Journal of Commerce and Accounting Research

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Impact of Internal Audit Quality on Financial Stability


Affiliations
1 Assistant Professor, American University of the Middle East, Kuwait
2 Assistant Professor, Higher College of Technology, Muscat, Oman
     

   Subscribe/Renew Journal


The objective of this study is to find out the effect of internal audit quality as an essential tool, for efficient and effective financial management and stability, which fulfills the financial goals of the firm. Due to the increasing importance of internal audit quality and the limited evidence on its impact on financial stability, we have examined the influence of internal audit on the financial aspects of companies. The study has drawn evidence from the data collected through a questionnaire and performing correlation analysis and simple regression on the audit, finance, and banking professionals. The findings assess and suggest a positive relationship between audit quality and financial stability. The research reveals the significant role of internal audit quality on the financials; high audit quality directly impacts the company’s level of financial stability. Based on the findings, awareness among the employees and management has to be maximised so that an understanding of the challenges and impact on financial stability can be assessed by the auditors. The paper will prove to be an essential contribution by providing substantial evidence regarding internal audit quality and financial stability.

Keywords

Internal Audit, Internal Audit Function, Audit Quality, Financial Stability, Audit Impact
Subscription Login to verify subscription
User
Notifications
Font Size


  • Adekola, D. R., & Adewale, O. A. (2018). Impact of internal audit function and efficiency on organizational performance. International Journal of Accounting Research, 3(6), 15-19.

  • Ahmad, H. (2015). Internal audit (IA) effectiveness: Resource-based and institutional perspectives. Australian Journal of Basic and Applied Sciences, 9(9), 95-104.

  • Alfadhli, M. I., bin NikMohd, N. M. N., & Yaakub, R. D. M. N. (2018). The impact of internal audit and its quality on sales in economic institutions: A case study (AlAhlia Cement Company-Libya). International Journal of Academic Research in Business and Social Sciences, 8(8), 50-65.

  • Amoh, K. K. (2017). The effects of internal audit quality on financial performance of firms listed at the Nairobi securities exchange (Doctoral dissertation). University of Nairobi.

  • Audit Quality. (2015). Agency theory and role of audit (pp. 1-14). The Institute of Chartered Accountant in England and Wales (ICAEW).

  • Azzali, S., & Mazza, T. (2018). The internal audit effectiveness evaluated with an organizational, process and relationship perspective.

  • Badara, M. A. S. (2013). Impact of the effective internal control system on the internal audit effectiveness at local government level. Journal of Social and Development Sciences, 4(1), 16-23.

  • Badara, M. A. S., &Saidin, S. Z. (2013). The journey so far on internal audit effectiveness: A calling for expansion. International Journal of Academic Research in Accounting, Finance and Management Sciences, 3(3), 340-351.

  • Choi, J. H., & Lee, W. J. (2014). Association between Big 4 auditor choice and cost of equity capital for multiplesegment firms. Accounting & Finance, 54(1), 135-163.

  • Cohen, A., & Sayag, G. (2010). The effectiveness of internal auditing: An empirical examination of its determinants in Israeli organizations. Australian Accounting Review, 20(3), 296-307.

  • Enekwe, C., Nwoha, C., & Udeh, S. N. (2020). Effect of audit quality on financial performance of listed manufacturing firms in Nigeria (2006-2016). Advance Journal of Management, Accounting and Finance, 5(1), 1-12.

  • Eshitemi, P. B., & Omwenga, J. (2017). Effect of audit quality on the financial performance of listed parastatals. In Social Science and Humanities Journal, 1(2), 144-157.

  • Eulerich, M., Henseler, J., & Köhler, A. G. (2017). The internal audit dilemma - The impact of executive directors versus audit committees on internal auditing work. Managerial Auditing Journal., 32(9).

  • Hassan, S. U., & Farouk, M. A. (2014). Audit quality and financial performance of quoted cement firms in Nigeria. European Journal of Business and Management, 6(28), 73-82.

