There has been a renewed interest in the concept of materiality motivated by concerns at the Securities and Exchange Commission, the Sarbanes-Oxley Act, and the Auditing Standards Board and International Auditing and Assurance Standards Board issuance of proposed standards on materiality. This paper: (1) reviews and integrates the empirical research on materiality since 1982, and (2) suggests some implications of this research for audit practice and research. The review indicates that while many issues related to materiality have been addressed by prior research, a number of new and important areas are in need of further examination.

PurposeThe purpose of this study is to investigate the impact of the presence of a code of ethics on the quality of auditors' judgments, within the context of the new International Standard on Quality Controls 1 (ISQC1).Design/methodology/approachA sample of 112 professional accountants and auditing students was employed to investigate the effect of the presence of a code of ethics (operationalised as the presence vs absence of an organisational code of conduct) on the quality of audit judgments, pertaining to an inventory writedown, using a 2 × 2 full factorial “between‐subjects” experimental design.FindingsThe results of this study indicate that the presence of a code of ethics has a positive impact on the quality of the judgments made by professional accountants, but not on students. This suggests that it is the code of ethics, in the context of greater general experience that leads to higher quality of judgments.Practical implicationsThe results suggest that the requirements of ISQC1 are relevant to the quality control of accounting firms and have potential to positively impact the quality of audit performance.Originality/valueThis is the first paper to examine the impact of the presence of a code of ethics within an audit context. It is the first time that the interactive effects of the code of ethics and technical competency, which together form an integral part of standard‐setters' quality control standards, upon the quality of auditor judgments has been investigated.

PurposeThe purpose of this paper is to provide insights into the current roles and responsibilities of the internal audit (IA) function and the factors perceived to be necessary to ensure its effectiveness. The current performance evaluation practices of IA are also examined.Design/methodology/approachSemi‐structured interviews were utilised to elicit the perceptions of key corporate governance actors about the evolving role of IA, as well as IA effectiveness, in terms of its design, measurement and evaluation.FindingsThe results of the study suggest significant expansion and refocus of the role of IA and perceptions of its effectiveness. However, the findings also suggest that performance evaluation mechanisms of IA have not evolved contemporaneously. The misalignment between the role and evaluation gives rise to difficulty in assessing the extent to which IA functions are meeting stakeholders' expectations.Practical implicationsThe findings are useful in informing the deliberations of regulators and standard setters, as well as providing a benchmark for internal auditors and audit committees. The insights are also relevant for external auditors who are required to consider various aspects of corporate governance, including the objectivity and quality of IA.Originality/valueThe use of semi‐structured interviews facilitates an in‐depth insight and understanding of the perceptions of roles, effectiveness and evaluation of IA and adds depth to the predominantly questionnaire‐based survey approach of prior studies.

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Purpose – The purpose of this paper is to investigate the nature and extent of internal audit functions’ (IAFs) involvement in environmental, social and governance assurance (ESG) and consulting in Australia. To identify emerging priorities, and the profession’s capacity to respond to these, the paper also explores internal audit practitioners’ perceptions of the current and future importance of these issues and the adequacy of their skills and expertise in meeting the challenges associated with their involvement in these areas. Design/methodology/approach – Data were collected from 100 Chief Audit Executives and internal audit service provider partners through a survey. Findings – Governance issues are a key area of focus for respondents’ assurance and consulting efforts, followed by social and environmental issues, respectively. While governance issues are perceived to be of greatest current importance to IAFs, environmental issues are most commonly expected to increase in importance over the next five years, and are reported to be in greatest need of further development of IAFs’ skills and expertise. Research limitations/implications – As the corporate landscape and expectations around transparency and accountability increase, the internal audit profession needs to address the current perceived skills gap in their ability to provide assurance and consulting on ESG issues to ensure their continued relevance and ability to meet stakeholders’ needs and expectations in providing effective integrated assurance and in contributing to internal improvements. Originality/value – This paper provides initial empirical evidence of the nature and extent of internal audit’s involvement in ESG assurance and consulting.