This study examines the influence of IAF quality factors on CAEs' ability not to modify internal audit report. It extends Calven (2021) study that investigates the impact of adherence to the IIA's Core Principles on the likelihood of IAF modifying valid audit findings. This study builds on the limited research that investigates the relationship between IAF quality and the resistance of CAEs to pressure. Thus, employees of the company would naturally question their objectivity in the discharge of their duties. Interestingly, IAF is part of the corporate governance system while simultaneously providing consultancy services for the company. However, the new role of the IAF in corporate governance has piqued the interest of researchers in examining the impact of competency and objectivity on IAF quality ( Abbott et al., 2015 Ege, 2015 Pizzini et al., 2015 Roussy and Brivot, 2016 Nalukenge et al., 2021). These two concepts have been extensively studied in the context of external auditing (e.g. The value and credibility of internal auditors are guaranteed by their competency and objectivity. on the approving charter, planning, execution and results of audit activities) to the highest authority in the organisation. 8), while objectivity is effectively achieved when the CAE reports functionally (e.g. Internal auditors' competence can be demonstrated through ‘ a mixture of experience and theoretical learning’ ( IIA, 2016, p. They should be independent and objective to meet the governance-related expectations of the AC and management. They “ must possess the knowledge, skills, and other competencies needed to perform their individual responsibilities” ( IIA, 2016, p. The IIA standards confirm that internal auditors should communicate risk and control information to the AC, board of directors, external auditors, senior management and other appropriate areas of the organisation.
This objectivity assessment is also relevant to IIA standards. In addition, it suggests that external auditors should assess CAE objectivity using their reporting lines (American Institute of Certified Public Accountants, 1997).
INTERNAL AUDIT FINDINGS PROFESSIONAL
65 suggests that external auditors should assess the competence of the chief audit executive (CAE) using their professional experience, professional certifications and training. 65 states that external auditors should evaluate the competence, objectivity and work of the IAF to make a reliance decision. For instance, Schneider (2010) analysed professional standards and research findings pertaining to external auditors' reliance on IAF. The effect of internal auditing on the quality of financial and non-financial disclosure has been under consideration. It has also been shown that a low level of independence from management influences the value and reliance of the work of IAF ( A Fayi, 2021 Al-Twaijry et al., 2004).
INTERNAL AUDIT FINDINGS FREE
For example, in a developed country such as Saudi Arabia, internal auditors believe they are not free to report fraud, wrongdoing or mistakes due to management pressure ( Al-Twaijry et al., 2003). One aspect of such vulnerability is the threat to the auditor's independence that results from the weaker power exercised by the AC compared to the top managers ( Roussy, 2015) or the conflict of interest between the two masters ( Norman et al., 2010). The argument underpinning the assumption is that internal auditors will be more willing to cooperate with management's wishes and requests, which may influence their reporting decision. However, this dual role of controller and service provider may impair the quality of reporting. The scope of internal auditors covers auditing and provides a variety of assurance and consulting services for companies (The Institute of Internal Auditors, n.d.).
The Institute of Internal Auditors (IIA) considers the internal audit function (IAF) to be one of the pillars of an effective corporate governance model, along with the audit committee (AC) of the board of directors, the executive management and the external auditor ( Gramling et al., 2004).
INTERNAL AUDIT FINDINGS FULL
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