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Usage of Internal Auditing Standards by Companies
in the United States and Select European Countries
Priscilla Burnaby Bentley College USAand Susan Hass Simmons College USA
Priscilla A. Burnaby, CPA, PhDBentley College
Mohammad Abdolmohammadi, CPA, DBABentley College
Susan Hass, Professor, CPASimmons College
Gerrit Sarens, PhD, CIA, CCSA Université Catholique de Louvain
Marco Allegrini, PhDUniversità di Pisa
Authors
Topics
• Introduction• Research Method• Demographic Information• Use and Adequacy of the
Standards and Practice Advisories• Conclusions
Introduction
Objective
• To compare usage of the Standards and Practice Advisories in:–Belgium–Italy –The Netherlands–The United Kingdom and Ireland–The United States of America
Legislation Mandating the Internal Audit Activity
• Sarbanes Oxley Act of 2002 – All those that have stock on the NYSE• King, 2002 – South Africa
Other Regulations
• Stock Exchanges -NYSE, 2004
• Central Banks and Supervisory Authorities throughout Europe
-Basel Committee, 2004 – Many countries -Banca d’Italia, 1999 - Italy -CBFA, 1997 – Belgium
European Corporate Governance Codes
• United Kingdom - Combined Code on Corporate Governance
• Italy - Corporate Governance Code• Belgian - Corporate Governance Code• The Dutch Corporate Governance Code
Research Questions• RQ1: What is the level of usage of the Standards in Belgium,
Italy, The Netherlands, the United Kingdom and Ireland, and the United States?
• RQ2: Do Belgium, Italy, The Netherlands, the United Kingdom and Ireland, and the United States differ in their compliance with the Standards?
• RQ3: Is guidance for usage of the Standards adequate?
• RQ4: What is the level of usage of the Practice Advisories in Belgium, Italy, The Netherlands, the United Kingdom and Ireland, and the United States?
Research Questions, continued
• RQ5: What are the reasons for lack of compliance with the Standards?
• RQ6: Are there differences in internal quality and improvement programs in Belgium, Italy, The Netherlands, the United Kingdom and Ireland, and the United States?
• RQ7: Are there differences in external quality and improvement programs in Belgium, Italy, The Netherlands, the United Kingdom and Ireland, and the United States?
Research Methodology
• Data was selected from the CBOK (2006) database
• Due to missing data for some of the questions in the CBOK survey, usable responses may vary slightly for each question analyzed
• Chi-square test
IIA Membershipas of September 30, 2006
*Provided by The IIA.
Affiliate IIA Membership as of
9/30/2006*
Usable Responses
Percentage of Membership
Belgium 1,154 102 8.8
Italy 2,531 456 18.0
The Netherlands 1,741 112 6.4
UK and Ireland 7,185 271 3.8
United States 54,686 3,139 5.7
Total 67,297 4,080 6.1
Demographic Information
Staff Level Belgium Italy TheNetherlands
UK and Ireland
United States
CAE 20.7 28.5 23.2 25.1 24.3Audit Manager
29.7 21.4 26.8 27.8 22.6
Audit Seniors/Supervisor 21.8 17.2 26.8 30.0 28.2
Audit Staff22.8 25.8 15.2 13.0 17.2
Other 5.0 7.1 8.0 4.1 7.7Total 100.0 100.0 100.0 100.0 100.0Number of Respondents
101 453 112 270 3,127
χ2 =56.68, p<.001
Participants’ Staff Levels(In Percentages)
