Tuesday, January 7, 2020
The effect of internal audit reports on audit quality and earnings performance. An empirical Study on the companies listed in London Stock exchange (LCE) Free Essay Example, 1750 words
The Effect Of Internal Audit Reports to Stakeholders On Audit Quality And Earnings Performance. An Empirical Study Of the Companies Listed On London Stock Exchange (LCE). Introduction Internal audit is an independent and objective consulting and assurance activity where the philosophy of adding value to improve the operations of a company is the guiding principle. It helps the company in accomplishing its objective by bringing a systematic and disciplined approach to evaluating and improving the efficiency of the companyÃ¢â¬â¢s governance, internal control and risk management (IIA 1). The quality of audit plays a vital role in maintaining an efficient market environment. However, an independent quality audit underpins confidence in the credibility and the integrity of financial statements that is essential for well functioning of the markets and enhancement of the financial operations (Faraouk and Hassan 2). The internal audit department provides an objective, reliable and neutral service to the management, board of directors and the audit committee (LjubisavljeviÃâ¡ and Jovanovi 124). On contrary, the interest of stakeholders is on return on the investments, sustainable growth, reliable reporting on the financial performance, strong leadership and the business practices of a company (Al-Matari, Al-Swidi & Fadzil 35). Recently the issue of globalization of audit has increased, and the need for ensuring quality of audit functions at different locations is essential. We will write a custom essay sample on The effect of internal audit reports on audit quality a nd earnings performance. An empirical Study on the companies listed in London Stock exchange (LCE) or any topic specifically for you Only $17.96 $11.86/pageorder now Similarly, the growth of investments across borders has increased and thus the importance of evaluating the quality of financial statements attested to by audit firms in other areas (Kleinman et al. , 62) The responsibility of the auditor is not exclusively in satisfying the needs of individual customers or the employee. Either the auditor owes the responsibility to the decision makers internally or externally since they use the information believing there are no material misstatements in those financial statements (Hoa, Pham et al. 73). The responsibility of the auditor is, therefore, to act in the interest of the public since the perception of audit quality is necessary to ensure public confidence in public accounting profession. Scope of internal auditing According to IIA (2015), the definition of internal audit states the essential purpose, nature and the extent of internal auditing. IIA identify internal audit as an independent, purposeful assurance and consulting undertaking intended to improve value and functions of a firm.