Date of Award

2016

Document Type

Dissertation

Degree Name

PhD in Accountancy

Department

Department of Accountancy

First Advisor

Mohammad J. Abdolmohammadi

Second Advisor

Ari Yezegel

Third Advisor

Gerrit Sarens

Abstract

This dissertation contains three studies that examine the IAF’s role in corporate governance, factors that lead IAFs to take a deliberate approach to improve IAF quality, and how IAFs influence financial reporting quality in the public sector.

The first study examines factors that are associated with IAF involvement in corporate social responsibility (CSR) auditing. Results suggest that organizations with more formally documented corporate governance guidance and IAF guidance are more likely to engage their IAFs in CSR auditing than those without such documentation. Findings also indicate that IAFs of governmental organizations and those within larger organizations engage in significantly more CSR audit activity than smaller ones. This study is important as stakeholder demand for CSR activity and disclosure is increasing, but generally lacks regulation.

The second study identifies variables that are associated with IAF quality through the use of external quality assessment and improvement programs (QAIP). The results indicate significant positive relationships between use of these programs and use of internal quality assessment programs, IAF performance measures, chief audit executive competence, audit committee involvement with the internal audit, IAF age, internal audit outsourcing status, and the nature of the IAF’s work. The study’s findings provide insights on specific variables that influence a deliberate effort to improve IAF quality through external quality assessment programs, and should be of interest to standard setters, regulators, and stock exchanges that advocate high internal audit quality.

The third study examines the relationship of IAF and quality therein with financial reporting quality in U.S. municipalities. Specifically, I examine the association of the presence of IAFs and the use of IAF quality assessments with audit reportable conditions and restatements. Results indicate significant positive relationships between both the presence of an IAF and use of IAF external QAIPs with reported significant deficiencies in internal controls and that the presence of an IAF is negatively associated with restatements in U.S. municipalities. The study’s findings provide insights on IAF influence over financial statement reporting quality and should be of interest to standard setters, regulators, and public sector leadership as they attempt to improve governmental financial reporting transparency and quality.

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