Age of Respondents(in Percentages)
Age Belgium Italy TheNetherlands
UK and Ireland
United States
25 years old or less
0.0 0.3 1.2 2.2 4.8
26 to 34 years old
25.0 26.5 20.2 19.3 23.8
35 to 44 years old
44.3 33.7 38.1 39.9 32.5
45 to 54 years old
22.7 31.1 25.0 32.3 25.9
55 to 64 years old
8.0 7.5 14.3 6.3 12.6
65 years or older
0.0 0.9 1.2 0.0 0.4
Total 100.0 100.0 100.0 100.0 100.0Number of Respondents
88 347 84 223 2529
χ2 =56.88, p<.001
Highest Level of Respondents’ Education (in Percentages)
Level of Education Belgium Italy TheNetherlands
UK and Ireland
United States
Secondary / High School Education
0.0 20.6 0.8 23.4 1.3
Bachelors / Diploma in Business8.9 42.8 5.4 19.6 49.9
Bachelors / Diploma in Fields Other than Business 4.0 17.5 4.5 20.7 11.9
Masters / Graduate Degree / Diploma in Business 57.4 13.7 56.3 20.0 30.1
Masters / Graduate Diploma in Fields Other than Business 26.7 3.8 20.5 12.2 5.5
Doctoral Degree 2.0 .7 8.0 1.5 .9
Other 1.0 .9 4.5 2.6 .4Total 100.0 100.0 100.0 100.0 100.0Number of Respondents 101 451 112 270 3129
χ2 =967.89, p<.001
Number of Years as an IIA Member (in Percentages)
Years Belgium ItalyThe
Netherlands UK and Ireland
United States
5 or less 68.3 74.4 64.0 42.5 56.1
6 to 10 19.8 18.8 21.6 33.6 20.2
11 or more 11.9 6.8 14.4 23.9 23.7
Total 100.0 100.0 100.0 100.0 100.0
No. of Respondents
101 453 111 268 3121
χ2 =119.26, p<.001
Respondents’ Professional Qualifications Type of Professional Qualification Belgium Italy
TheNetherlands
UK and Ireland
United States
χ2 p
Internal Auditing (such as CIA / MIIA / PIIA) 55.9 31.1 48.2 62.4 40.6 80.355 <.001
Information Systems Auditing (such as CISA / QiCA / CISM) 9.8 3.9 20.5 14.0 14.0 42.918 <.001
Government Auditing / Finance (such as CIPFA / CGAP / CGFM) .0 2.0 4.5 7.0 4.9 16.404 .003**
Control Self-Assessment (such as CCSA) 8.8 12.3 2.7 1.1 3.0 100.076 <.001**
Public Accounting / Chartered Accountancy (such as CA / CPA / ACCA / ACA)
10.8 12.3 47.3 17.7 36.3 166.812 <.001
Management / General Accounting (such as CMA / CIMA / CGA) 2.9 .7 2.7 5.5 2.2 18.389 .001**
Accounting - technician level (such as CAT / AAT) 2.0 4.6 1.8 8.5 .1 191.144 <.001**
Fraud Examination (such as CFE) 8.8 2.0 .9 1.5 8.7 49.165 <.001**Financial Services Auditing (such as CFSA / CIDA / CBA) 2.9 1.8 .0 .4 6.2 38.284 <.001**
Fellowship (such as FCA / FCCA / FCMA) 1.0 .7 .0 7.7 .4 142.223 <.001**
Certified Financial Analyst (such as CFA) 1.0 .4 .0 .4 .4 1.205 .877**
Other 12.7 22.1 24.1 16.6 13.1 35.763 <.001Number of Respondents 102 456 112 271 3139
**When the number of observations is less than 5 in a cell, the Chi-square results should be interpreted cautiously.
Age of Respondents’ Organizations(in Percentages)
Age Belgium Italy TheNetherlands
UK and Ireland
United States
0 to 5 years 2.1 21.5 6.6 9.3 4.3
6 to 10 years 8.2 14.8 12.6 10.5 6.7
11 to 15 years 7.2 7.7 3.9 5.9 5.0
16 to 20 years 5.2 3.3 1.0 6.7 4.6
21 to 25 years 1.0 3.8 1.0 7.6 3.7
26 to 30 years 6.2 6.8 4.9 4.6 5.0
31 to 35 years 3.1 1.2 4.9 4.6 3.4
36 to 40 years 3.1 2.6 7.8 6.3 4.6
41 to 45 years 1.0 .7 1.0 .4 1.6
46 to 50 years 12.4 4.0 6.8 5.9 5.7
51 or more years 50.5 33.6 49.5 38.2 55.4
