PurposeThis paper aims to develop a descriptive framework of the components of intellectual capital in annual reports. The paper also aims to investigate the effects of disclosure of intellectual capital on market capitalization.Design/methodology/approachThe components of intellectual capital are used as units of analysis to content analyze the annual reports of a sample of 58 Fortune 500 companies over the five‐year period of 1993‐1997.FindingsThe frequency of disclosure of information about brand and proprietary processes has increased over the study period. The results also point to significant differences between the “new” and “old” economy sectors with respect to intellectual capital categories of brand and partnerships where there is more disclosure by “old” economy sector and information technology and intellectual property where there is more disclosure by the “new” economy sector. Finally, the results show a highly significant effect for the intellectual capital disclosure on market capitalization.Research limitations/implicationsThe time period is limited to the years before the market excesses of the late 1990s and the market decline of the 2000s. The results have significant implications for setting standards of disclosure of intellectual capital in annual reports.Originality/valueThis is the first paper to provide information on disclosure of intellectual capital by fortune 500 companies in the USA. Its results have value for various users of annual reports who seek to understand the ways in which companies disclose information about their intellectual capital.

This study investigates (1) whether agency variables are associated with the relative size of the internal audit function (IAF); (2) whether the IAF is complementary to other monitoring mechanisms such as independent board members and an active audit committee; and (3) the impact of the control environment on the relative size of the IAF. We use data from a sample of Belgian firms. We find evidence of a monitoring role for the IAF in corporate governance. Specifically, the relative IAF size is positively related to management share ownership. Also, we find evidence for a substitution effect between independent board members and the IAF. Finally, it turns out that a supportive control environment also has a positive impact on the relative size of the IAF. Our results can benefit companies interested in assessing the current size of their IAF and the role that it can play in corporate governance.

Purpose -By conducting the 2006 global Common Body of Knowledge (CBOK) study, The Institute of Internal Auditors (The IIA) attempts to better understand the expanding scope of internal auditing practice throughout the world. The purpose of this review of recent internal auditing literature in The Americas is to document how the internal audit function is changing in response to the shifts in global business practices. Design/methodology/approach -The literature in The Americas is reviewed with a focus on developments that have implications for the expanded scope of internal auditing and the changing skill sets of internal auditors. This focus has implications for CBOK 2006. Findings -The literature indicates a paradigm shift in the activities performed by internal auditors. The increasing complexity of business transactions, a more dynamic regulatory environment in the USA, and significant advances in information technology have resulted in opportunities and challenges for internal auditors. Although in 2004, The IIA responded to the changing organizational environment by updating the professional practices framework, more work needs to be done to prepare internal auditors for the expanded set of skills and knowledge required to perform audits of the future. Originality/value -By presenting an overview of past literature in The Americas and discussing the shifting demands on internal audit services, the researchers hope to motivate further research in the field.

SUMMARY: We examine post-restatement audit fees and executive turnover for a sample of firms that restated their 2003 financial statements. We investigate and find evidence that audit fees are higher for restatement firms compared with a matched-pair control group of non-restatement firms. We propose that the higher audit fees reflect a cost of both an increase in perceived audit risk and a loss of organizational legitimacy. Prior literature suggests that changing top management is a response to a legitimacy crisis; thus we expect to find that executive turnover moderates the positive relationship between restatement and audit fees. Our results indicate that a change in CFO for a restatement firm moderates the increased audit fee, but a change in CEO does not.

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