Auditor's Liability and Methods for its Limitation

The objective of this study was to evaluate good hygiene practices in food trucks, and to verify if there is a difference between the evaluation made by internal auditors and by that of an external auditor. The transversal study was conducted in 95 food trucks in the city of Curitiba, Brazil. A checklist for good hygiene practices was applied during the work routine by internal auditors (owner or manager of each food truck) who evaluated their own food trucks and by an external auditor (who did not work directly with the food trucks) who assessed all the food trucks under study. There was significant difference (p < .01) in the assessment of good hygiene practices between the external and internal auditors. The external auditor was more critical in rating the specific good hygiene practices than the internal auditors (p < .01), indicating their impartial assessment of the routine activities and of the good hygienic practices in the food trucks. This study revealed the importance of internal and external auditors in the evaluation of sanitary risks in food trucks and demonstrated that external auditors are less prone to bias. We concluded that external audits are an effective tool for improving food safety in street food.

The study examines the cooperation between internal and external auditors in discharging duties and upholding organizational objectives. The aim is to know how the internal auditor relates with the external auditor once appointed and especially during the process of carrying out his/her duties. To achieve this primary data was collected through face-to-face interview from Mike Ukueje &amp; Co. which is the case study of this research. The result showed that both the internal auditor and external auditor work in the interest of the organization through emphasis on the internal control system even though they are guided in their duties by the articles of association (internal auditor) and CAMA 2004 (external auditor). In the private sector external auditors are welcome whole heartedly by their internal counterpart, while in the public sector they are treated with suspicion and prejudice. For this reason it is advisable to enlighten the public sector more on the responsibilities of the external auditor.

SUMMARY Based on a survey of 67 internal audit professionals, we examine the interactions between internal and external auditors and the experience internal auditors have working with external auditors. Specifically, we investigate perceptions of collaboration, interaction, contribution, and confidence with respect to internal-external auditor relationships. In general, we find a positive relationship between internal and external auditors. However, our results suggest that internal auditors see a lot of room for growth in the internal-external audit relationship and are looking for more opportunities to collaborate with external auditors. We discuss implications for both internal and external auditors in practice. JEL Classifications: M42.

The International standard on Auditing (ISA) 610, using the work of internal audit allows the external auditors to use internal audit's work and use internal auditors as assistants. But the external auditors have to evaluate internal audit function by themselves. The self-evaluation causes uncertainty in using IAF's work and using internal auditors as assistants. The prior studies identify that the three determinants of IAF quality are objectivity, competence and work performance. This study argues that the quality assurance report (QAR) help increase external auditors' reliance decision. Moreover a paper posits that the internal control environment is also related to the external audits' judgment. The paper manipulates the QAR rating into generally conform, partially conform and no report and classifies the internal audit (IA) report rating into satisfactory versus partial satisfactory. The IA report is represented an internal control of company while the QAR is presented quality of IAF. For the main predictions, the study forecasted that the effect of the internal audit report type on the likelihood to use IAF's work for control testing/substantive/and use IA as assistant are conditional upon the QAR rating The experiment results mostly support the predictions where the dissertation found that the external auditors were willing to use IAF's work in good internal control environments than poor internal control environments. The finding indicates that internal control environments is an addition determinant of external auditors' reliance decision. Additionally the external auditors who receive generally conform QAR have greater likelihood to use IAF's work than those who receive partially conform and no QAR. This result confirms that the QAR help increase external auditors' reliance decision. However, the finding highlights the potential reliance error in no QAR condition as they have bias against the IAF's work. The external auditors treat a quality of IAF in no QAR condition as poor as partially conform QAR condition. The incorrect reliance of auditors can cause over and under audit work, leading to ineffectiveness or inefficiency of audit engagement. In the second experiment, the research investigates on salience bias. The study constantly holds satisfactory internal audit report while the experiment manipulates QAR at four levels (Generally conform, partially conform and unrelated to work performance, partially conform and related to work performance and no report). The paper predicts that the external auditors likelihood to use IAF's work decreases from generally conform, partially conform and unrelated to work performance, no report and partially conform and related to work performance respectively. The result is mostly consistent with prediction. The result confirms salience bias as they decrease willing to use IAF's work in partially conform and unrelated to work performance condition. The external auditors ignore details of information that is not related to work performance. Again, the incorrect reliance of auditors leads to ineffectiveness of audit engagement and clients lose opportunity to utilize IAF.