Total 100.0 100.0 100.0 100.0 100.0
Number of Respondents
97 426 103 238 2783
χ2 =307.46, p<.001
Number of Years IAA Has Existed (in Percentages)
Number of Years Belgium ItalyThe
Netherlands UK and Ireland United States
0-5 36.4 44.8 17.2 17.9 24.0
6-10 21.6 25.3 25.0 24.6 16.3
11-15 12.5 8.6 10.6 11.2 11.0
16-20 8.0 6.3 6.7 13.8 12.5
21-25 9.1 4.8 7.7 8.5 9.2
26-30 5.7 4.3 13.5 5.8 8.5
31-35 .0 1.8 5.8 5.4 2.9
36-40 1.1 1.0 1.9 2.2 4.7
41-45 .0 .3 2.9 .4 .7
46-50 1.1 .8 2.9 7.1 4.4
More than 50 years 4.5 2.0 5.8 3.1 5.8
Total 100.0 100.0 100.0 100.0 100.0Number of Respondents 88 396 104 224 2592
χ2 =202.86, p<.001
Use and Adequacy of the
Standards and Practice Advisories
(RQ1) Organizations’ Use of The Standards In Whole or In Part
(in Percentages)
Position in the IAA Belgium Italy The Netherlands
UK and Ireland United States
χ2 pNumber of
Respondents
% Number of
Respondents
% Number of Respond
ents
% Number of
Respondents
% Number of
Respondents
%
CAE 21 90.5 126 81.7 26 88.5 68 85.3 753 86.3 2.412 .660
Audit Manager
30 93.3 96 85.4 30 70.0 75 89.3 700 86.7 8.814 .066
Audit Senior/Supervi-sor
22 68.2 76 81.6 30 60.0 81 74.1 873 83.6 17.504 .002
Audit Staff
22 90.9 113 86.7 17 88.2 35 62.9 523 83.7 12.868 .012
Other 5 100.0 27 85.2 8 37.5 9 77.8 218 76.1 9.433 .051
Overall Average
100 87.1 438 84.0 111 72.1 268 79.9 3067 84.4
(RQ2) Full and Partial Compliance with the Standards (in Percentages)
StandardBelgium Italy
The NetherlandsUK and Ireland
United Statesχ2 p
Full Partial Full Partial Full Partial Full Partial Full Partial
1000- Purpose, Authority, and Responsibility
71.1 23.7 62.3 30.0 61.8 25.0 64.2 21.4 69.2 13.5 120.953 <.001
1100- and Objectivity76.6 19.5 68.7 25.5 70.1 19.4 64.0 22.3 70.8 13.4 86.370 <.001
1200- Proficiency and Due Professional Care
61.0 35.1 58.5 36.9 68.7 14.9 66.5 20.2 69.1 14.5 141.578 <.001
1300- Quality Assurance and Improvement Program
38.7 40.0 28.6 40.2 31.3 41.8 38.6 39.2 48.6 24.5 159.730 <.001
2000- Managing the Internal Audit Activity
53.2 40.3 54.9 37.2 54.4 30.9 57.4 26.6 64.1 18.2 126.440 <.001
2100- Nature of work58.4 35.1 61.0 32.7 58.5 29.2 52.7 29.0 64.6 16.4 107.028 <.001
2200- Engagement Planning63.6 32.5 59.0 33.6 56.1 28.8 58.2 25.3 63.7 17.8 101.961 <.001
2300-Performing the Engagement
63.6 32.5 61.4 33.4 49.2 36.9 56.7 28.1 67.5 15.4 126.152 <.001
2400- Communicating Results68.4 28.9 65.4 29.1 59.7 28.4 62.8 21.5 69.3 14.4 94.343 <.001
2500- Monitoring Progress63.6 29.9 46.6 45.6 47.8 37.3 51.2 30.0 60.8 20.3 135.978 <.001
2600- Resolution of Management’s Acceptance of Risks
48.7 36.8 34.9 36.6 47.0 30.3 49.1 31.0 59.2 18.3 152.405 <.001
Overall Average 60.6 32.2 54.7 34.6 55.0 29.4 56.5 26.8 64.3 17.0
Standard Belgium ItalyThe
Netherlands UK and Ireland
United States
χ2 p
1000- Purpose, Authority, and Responsibility97.4 94.9 76.5 80.3 81.1 70.531 <.001
1100- and Objectivity94.9 95.5 80.6 82.5 83.1 58.564 <.001
1200- Proficiency and Due Professional Care97.5 96.8 76.5 82.5 81.9 66.003 <.001
1300- Quality Assurance and Improvement Program 85.5 73.9 76.5 72.0 74.9 70.305 <.0012000- Managing the Internal Audit Activity
96.2 92.8 79.4 77.2 79.9 63.008 <.0012100- Nature of work
