Factors associated with the size of internal audit functions: evidence from Kuwait

Abstract

Purpose This study aims to examine whether the size of internal audit functions (IAFs) is significantly related to factors documented by related prior auditing research, namely, diffusion of ownership, firm size, affiliation to the financial services industry, proportion of assets in the form of receivables and inventory, audit committee’s size and the presence of risk management committee. Design/methodology/approach Using data related to companies listed on the Kuwait Stock Exchange, this study uses a regression model to examine research hypothesis related to factors predicted to have an association with the size of the firm’s IAF. Findings The results of the current study provide evidence of a significantly positive relation between the size of the IAF and firm’s affiliation to the finance sector, audit committee’s size and the presence of a separate risk management committee. Such empirical evidence, which stems from the Kuwaiti market, is expected to be valuable for regulators and policy makers as well as audit researchers interested in linking it to the international empirical findings about this issue documented in other audit markets. Originality/value This study is original because it is the first to empirically examine factors associated with the size of IAFs in the GCC region, including Kuwait.

Internal audit effectiveness: operationalization and influencing factors

“…Hence, the size of the IA department is considered as an important factor that potentially influence the IA effectiveness (Chang, Chen, Cheng, & Chi, 2019). The size is also closely related to the resources allocated and the level of investment made on the IA function (Alhajri, 2017). Some of the primary studies (e.g., [S3], [S14]) also report this factor as a metric used by the external auditors to assess the quality of the IA.…”

An examination of factors associated with investment in internal auditing technology

“…Previous internal audit investment research examines the factors associated with internal audit budgeting (Carcello et al , 2005a, 2005b; Barua et al , 2010) and staffing (Carcello et al , 2005b; Anderson et al , 2012; Goodwin-Stewart and Kent, 2006; Gronewold and Heerlein, 2009; Sarens and Abdolmohammadi, 2011; Alhajri, 2017). Carcello et al (2005a) find that US public company internal audit budgets are related to the companies’ risks, auditing characteristics and ability to pay for monitoring, and Barua et al (2010) find US public company internal audit budgets are related to various audit committee characteristics.…”

An Examination of Internal Audit Function Size: Evidence from U.S. Government and Nonprofit Sectors

“…A considerable amount of research has examined factors associated with organizations' investment in the IAF (measured by IAF staff or budget size) in the U.S. for-profit sector (Carcello et al 2005a;Barua, Rama, and Sharma 2010;Carcello, Hermanson, and Raghunandan 2005b;Anderson et al 2012) and the for-profit sector of other countries (Goodwin-Stewart and Kent 2006;Gronewold and Heerlein 2009;Sarens and Abdolmohammadi 2011;Alhajri 2017). Due to extensive differences between the GNP and for-profit sectors (including purpose, monitoring needs, and stakeholders), the GNP sector is a unique environment in which to study investment in internal auditing.…”