This study investigates voluntary demand for auditing by family businesses, a significant but relatively unexplored segment of the economy. The paper considers demand for both internal and external auditing by using survey data to investigate the impact of firm characteristics linked to the cost vs. benefit of engaging an auditor. Variables examined are firm size, debt, and two agency proxies that measure separation of ownership and control, namely, the proportion of nonfamily management in the firm, and the proportion of nonfamily representation on the board of directors. The paper also considers the association between internal and external auditing. Descriptive results on voluntary demand for auditing by 186 family businesses revealed that internal audit was more prevalent than external audit, and outsourcing was a common method for providing internal audit. Results from logistic regression analyses provide support for the hypothesized impact of the two agency proxies and firm debt on demand for external audit, but do not explain the demand for internal audit. For firms that voluntarily engaged an auditor (internal and/or external audit), the negative and significant correlation between internal and external audit suggest that in the family business environment they are more commonly viewed as substitute rather than complementary responses.

The Institute of Internal Auditors (IIA) argues that internal auditors often have a strong “employee” identity within their organization. While external auditors are concerned that this employee identity might negatively impact internal auditors' objectivity, the IIA argues this identity can actually be beneficial as employees may be more willing to share sensitive and audit-relevant information with the internal auditor than they would with the external auditor. Through an experiment relying on the social identity and organizational silence literatures, I test the prediction that non-audit employees will identify more highly with the internal than the external auditor and they will thus, be willing to share more information about internal control weaknesses with the internal than the external auditor. The results from a moderated mediation analysis support this prediction and also show the effect is stronger as the severity of the internal control weakness increases. Overall, this research informs external auditors and regulators about conditions under which the internal auditor may have an advantage over the external auditor in obtaining information that could help improve audit quality. It also informs managers about an important role played by their internal auditors that may result in increased quality of the internal control system while also potentially lowering audit fees.

Purpose This paper aims to examine the impact of European sustainability regulations on the degree of co-operation among audit committees, internal auditors and external auditors. Design/methodology/approach This study is based on online questionnaires completed by 112 German audit committee members, internal auditors and external auditors, adopting a research approach with qualitative components. Findings This study reveals that although the three authorities have strengths within financial and industry expertise and possess a solid base of financial, personnel and technical resources, they have deficiencies in dealing with social and, notably, environmental issues such as water and marine resources as well as biodiversity and ecosystems. However, increased sustainability-related communication and opportunities for collaboration could positively impact sustainability oversight. The parties could mutually alleviate their workloads by involving environmental experts or by conducting aligned audits of sustainability-related internal control and risk management systems performed by internal and external auditors under the strategic oversight of the audit committee. Despite potential benefits, parties tend to overestimate their own capabilities and seek assistance from one another for environmental issues, hindering effective co-operation and fostering resentment. Originality/value This research contributes by stressing the need to consider environmental capabilities in the work and profiles of all three parties. It also highlights the importance of audits of sustainability-related internal control and risk management systems co-ordinated by the audit committee and performed by internal and external auditors.

The general aim of this study is to assess the relationships between external and internal auditors concerning cooperation and trust as resources integrated in organizations' lines of defense, to favor solid, opportune, and transparent decision‐making in organs of governance. More precisely, the specific aims are: (1) to analyze the relationship between trust and cooperation; (2) to explore and analyze the categories of the mutually important factors for trust and cooperation; and (3) to analyze the differences between internal and external auditors. To achieve these goals, quantitative and exploratory research was undertaken, with data collection through surveys directed to the two auditor groups (internal and external) in Portugal. In order to analyze if there were relations between trust and cooperation, logistic regression was performed. Based on exploratory factor analysis of principal components, it was possible to extract three factors for cooperation and trust: (1) work performance, (2) coordination/collaboration, and (3) competence. A multiple linear regression was also used to check the differences between internal and external auditors for the three factors identified. From the two groups involved in this study, it was possible to gain each group's perception of the professional relationship concerning cooperation and trust as determinant variables in auditing. It was found that there is still a long way to go and that each group has slightly different perceptions. This study contributes to the scientific and professional community regarding the perception of cooperation and trust between these professionals.