92.2 93.0 76.9 72.6 78.0 59.926 <.0012200- Engagement Planning
92.2 94.8 78.5 77.1 79.1 65.249 <.0012300-Performing the Engagement
94.9 94.8 79.7 76.7 80.3 62.029 <.0012400- Communicating Results
94.8 94.8 80.3 79.0 80.8 53.527 <.0012500- Monitoring Progress
90.9 92.4 79.1 78.0 78.3 56.364 <.0012600- Resolution of Management’s Acceptance of Risks 79.2 73.3 73.1 72.8 75.2 57.346 <.001Overall Average
92.3 90.6 77.9 77.3 79.3
(RQ3) Adequacy of Guidance Provided by Each of the Standards (in Percentages)
(RQ4) Adequacy of Practice Advisories (in Percentages)
Practice Advisories Belgium ItalyThe
Netherlands UK and Ireland
United States
χ2 p
1000- Purpose, Authority, and Responsibility 82.8 91.7 73.6 72.2 82.9 27.968 <.0011100- and Objectivity 75.4 90.3 75.0 73.6 83.2 31.417 <.0011200- Proficiency and Due Professional Care 80.7 91.7 71.2 73.4 82.5 27.781 .0011300- Quality Assurance and Improvement Program 69.0 71.3 73.1 68.8 78.0 17.370 .0262000- Managing the Internal Audit Activity 78.6 89.4 71.2 69.8 81.6 34.533 <.0012100- Nature of work 78.9 89.8 71.2 68.3 80.7 28.523 <.0012200- Engagement Planning 71.9 91.1 65.4 66.7 81.3 61.466 <.0012300-Performing the Engagement 78.9 91.9 67.3 68.3 81.6 40.508 <.0012400- Communicating Results
78.6 90.2 74.5 71.0 82.1 28.623 <.0012500- Monitoring Progress 78.9 87.9 69.2 69.6 80.3 26.334 .0012600- Resolution of Management’s Acceptance of Risks 70.2 73.7 67.3 66.1 78.0 18.715 .016Overall Average 76.1 87.2 70.8 69.8 81.1
(RQ5) Reasons for Not Using the Standards In Whole or In Part* (in Percentages)
Reason Belgium ItalyThe
Netherlands UK and Ireland
United States
Average For All Respondents
χ2 p
Standards or Practice Advisories are too complex
10.6 7.5 5.0 2.0 3.2 3.8 32.968 <.001
Not appropriate for small organizations
14.9 11.3 12.0 6.0 8.9 9.2 10.091 .039
Too costly to comply 12.8 12.0 6.0 2.8 7.3 7.7 23.752 <.001Too time consuming 18.1 12.5 17.0 9.2 9.2 10.0 17.515 .002Superseded by local/government regulations or standards
6.4 7.9 14.0 19.3 7.4 8.4 46.667 <.001
Not appropriate for my industry
5.3 2.6 2.0 4.4 4.4 4.2 4.375 .358**
Compliance not supported by management / board
16.0 16.6 11.0 7.2 8.6 9.7 32.591 <.001
Not perceived as adding value by management / board
18.1 21.9 17.0 10.0 9.8 11.5 59.815 <.001
Inadequate internal audit staff
6.4 20.7 8.0 7.6 10.6 11.3 44.628 <.001
Compliance not expected in my country
6.4 3.1 5.0 4.0 .3 1.2 82.260 <.001
Other 10.6 8.4 23.0 15.3 13.6 13.3 18.408 .001Number of Respondents 94 416 100 249 2877 3736 <.001
*Note: Since respondents could mark all that apply, percentages do not add up to 100.**When the number of observations is less than 5 in a cell the Chi-square results should be interpreted cautiously.
(RQ5) Top Five Reasons for Lack of Compliance
• Not perceived as adding value by management/board (11.5%)
• Inadequate staff in the IAA (11.3%)• Too time consuming (10.0%)• Compliance not supported by
management/board (9.7%)• Not appropriate for small organizations (9.2%).
Using of the Standards in Whole or in Part Compared to the Number of Years Organization Has Had an
IAA (in Percentages)
Years with IAA
Belgium
Italy The Netherlands UK and Ireland
United States
# of Responde
nts
% UseStds.
