (iii) due to rotation ofpartners in charge, new partners claimed thatthey did not have sufficient knowledge aboutthe quality of the client’s internal auditdepartment.

9. For this variable, we use the natural log of thetotal number of staff in the internal auditdepartment divided by the natural log of totalassets. We scale by total assets because the sizeof the function is likely to be associated with thesize of the organisation.

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AUTHOR PROFILES

Mazlina Mat Zain is a Lecturer in the Faculty ofManagement, Multimedia University, Malaysia.Mazlina’s research interests are in the areas ofcorporate governance and financial reportingquality.

Nava Subramaniam is Associate Professor inthe Department of Accounting, Finance andEconomics, Griffith University, Australia. She ispresently the Associate Editor of the Journal ofApplied Management Accounting Research (JAMAR),and Joint Editor of Accounting, Accountability andPerformance. Her main research interests are incorporate governance, management controlsystems, and organisational performance,especially focusing on the relationship betweengovernance mechanisms, internal and externalauditors, and organisational performance.



Jenny Stewart is a Professor in the Departmentof Accounting, Finance and Economics, at GriffithUniversity. She has held previous positions at theUniversity of Queensland, Queensland Universityof Technology, Nanyang Technological University,

Lincoln University, the University of Adelaide andthe University of South Australia. Jenny’s mainresearch interests are in corporate governance,focusing in particular on the roles of the auditcommittee and internal and external auditors.

internal auditors' assessment of their contribution to financial statement audits: the relation...

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