This article explores the impact of two previously overlooked characteristics, compliance with Institute of Internal Auditors (IIA) standards and the presence of potentially competing duties, on external auditors' perceptions of internal audit competence, objectivity, and, in turn, their willingness to rely on the internal audit function. This research finds that external auditors consider internal audit functions to be more competent and objective when they fully comply with IIA standards and that external auditors consider internal auditors to be more objective in the absence of any potentially competing duties in other areas. Overall, ratings of objectivity and competence relate to the decision to rely on the internal audit function. This study contributes by providing evidence that external auditors are more willing to rely on internal audit functions that comply with IIA standards and do not perform managerial/consulting duties, even though evidence suggests internal audit functions often do not fully comply with IIA standards and do perform managerial/consulting duties. Additionally, this study's results suggest that remedial action could reduce external audit fees and improve internal audit quality.
Summary
The literature on corporate governance (CG) has been expanding at an unprecedented rate since major corporate scandals surfaced, such as Enron, WorldCom, and HealthSouth. Corresponding with accounting's important role in CG, accounting scholars increasingly have investigated CG in recent years, so the body of literature is growing. Although previous attempts have been made to summarize extant literature on CG via reviews, none of these attempts has utilized recent developments in text analyses and natural language processing. This study uses latent semantic and topic analyses to address this research gap by analysing abstracts from 1,399 articles in all accounting journals that the Australian Business Deans Council (ABDC) has rated A and A*. The ABDC journal list is widely recognized as a journal‐quality indicator across many universities worldwide. The analyses revealed 10 distinct research topics on CG in the ABDC's top accounting journals. The results presented include the five most representative articles for each topic, as distinguished by topic scores. This study carries important practice and policy implications, as it reveals major research streams and exhibits how researchers respond to various CG problems.
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