دانلود رایگان مقاله انگلیسی اثرات رابطه گزارش دهی و نوع نقص بازرسی داخلی در ارزیابی کنترل های داخلی حسابرسان داخلی - امرالد 2018

Abstract

Purpose – This paper aims to explore whether an internal auditor’s evaluation of internal control deficiencies are influenced by the party with primary influence over the internal audit function and by the type of internal control deficiency. Design/methodology/approach – A behavioral experiment is conducted with internal auditors as participants in a 2
2 between-subjects factorial design. Findings – Results indicate that internal auditors are less likely to evaluate a pervasive control deficiency related to “tone at the top” as a material weakness than a process-specific control deficiency. Furthermore, internal auditors are somewhat less likely to evaluate a process-specific internal control deficiency as a material weakness when management has primary influence over the internal audit function than when the audit committee has primary influence. It is also found that the best practice of internal audit oversight (i.e., primary oversight of internal auditors by the audit committee) may lead to potential internal under-reporting of instances where the audit committee represents a material weakness in internal control. Research limitations/implications – Limitations of this research include lack of economic consequences (e.g. future pay and job loss) associated with the internal control decisions made by the participants; less concise information provided to the participants than would generally be available to them; and lack of generalizability of the findings beyond the specific company setting and internal control scenario portrayed in the case materials. Practical implications – Not evaluating a pervasive control deficiency related to “tone at the top” as a material weakness seems to not fully align with relevant professional guidance and can possibly result in inaccurate internal information about the quality of internal controls. Furthermore, having an internal auditor’s evaluation of a process-specific internal control deficiency influenced by the party with primary influence over the internal audit function would not appear to align with relevant professional guidance. Finally, primary oversight by the audit committee of the internal auditors may lead to potential internal under-reporting of instances where the audit committee represents a material weakness in internal controls and, thus, possible communication of inaccurate internal control information. Originality/value – This study is the first to address whether the party with primary influence over the internal audit function influences an internal auditor’s evaluation of internal control deficiencies.

Summary and Conclusion

The results that we discuss below are, of course, subject to limitations common with most experimental behavioral studies[14]. Notwithstanding these typical limitations, our results strongly show that internal auditors will be less likely to evaluate a pervasive control deficiency related to tone at the top as a material weakness than a process-specific control deficiency. Our pervasive control deficiency – reflective of tone by top management – can have significant implications on ICFR throughout the company. Not evaluating this deficiency as a material weakness may result in providing inaccurate internal information about internal control quality. In reviewing the results related to the pervasive internal control deficiency, it is important to recall that we selected one specific pervasive internal control deficiency – management tone at the top related to the importance of internal controls. The results may be driven by our choice of the pervasive internal control deficiency. Potentially, internal auditors may perceive internal controls related to tone at top as less important than other pervasive controls (e.g. management override controls, an effective whistleblower program, hiring practices related to hiring competent financial reporting employees). Thus, if we had selected an alternative pervasive control, our results may have differed. We recognize that this is an empirical question and therefore suggest future research related to this issue.

Our results, coupled with archival analysis, cause us to question whether pervasive material weaknesses related to tone at the top are being under-reported. Analyses provided by Audit Analytics (2016a, 2016b) note that it is rare for pervasive tone at the top deficiencies to be reported as material weaknesses. Is this finding due to the fact that such material weaknesses are rare or that there is a bias against reporting such material weaknesses? Do standard setters and regulators not expect an inappropriate tone about the importance of controls to be classified as a material weakness?