مقاله انگلیسی رایگان در مورد محتویات افشاگری های حسابرسی داخلی و اجرت حسابرسی خارجی – وایلی ۲۰۱۸

INTRODUCTION

The aim of this study is to explore the content of internal audit (IA) disclosures in annual reports and explain the relationship between IA disclosures and external audit fees. Although the IA function (IAF) is seen as an important governance mechanism (Gramling, Maletta, Schneider, & Church, 2004), there are generally no statutory requirements to disclose information about the composition and activities of the IAF (Holt & DeZoort, 2009). Current governance disclosures focus mainly on management, the audit committee, and external auditors, while little information is disclosed about the nature of the IAF (Archambeault, DeZoort, & Holt, 2008). According to the Swedish corporate governance code (the Code), the use of an IAF is recommended and the absence of an IAF needs to be evaluated on an annual basis and clarified in the corporate governance report (Swedish Corporate Governance Board, 2010). However, there are no additional reporting requirements connected to IA. Companies that want to share information can do so by voluntary disclosures. Therefore, managers have the opportunity to voluntarily disclose information that they believe is relevant and useful to external stakeholders (Meek, Roberts, & Gray, 1995). According to Beekes and Brown (2006), companies with superior governance quality differentiate themselves from other companies by the use of more informative disclosures in the annual report. By considering both internal and external auditing as important elements of corporate governance, previous IA research has examined whether the existence of an IAF (Goodwin‐Stewart & Kent, 2006; Hay, Knechel, & Ling, 2008; Singh & Newby, 2010), IAF quality (Gros, Koch, & Wallek, 2017; Zain, Zaman, & Zulkifflee, 2015), and external auditors’ reliance on the IAF (Abbott, Parker, & Peters, 2012; Felix, Gramling, & Maletta, 2001; Messier, Reynolds, Simon, & Wood, 2011) are associated with the external audit fees. Owing to mixed results and different theoretical perspectives, it has been argued that the IA can act, at least in part, as either a substitute for or a complement to the external audit. This study extends existing IA research by examining the relationship between IA disclosures and external audit fees. Based on previous findings that more informative disclosures signal actual investments in disclosed activities (Toms, 2002) and increased governance quality (Beekes & Brown, 2006), this study posits that companies with more informative IA disclosures have higher IAF quality, which will likely have an impact on the external audit fees. Yatim, Kent, and Clarkson (2006) argue that good corporate governance practice improves both risk management and internal control processes, which affects auditors’ risk assessments and, in the end, leads to lower external audit fees. Conversely, investments in IA may also signal that those charged with governance are willing to pay more for an external audit, and hence demand a higher quality audit (Goodwin‐Stewart & Kent, 2006).