Audit committee characteristics and investment in internal auditing
Dasaratha V Rama and
Journal of Accounting and Public Policy, 2010, vol. 29, issue 5, 503-513
Regulators and others recently highlighted the increasingly important role of internal auditing in supporting and interacting with the audit committee to ensure the integrity and quality of financial reporting. Likewise, one of the roles of the audit committee is to oversee the quality of monitoring mechanisms implemented by the firm, which includes the internal audit function. However, our understanding of the relationship between the audit committee and internal auditing is limited. We fill this void by providing the first empirical evidence of the association between audit committee characteristics and the investment in internal auditing. Our analyses, from a sample of 181 SEC registrants, suggest that the investment in internal auditing (internal audit budget) is negatively related to the presence of auditing experts on the committee and the average tenure of audit committee members, but positively related to the number of audit committee meetings (a proxy for audit committee diligence). These observations suggest potential complementary and substitution effects between the audit committee and internal auditing, and thus raise important implications for future research.
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jappol:v:29:y::i:5:p:503-513
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