Role of Internal Auditors in Corporate Governance - Business Research

Running head: BUSINESS RESEARCH
Applied Business Research
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BUSINESS RESEARCH1
Abstract
The research proposed to investigate the role of internal auditors and their
contribution towards corporate governance. Past studies highlighted some of the
major corporate accounting scandals in the 21st century which had enhanced the
need for highly efficient corporate governance. The occurrence of these scandals in
both Europe and United States of America displayed the necessity of internal
mechanism in corporate governance. The research has proposed the following
objectives:
 Conceptual understanding of the role of internal auditors in corporate
governance
 Role of internal auditors in contributing towards corporate governance
 Recommend strategies to engage internal auditors efficiently and contribute to
the transparency of internal control systems and governance
The analysis of the past literature have examined and identified that majority of the
studies have examined the role of external auditors and there is lack of research on
the role of internal auditors. In order to fulfil the scope, research had proposed a
mixed method research design consist of 5 responses for the qualitative interview
and 341 responses for the quantitative survey.
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BUSINESS RESEARCH2
Topic: Auditors’ responsibilities and contributions toward corporate governance
1.0 Research Background
Past studies highlight some of the major corporate accounting scandals in the
21st century which has enhanced the need for highly efficient corporate governance.
The occurrence of these scandals in both Europe and United States of America
displayed the necessity of internal mechanism in corporate governance (Coetzee,
2016). This has led to special emphasis on the aspect of internal audit and shifted
the focus from investigation of reliability of financial controls and accounting to
evaluation of efficacy of management of enterprise risk, corporate governance and
internal controls (Chambers and Odar, 2015). The development of new scope of
work in audit systems have resulted in introduction of new conceptualisation
approaches. The internal audit processes have had significant impact on the
perception of management in respect to position of internal audit processes in
corporate governance. This marks the evolution of the role of various internal audit
processes in adding value and fulfilling the objectives of the company (Abernathy et
al., 2015).
Internal audit has contributed to organisations at several levels as it facilitates
in managing risk and control responsibilities, monitors risk factors, provides advises
and identification of various weaknesses within the organisational control system.
These functions helps in developing effective risk management processes, external
auditors and audit committee in completing their roles. The main importance of
internal audit in corporate governance is ensuring financial reporting accuracy and
monitoring of risk management processes. This shows that internal audit function
has become a key cornerstone in developing corporate governance. Chambers and
Odar, (2015) argued that internal audit is a critical part of corporate governance and
helps in achieving company objectives. Coetzee, (2016) stated that in modern
business environment, internal audit has become a key function is supporting the
audit committee, external auditors and management.
Despite the increase in attention on internal audit function in the current
studies, past studies have revealed from empirical analysis that there is lack of
similar priority on internal audit from various firms. Abernathy et al., (2015) evaluated
voluntary disclosure in various firms in United States related to internal and external

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audit. The results show that disclosure related to external audit is far more common
in comparison to the internal audit. Siboni et al., (2016) analysed the corporate firms
in Australia and found out that some of them do not participate in internal audit.
However, even though there has been increase in implementation of internal audit in
majority of the organisation but the internal audit department in majority of the cases
are not adequately sourced and require more human resources to support corporate
governance. However, internal audit is also influenced by expectation of the senior
managers which affects the objectivity and purpose of internal audit.
1.1 Research Questions and Objectives
The objective of the study has been developed based on the research
problem identified. The study proposes to highlight the responsibilities and
contribution of internal audit in corporate governance. The objectives of the present
has been listed below:
 To develop a conceptual understanding of the role of internal auditors in
corporate governance
 To examine the role of internal auditors in contributing towards corporate
governance
 To recommend strategies to engage internal auditors efficiently and contribute
to the transparency of internal control systems and governance.
Research questions
What is the role of internal auditors in contributing towards corporate governance?
What are the different aspects of internal auditing and corporate governance?
2.0 Literature review
In light of the evidence gathered from the past researches, significant
exploration has been performed on existence of internal audit and financial
investment. In contrast to this it can be said that availability of literature on internal
audit function is far greater in developed markets when compared to the functions in
markets that are still emerging (Al-Akra, Abdel-Qader and Billah, 2016).
Furthermore, the implementation of internal audit function and its magnitude in any
organisation depends on the size, operating cash flow, service, finance and review of
the audit committee on the budget. Prior researches shows that different