Agency Theory and the Internal Audit

Adams, Mike

doi:10.1108/02686909410071133

Cited by 210 publications

(214 citation statements)

References 12 publications

(8 reference statements)

Supporting

Mentioning

196

Contrasting

Unclassified

Order By: Relevance

“…We have noted that companies are more likely to use internal audit when agency costs are high (Adams, 1994). We therefore include a number of control variables which have been shown to affect agency costs and which have not been addressed in our hypotheses.…”

Section: Control Variablesmentioning

confidence: 99%

“…Ettredge et al (2000) explore the substitution of internal auditing for external auditing using time-series data. All of these studies use agency theory to explain the use of internal audit as a monitoring mechanism to reduce agency costs (Adams, 1994). Carcello et al (2005) is, to our knowledge, the only other study to explore the factors associated with public companies' investment in internal audit.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

The use of internal audit by Australian companies

Goodwin-Stewart

Kent

2006

Managerial Auditing Journal

168

205

View full text Add to dashboard Cite

Purpose -The purpose of this study is to explore the voluntary use of internal audit by Australian publicly listed companies and to identify factors that lead listed companies to have an internal audit function. Design/methodology/approach -Drawing on the Institute of Internal Auditors' definition of internal auditing, the paper predicts that internal audit use is associated with factors related to risk management, strong internal controls and strong corporate governance. To test the predictions, the study combines data from a survey of listed companies with information from corporate annual reports. The paper also provides descriptive information on the use of internal audit. Findings -The results indicate that only one-third of the sample companies use internal audit. While size appears to be the dominant driver, there is also a strong association between internal audit and the level of commitment to risk management. However, the study finds only weak support for an association between the use of internal audit and strong corporate governance. Research limitations/implications -A limitation of our study is that some of the variables in the model may not be good proxies for the factors being measured. Refinement of the model and the variables used provides an opportunity for future research. Practical implications -The limited use of internal audit by Australian companies has important implications for sound corporate governance. Originality/value -This is the first study that identifies factors associated with the use of internal audit by Australian listed companies.

show abstract

Section: Control Variablesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The use of internal audit by Australian companies

Goodwin-Stewart

Kent

2006

Managerial Auditing Journal

168

205

View full text Add to dashboard Cite

show abstract

“…Adams [18] used agency theory to explain that it is in the interest of management to maintain a strong internal audit department. The mandate, scope, methodology, and results should be determined solely by the internal audit charter without seeking consent from top management.…”

Section: Literature Reviewmentioning

confidence: 99%

An Exploratory Study on Management Support Services and Its effects on the Quality Service Delivery of Internal Auditors in the Northern Ghana

Dawuda¹,

Ataribanam²,

Aa³

2017

Int J Account Res

View full text Add to dashboard Cite

“…While, Walker, Shenkir, and Barton (2002) argued that no precise method or "silver bullet" exist for the role of internal auditor in the ERM framework. While using the internal audit as a monitoring mechanism to reduce agency costs is consistent with the agency theory (Adams, 1994;Jensen & Meckling, 1976), management's responsibility includes monitoring or managing organizational risks, and implementing controls to mitigate such risks; not the internal auditor. From an agency perspective, internal auditors can be considered part of the corporate governance structure because they monitor the financial reporting process (e.g., Beasley & Salterio, 2001;Cohen, Krishnamoorthy, & Wright, 2002).…”

Section: Introductionmentioning

confidence: 99%

A Conceptual Framework of Potential Conflicts with the Role of the Internal Auditor in Enterprise Risk Management

Thompson

2013

AFR

View full text Add to dashboard Cite

Internal auditors are expected to be increasingly involved in Enterprise Risk Management (ERM) by adding value to the organization and providing assurance that the entity's risk exposures are properly understood and managed. The Institute of Internal Auditors' (IIA, 2009) revised position paper defines the internal auditor's role in ERM as measuring and monitoring performance, and at the same time evaluating the effectiveness of management's risk monitoring process. In this paper, the author proposes a conceptual framework to assess whether potential conflicts exist with the role of the internal auditor in companies with fully implemented ERM frameworks. The existence of conflicts would depend on whether the internal auditor's independence and objectivity is impaired. The proposed conceptual framework suggests that the internal auditor's independence and objectivity would not be impaired when it leads and maintains the ERM framework. In addition, the internal auditor's independence and objectivity would not be impaired when it spends more time performing ERM consulting activities versus providing assurance on controls. Finally, the proposed conceptual framework suggests that the internal auditor's independence and objectivity would not be impaired when it reports to a separate board risk management committee. From the review of prior literature on the internal auditor's role in ERM, hypotheses are developed to suggest a relationship between the internal auditor's independence and objectivity with performing a leading and maintaining role in ERM, providing assurance on controls and consulting services, and reporting to a separate risk management committee that can be empirically tested in future research.

show abstract

Agency Theory and the Internal Audit

Cited by 210 publications

References 12 publications

The use of internal audit by Australian companies

The use of internal audit by Australian companies

An Exploratory Study on Management Support Services and Its effects on the Quality Service Delivery of Internal Auditors in the Northern Ghana

A Conceptual Framework of Potential Conflicts with the Role of the Internal Auditor in Enterprise Risk Management

Contact Info

Product

Resources

About