A critical analysis of the independence of the internal audit function: evidence from Australia

Joe Christopher, Gerrit Sarens and Philomena Leung

Accounting, Auditing & Accountability Journal, 2009, vol. 22, issue 2, 200-220

Abstract: Purpose - This study aims to critically analyse the independence of the internal audit function through its relationship with management and the audit committee. Design/methodology/approach - Results are based on a critical comparison of responses from questionnaires sent out to Australian chief audit executives (CAEs) versus existing literature and best practice guidelines. Findings - With respect to the internal audit function's relationship with management, threats identified include: using the internal audit function as a stepping stone to other positions; having the chief executive officer (CEO) or chief finance officer (CFO) approve the internal audit function's budget and provide input for the internal audit plan; and considering the internal auditor to be a “partner”, especially when combined with other indirect threats. With respect to the relationship with the audit committee, significant threats identified include CAEs not reporting functionally to the audit committee; the audit committee not having sole responsibility for appointing, dismissing and evaluating the CAE; and not having all audit committee members or at least one member qualified in accounting. Originality/value - This study introduces independence threat scores, thereby generating analysis of the internal audit function's independence taking into account a combination of threats.

Keywords: Internal auditing; Corporate governance; Audit committees; Managers; Australia (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (33)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:aaajpp:v:22:y:2009:i:2:p:200-220

DOI: 10.1108/09513570910933942

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