Risk-based internal audit: factors related to its implementation

Abstract

Purpose This study aims to investigate the factors associated with the implementation of risk-based internal audit (RBIA). Design/methodology/approach As a first step, a literature review of the relevant literature is performed and five potential factors related to the implementation of RBIA are identified. Based on that, this paper constructs a questionnaire survey sent out to 185 internal auditors, executives and accountants in Greece to receive 90 responses during the period of November 2019–January 2020. Multiple regression analysis is conducted to identify the factors related to the implementation of RBIA. Findings This paper shows that there is a statistically significant positive relationship between the implementation of RBIA and: the provision of risk management training, an active audit committee role and the establishment of a formalized risk management system. Practical implications The results have important implications for internal auditors, chief executive officers and accountants who wish to enhance internal audit effectiveness and the accuracy and quality of financial information. Originality/value Empirical studies on the factors related to the implementation of RBIA are rare. This is the first study to create empirical variables based on a thorough review of the relevant literature to empirically investigate the factors that are related to the implementation of RBIA in an emerging economy. By focusing on the Greek context, this study also sheds light to other countries with similar corporate governance systems, thus providing insights to settings where the Type II agency problem exists (La Porta et al., 1999).

Bibliometric analysis on corporate governance topics published in the journal ofCorporate Governance: The International Journal of Business in Society

“…The two last corporate governance topics are audit quality (Alzeban, 2020; Fera et al , 2022; Koutoupis et al , 2018; Oussii and Klibi, 2020; Lois et al , 2020; Vadasi et al , 2020) and UK boards (Aladwey et al , 2022; Elmagrhi et al , 2018; Mathew et al , 2016) representing 2.27% and 1.98% of the total topics, respectively.…”

“…The listed companies were considered as the major sample in the corporate governance studies with a representation of 4.53% (Briozzo et al, 2019;Githaiga and Kosgei, 2022;Liu, 2016;Merendino and Melville, 2019;Mgammal et al, 2018;Hassan et al, 2019;Sewpersadh, 2019), while Islamic banks consisted of 3.12% of the total topics (Aslam and The two last corporate governance topics are audit quality (Alzeban, 2020;Fera et al, 2022;Koutoupis et al, 2018;Oussii and Klibi, 2020;Lois et al, 2020;Vadasi et al, 2020) and UK boards (Aladwey et al, 2022;Elmagrhi et al, 2018;Mathew et al, 2016) representing 2.27% and 1.98% of the total topics, respectively.…”

Factors Affecting the Implementation of Risk-Based Internal Auditing

“…Shifts in organizational circumstances, the entities, and technological advances and changes in regulatory/legislative structures have significantly altered the functions and methods of internal auditing (Chaudhari 2017;Abidin 2017). Ultimately, adopting and implementing RBIA processes will expand the range of internal audits to encompass comprehensive monitoring of all organizational activities and tasks (Lois et al 2021;Stojanović and Andrić 2016). Basically, structured RBIA processes will reinforce the supervisory responsibilities carried out by internal auditors and enhance the accuracy of what has been audited for documenting official business transactions.…”

“…Comprehending the goals and strategies of work tasks and bringing them into line with the workplace's goals and overall activities (Chaudhari 2017;Coetzee and Lubbe 2014;Lois et al 2021;Abidin 2017) involves determining, measuring, and prioritizing the dangers for the organization. Doing so contributes to more effective and cost-efficient holistic risk management practices (Castanheira et al 2009;Lois et al 2021), and internal auditors turn their attention to what will happen in the future (Petridis et al 2021). Namely, they will prioritize "high-risk" areas when preparing internal audit plans and accounts (Sarens et al 2012;Nickell and Roberts 2014;Abidin 2017).…”

“…This is because what is very important is the evaluation of organizational goals, risks, and audits (Burton et al 2012) and assuring the efficiency of internal controls and risk management operations (Abbas and Iqbal 2012;Bozkus Kahyaoglu and Caliyurt 2018;Spira and Page 2003). This results in more efficient audit resource allocation and repeatedly enhances the internal audit function's added value (Almagrashi et al 2023;Lois et al 2021;Sheehan 2010). It achieves this by elevating the quality of audit work, enhancing how sound operations are carried out, and assisting the organization's long-term sustainability and success (Coetzee and Lubbe 2014;Lois et al 2021;Sarens et al 2012;Sheehan 2010;Abidin 2017).…”