Internal Audit Functions and Corporate Governance: Evidence from Hungary

Mária Borda Rabóczki ()
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Mária Borda Rabóczki: Management Accounting Department, Corvinus University of Budapest, Budapest

Society and Economy, 2018, vol. 40, issue 2, 289-314

Abstract: This study examines the relationship between the existence and independence of internal audit and other corporate governance factors in an emerging market, building on disclosed data from Hungarian listed companies in 2011. The results indicate that almost half of the listed firms use internal audit, however, independence of the function is less common. Ordinal regression results confirm the negative impact of concentrated foreign ownership on the need of internal audit, and the complementary relation between internal audit and supervisory board monitoring. The complementary role of internal audit to external one is partially evidenced. The results also indicate that larger firms are supposed to establish internal audit and strengthen its independence more than smaller ones. The findings of the study have important implications for sound corporate governance in Hungary. The study, by assessing the institutional and regulatory context of an emerging market, contributes to the literature by providing an improved understanding of the existence and independence of internal audit.

Keywords: internal audit; audit committee; supervisory board; corporate governance; Hungary (search for similar items in EconPapers)
JEL-codes: G30 M42 (search for similar items in EconPapers)
Date: 2018
Note: The author is grateful to Peter Vakhal, senior research fellow at the Kopint-Tárki Institute for Economic Research, for his valuable methodological support in regression analysis.
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