Internal auditors and the external audit: a transaction cost perspective

Morrill, Cameron K.J.; Morrill, Janet

doi:10.1108/02686900310482632

Cited by 37 publications

(51 citation statements)

References 21 publications

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“…The internal auditors' participation in the external audit is similar to the vertical integration or outsourcing decision (Morrill & Morrill, 2003). Audit services can be purchased from within or outside the firm and the optimal mix depends on the costs associated with each of the available sources.…”

Section: Internal Audit and External Audit Feesmentioning

confidence: 99%

Internal audit department characteristics/activities and audit fees: Some evidence from Hong Kong firms

Hutchinson

2010

Journal of International Accounting, Auditing and Taxation

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a b s t r a c tThis study provides preliminary support for the notion that internal audit function assists in reducing external audit effort and fees. Data on internal audit characteristics and activities are obtained from survey respondents of Hong Kong companies and audit fee model data are acquired from their annual reports. The results of this study suggest that the external auditor of firms in Hong Kong rely on the internal audit function and subsequently charge a lower fee. Lower external audit fees are associated with a larger internal audit department and certain activities carried out by the internal audit. Specifically, lower external audit fees are associated with more internal audit effort spent on activities relating to financial statements, systems development and maintenance, operating efficiency and effectiveness, fraud investigations and unlimited access to internal auditors' working papers. The results of this study suggest that the contribution of the internal audit may substitute for some substantive external auditing processes and lower monitoring costs.

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Section: Internal Audit and External Audit Feesmentioning

confidence: 99%

Internal audit department characteristics/activities and audit fees: Some evidence from Hong Kong firms

Hutchinson

2010

Journal of International Accounting, Auditing and Taxation

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“…Furthermore, to determine the extent of their reliance on IA work, external auditors assess IA effectiveness. This reliance is also an area where IA adds value to organisations through reduced external audit fees (Krishnamoorthy, 2001(Krishnamoorthy, , 2002Morrill and Morrill, 2003). IA may therefore gain some feedback and improve its effectiveness when internal and external audit linkages are strong.…”

Section: Internal and External Audit Linkagesmentioning

confidence: 99%

Antecedents and organisational performance implications of internal audit effectiveness

Mihret

James

Mula

2010

Pacific Accounting Review

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Purpose -This paper synthesises relevant theoretical and empirical literature to develop propositions and suggests a research agenda on the antecedents and organisational performance implications of internal audit effectiveness. Design/methodology/approach -The paper employs institutional theory and Karl Marx's theory of the ‗circuit of industrial capital' to synthesize relevant internal audit literature to develop theoretically justifiable propositions and highlight an operational research agenda. Findings -Propositions and a research agenda are provided on potential antecedents of internal audit effectiveness and its possible association with company performance measured as rate of return on capital employed. Also, key variables are identified and operationalisation issues discussed. Originality/value -As the extant literature does not provide a canon of internal audit effectiveness, the paper's originality is its argument that a positive association between compliance with standards for the professional practice of internal auditors and organisational goal achievement could serve as an approach to assess internal audit effectiveness. Furthermore, the use of the two theories in combination provides additional insights into identifying the antecedents of internal audit effectiveness and its measurement.Paper type -Literature review, theory

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“…Morill and Morill (2003) argue that such a construct is not directly observable, requiring the use of multiple indicators. In their systematic assessment of TCT-related literature, David and Han (2004, p.54) conclude that the term asset specificity means "many different things to different people".…”

Section: Introductionmentioning

confidence: 98%

Asset specificity's impact on outsourcing relationship performance: A disaggregated analysis by buyer–supplier asset specificity dimensions

Vita

Tekaya

Wang

2010

Journal of Business Research

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Internal auditors and the external audit: a transaction cost perspective

Cited by 37 publications

References 21 publications

Internal audit department characteristics/activities and audit fees: Some evidence from Hong Kong firms

Internal audit department characteristics/activities and audit fees: Some evidence from Hong Kong firms

Antecedents and organisational performance implications of internal audit effectiveness

Asset specificity's impact on outsourcing relationship performance: A disaggregated analysis by buyer–supplier asset specificity dimensions

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