Article2017

Factors associated with the size of internal audit functions: evidence from Kuwait

34 citations0/0 files storedManagerial Auditing Journal

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Auditing, Earnings Management, Governance Corporate Finance and Governance Corporate Governance and Financial Management

Abstract

Purpose This study aims to examine whether the size of internal audit functions (IAFs) is significantly related to factors documented by related prior auditing research, namely, diffusion of ownership, firm size, affiliation to the financial services industry, proportion of assets in the form of receivables and inventory, audit committee’s size and the presence of risk management committee. Design/methodology/approach Using data related to companies listed on the Kuwait Stock Exchange, this study uses a regression model to examine research hypothesis related to factors predicted to have an association with the size of the firm’s IAF. Findings The results of the current study provide evidence of a significantly positive relation between the size of the IAF and firm’s affiliation to the finance sector, audit committee’s size and the presence of a separate risk management committee. Such empirical evidence, which stems from the Kuwaiti market, is expected to be valuable for regulators and policy makers as well as audit researchers interested in linking it to the international empirical findings about this issue documented in other audit markets. Originality/value This study is original because it is the first to empirically examine factors associated with the size of IAFs in the GCC region, including Kuwait.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1988Management ownership and market valuation 1981Auditor size and audit quality 1980The Pricing of Audit Services: Theory and Evidence 1978Towards a Positive Theory of the Determination of Accounting Standards.1998Management Ownership and Market Valuation: An Empirical Analysis 1977Corporate Financial Statements, A Product of the Market and Political Processes 1989Characteristics of firms correcting previously reported quarterly earnings

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