The purpose of this study is to investigate how the level of controls testing coordination with the external auditor affects internal auditors' effort. The internal auditor's planned substantive testing audit hours are the measure of effort in this study. Regulators and stakeholder organizations have encouraged more collaboration between external and internal auditors to improve audit efficiency. The effect of external auditor coordination on internal auditors' planned audit hours has important implications for audit efficiency and effectiveness. An experiment is conducted with 112 internal auditors to examine the hypothesized effect. The study uses a 2 × 2 between-subjects design and manipulates fraud risk and external auditor coordination. Consistent with my prediction, I find that coordination moderates the relationship between fraud risk and planned audit hours. The results illustrate that although high external auditor controls testing coordination decreases internal auditors' planned substantive testing audit hours, internal auditors are more sensitive to responding to fraud risk when external auditor controls testing coordination is high.

The Influence of External Auditor's Working Style, Communication Barriers and Enterprise Risk Management toward Reliance on Internal Auditor's Work

The purpose of this study is to examine effectiveness of US Statement of Auditing Standard (SAS) No. 99 red flags in detecting fraud as perceived by both the Malaysian internal auditors and external auditors. SAS No. 99 and International Standards on Auditing require external auditors to use red flags in detecting fraudulent financial reporting activities, while conducting financial statement audits. Questionnaires were completed by 52 Malaysian internal auditors and 40 Malaysian external auditors. Statistical analysis determines that Malaysian external and internal auditors perceive each of the 59 red flags as perceiving different levels of effectiveness in detecting fraudulent financial reporting activities. In addition, significant differences were found to exist between Malaysian external auditors and Malaysian internal auditors concerning the fraud detecting effectiveness of 12 red flags.

The Islamic financial Institutions (IFI) governance structure required an internal shariah auditors to assist the duties of Shariah Supervisory Board (SSB). Internal audit was a key player besides SSB, External auditors and the Audit and Governance Committees (AGC). This study was to examine the effectiveness of the role of internal shariah auditors. By adopting limited literature review of indexed international journals was used in this study. The result of the study based on limited literature data sources were the effevtiveness of internal shariah audit on internal audit organizations ini the Good Corporate Governance (GCG) structure, namely the structure, requirements and processes of internal shariah audit. In addition, internal and external factors also affected the effectiveness of internal shariah audit. The Role of the AGC affected the effectiveness of internal audit. Governance and internal audit of Shariah non compliant income were important parts of risk management in IFI

We test competing theoretical perspectives of family firm governance in two separate studies by investigating whether family firm control moderates the detrimental effect of a management training ground (MTG) on internal auditor objectivity and on the external auditor’s decision to rely on the internal audit function (IAF). In Study 1, we assess the objectivity of internal auditors working under an IAF that serves as a MTG or non-MTG and located in a family or non-family firm. A key result of Study 1 is the mitigating role of family firm control, as we find that the objectivity of internal auditors is reduced when the IAF serves as a MTG but only in non-family firms. When the IAF is located in a family-controlled firm, the objectivity of internal auditors is unaffected by the opportunity to be promoted into management positions outside of the IAF. In Study 2, we utilize a controlled laboratory experiment with experienced Big 4 auditors as participants and examine their decision to rely on an IAF when it serves as a MTG. Our analyses indicate that external auditors reduce their reliance on non-family firm IAFs that are also MTGs and their decision is fully mediated by the perceived objectivity of non-family firm internal auditors. In contrast, external auditors’ reliance on family firm IAFs and their perceptions of internal auditor objectivity are unaffected under a MTG regime. The results of Studies 1 and 2 provide support for the alignment perspective of family firms.

The primary objective of this study is to investigate internal and external auditor perceptions regarding their responsibilities related to preventing, detecting, and reporting fraud. Moreover, the study explores the procedures that internal and external auditors follow to detect fraud during an audit. This study features a survey of 53 auditors in the United Arab Emirates. The results indicate that internal auditors are primarily responsible for identifying incidents of fraud. The results also demonstrate that the procedures followed by external auditors are slightly more rigorous than those followed by internal auditors. The principal contribution is that internal auditors are primarily responsible for identifying fraud and are consequently more concerned about reporting incidents related to fraud. The results provide empirical support for the notion that external auditors should increase the degree to which they seek to detect and report incidents of fraud as well.

Internal Audit Outsourcing and the Risk of Misleading or Fraudulent Financial Reporting: Did Sarbanes-Oxley Get It Wrong?