  • Kontogeorgis, G. (2018). The role of internal audit function on corporate governance and management. International Journal of Accounting and Financial Reporting, 8(4), 100-114.

  • Lagat, C., & Okelo, C. (2016). Effect of internal control systems on financial management in Baringo county government, Kenya. Journal of Economics Finance and Accounting, 3(1).

  • Nwanyanwu, L. A. (2017). Audit quality practices and financial reporting in Nigeria. International Journal of Academic Research in Accounting, Finance and Management Sciences, 7(2), 145-155.

  • Okpala, K. (2015). Stamatis generic model and audit quality in Nigeria. The Journal of Social Sciences Research, 1(8), 94-101.

  • Panda, B., & Leepsa, N. M. (2017). Agency theory: Review of theory and evidence on problems and perspectives. Indian Journal of Corporate Governance, 10(1), 74-95.

  • Petraşcu, D. (2010). Internal audit: Defining, objectives, functions and stages. Studies in Business & Economics, 5(3), 238-246.

  • Pizzini, M., Lin, S., & Ziegenfuss, D. E. (2015). The impact of internal audit function quality and contribution on audit delay. Auditing Journal of Practice & Theory, 34(1), 25-58.

  • Shamki, D., & Alhajri, T. A. (2017). Factors influence internal audit effectiveness. International Journal of Business and Management, 12(10), 143-154.

  • Skousen, C. J., Smith, K. R., & Wright, C. J. (2009). Detecting and predicting financial statement fraud: The effectiveness of the fraud triangle and SAS No. 99. In corporate governance and firm performance. Emerald Group Publishing Limited.

  • Stefano, A., & Mazza, T. (2018). The internal audit effectiveness evaluated with an organizational, process

  • and relationship perspective. International Journal of Business and Management, 13(6), 238-254. doi:10.5539/ijbm. v13n6p238.s

  • Suryana, U. (2018). The role of the internal audits to the quality of financial reporting.

  • Theofanis, K., Drogalas, G., & Giovanis, N. (2011). Evaluation of the effectiveness of internal audit in Greek hotel business. International Journal of Economic Sciences and Applied Research, 4(1), 19-34.

  • Vijayakumar, A. N., & Nagaraja, N. (2012). Internal control systems: Effectiveness of internal audit in risk

  • management at public sector enterprises. BVIMR Management Edge, 5(1), 1-8.

  • Volosin, E. (2008). The theories of audit expectations and the expectations gap. GRIN Verlag.

  • Ziniyel, D., Otoo, I. C., & Andzie, T. A. (2018). Effect of internal audit practices on financial management. European Journal of Business, Economics and Accountancy, 6(3), 39-48.


Abstract Views: 175

PDF Views: 0




  • Impact of Internal Audit Quality on Financial Stability

Abstract Views: 175  |  PDF Views: 0

Authors

Suzan Dsouza
Assistant Professor, American University of the Middle East, Kuwait
Ajay Kumar Jain
Assistant Professor, Higher College of Technology, Muscat, Oman

Abstract


The objective of this study is to find out the effect of internal audit quality as an essential tool, for efficient and effective financial management and stability, which fulfills the financial goals of the firm. Due to the increasing importance of internal audit quality and the limited evidence on its impact on financial stability, we have examined the influence of internal audit on the financial aspects of companies. The study has drawn evidence from the data collected through a questionnaire and performing correlation analysis and simple regression on the audit, finance, and banking professionals. The findings assess and suggest a positive relationship between audit quality and financial stability. The research reveals the significant role of internal audit quality on the financials; high audit quality directly impacts the company’s level of financial stability. Based on the findings, awareness among the employees and management has to be maximised so that an understanding of the challenges and impact on financial stability can be assessed by the auditors. The paper will prove to be an essential contribution by providing substantial evidence regarding internal audit quality and financial stability.

Keywords


Internal Audit, Internal Audit Function, Audit Quality, Financial Stability, Audit Impact

References