# of Responde
nts
% UseStds.
# of Responde
nts
% UseStds.
# of Responde
nts
% UseStds.
# of Responde
nts
% UseStds.
0-5* 32 90.6 174 82.8 18 83.3 40 80.0 615 83.6
6 or more
**56 83.9 217 87.1 86 68.6 184 82.1 1954 85.7
Total 88 391 104 224 2569
χ2.775 1.439 1.573 .094 1.623
p .379 .230 .210 .760 .203
*χ2 = 1.607, p = .807 between counties** χ2 = 20.731, p<.001 between countries
Use of the Standards in Whole or in Part Compared to the Number of Full-Time Staff at Each Staff (in Percentages)
Belgium Italy The Netherlands UK and Ireland United States
Number of Staff
# of Responde
nts
% # of Responde
nts
% # of Responde
nts
% # of Responde
nts
% # 0f Responde
nts
%
1-3 25 88.0 96 68.8 17 52.9 38 68.4 665 77.34-6 12 58.3 74 87.8 15 86.7 49 79.6 530 84.07-9 6 100.0 35 77.1 3* 100.0 41 78.0 369 86.210-12 2* 100.0 21 85.7 4* 100.0 16 81.3 205 81.013-15 5 60.0 12 91.7 9 66.7 12 75.0 156 89.116-18 1* 100.0 17 82.4 8 75.0 7 85.7 110 89.119-21 7 85.7 7 85.7 3* 66.7 7 71.4 71 94.422-24 2* 100.0 5 100.0 1* .0 7 71.4 68 83.825 or more
31 93.5 127 92.9 44 75.0 73 90.4 706 90.8
Total 91 394 104 250 2880Chi-square
13.541 27.374 10.553 9.33 61.104
p .095 .001 .228 .315 <.001
Quality Assurance and Improvement Program
(RQ6) When IAA Was Last Subject to a Formal Internal Quality Assessment (in Percentages)
Timing Belgium Italy The Netherlands
UK and Ireland
United States
# of Respo
nd ents
% # of Respo
nd ents
% # of Respo
nd ents
% # of Respond ents
% # of Respo
nd ents
%
Done in past 5 years or scheduled to be completed prior to January 1, 2007.
39 50.6 122 35.0 45 55.6 127 69.4 1191 60.0
Never had one or not done in compliance with Standard 1311
38 49.4 227 65.0 36 44.4 56 30.6 794 40.0
Total Number of Respondents
77 100.0 349 100.0 81 100.0 183 100.0 1985 100.0
χ2 = 89.275, p<.001
(RQ7) When IAA Was Last Subject to a Formal External Quality Assessment (in Percentages)
Timing Belgium Italy The Netherlands UK and Ireland United States
# of Responde
nts
% # of Responde
nts
% # of Responde
nts
% # of Respond
ents
% # of Responde
nts
%
Done in past 5 years or scheduled to be completed prior to January 1, 2007.
35 47.9 79 27.1 35 43.8 126 68.5 1127 57.7
Never had one or not done in compliance with Standard 1312
38 52.1 213 72.9 45 56.3 58 31.5 827 42.3
Total Number of Respondents
73 100.0 292 100.0 80 100.0 184 100.0 1954 100.0
χ2 =115.997, p<.001
Conclusions
Conclusions
• Growth of the profession has been hastened by national regulation
• Respondents age, education, time in the profession, and years of IIA membership vary by country
• Age of organizations and of IAAs vary by country• There is consistency within each country for the use
of the Standards in whole or in part by staff level but variation by country
Conclusions, continued
• Significant differences exist between countries In the level of satisfaction with the adequacy of the guidance for all Standards and Practice Advisories, with the exception of Standards 1300 and 2600– UK and Ireland are least satisfied with the Standards and
Practice Advisories– Belgium is most satisfied with Standards guidance– Italy is most satisfied with the Practice Advisories
Conclusions, continued
• Compliance with Standard 1300, Quality Assurance and Improvement Program and Standard 2600, Resolution of Management’s Acceptance of Risks, is universally limited– US has highest full compliance– Italy has lowest full compliance
Conclusions, continued
• Convincing management and the board of the value of the Standards is a significant challenge for many IAAs
• Size of the audit staff affects usage of the Standards in Italy and the US
Thank You
Questions