An International Study of Internal Audit Function Quality

Accounting and Business Research, Forthcoming

57 Pages Posted: 5 Oct 2017

See all articles by Like Jiang

Like Jiang

University of Melbourne - Faculty of Business and Economics

Paul André

HEC Lausanne

Chrystelle Richard

ESSEC Business School

Date Written: October 4, 2017


We investigate organisational and environmental factors that influence firms’ incentives to develop high-quality internal audit functions (IAFs) by using a unique international sample formed by matching proprietary data from a global internal auditor survey with public data obtained from Worldscope. Concerning organizational factors, we find that a positive relationship exists between IAF quality and firm complexity and confirm that complex firms have a higher demand for monitoring and advising and, therefore, a greater need for formal controls. In addition, IAF quality is positively related to board monitoring and audit committee diligence but negatively associated with CEO power, which suggests that IAF quality is influenced by other key players in corporate governance. Regarding environmental factors, we document that IAF quality is positively associated with industry competition, which implies that a firm’s incentive for a high-quality IAF is enhanced when confronted with greater environmental uncertainty. Furthermore, IAF quality has a significantly positive relationship with our self-constructed index of IAF requirements included in national corporate governance codes, which indicates that strong home-country corporate governance codes play a role in fostering IAF development.

Keywords: Internal Audit Function, Internal Audit Quality, Corporate Governance, CBOK 2010

JEL Classification: M41, M42

Suggested Citation

Jiang, Like and Andre, Paul and Richard, Chrystelle, An International Study of Internal Audit Function Quality (October 4, 2017). Accounting and Business Research, Forthcoming, Available at SSRN:

Like Jiang (Contact Author)

University of Melbourne - Faculty of Business and Economics ( email )

Victoria, 3010

Paul Andre

HEC Lausanne ( email )

Lausanne, 1015

Chrystelle Richard

ESSEC Business School ( email )

3 Avenue Bernard Hirsch
CS 50105 CERGY

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