Access the full text.
Sign up today, get DeepDyve free for 14 days.
S. Hass, M. Abdolmohammadi, P. Burnaby (2006)
The Americas literature review on internal auditingManagerial Auditing Journal, 21
Journal of Accounting and Economics, 33
Georges Selim, M. Allegrini (2009)
Internal Auditing and Consulting Practice: A Comparison Between UK/Ireland and ItalyCorporate Governance Practice Series eJournal
M. Arena, G. Azzone (2009)
Identifying Organizational Drivers of Internal Audit EffectivenessEuropean Finance eJournal
P. Myers, Audrey Gramling (1997)
The perceived benefits of certified internal auditor designationManagerial Auditing Journal, 12
(2015)
Abnormal Accruals in Newly Public Companies: Opportunistic Misreporting or Economic Activity?Corporate Governance & Finance eJournal
Gerrit Sarens (2009)
Internal Auditing Research: Where are We Going? EditorialRisk Management
M. Cameran, A. Prencipe, Marco Trombetta (2016)
Mandatory Audit Firm Rotation and Audit QualityEuropean Accounting Review, 25
Abdallah Atieh, Simon Hussain (2012)
Do UK firms manage earnings to meet dividend thresholds?Accounting and Business Research, 42
R. Davidson, Jenny Goodwin-Stewart, P. Kent (2005)
Internal Governance Structures and Earnings ManagementFinancial Accounting
Sudipta Basu (1997)
The conservatism principle and the asymmetric timeliness of earningsJournal of Accounting and Economics, 24
Mark Cecchini, Scott Jackson, Xiaotao Liu (2011)
Do initial public offering firms manage accruals? Evidence from individual accountsReview of Accounting Studies, 17
B. Jaggi, Sidney Leung, F. Gul (2009)
Family control, board independence and earnings management: Evidence based on Hong Kong firmsJournal of Accounting and Public Policy, 28
April Klein, Eli Bartov, James Doona, Lee-Seok Hwang, Jayanthi Krishnan (2006)
NEW YORK UNIVERSITY SCHOOL OF LAW NYU Center for Law and Economics Audit Committee, Board of Director Characteristics, and Earnings Management
Vineeta Sharma, D. Sharma, Umapathy Ananthanarayanan (2011)
Client Importance and Earnings Management: The Moderating Role of Audit CommitteesAuditing-a Journal of Practice & Theory, 30
Pelham Gore, P. Pope, Ashni Singh (2007)
Earnings management and the distribution of earnings relative to targets: UK evidenceAccounting and Business Research, 37
Elias Gebrayel, Hajer Jarrar, Charbel Salloum, Q. Lefebvre (2018)
Effective Association between Audit Committees and the Internal Audit Function and Its Impact on Financial Reporting Quality: Empirical Evidence from Omani Listed FirmsResearch Methods & Methodology in Accounting eJournal
F. Kabuye, S. Nkundabanyanga, Julius Opiso, Zulaika Nakabuye (2017)
Internal audit organisational status, competencies, activities and fraud management in the financial services sectorManagerial Auditing Journal, 32
Kin Lo, Felipe Ramos, Rafael Rogo (2016)
Earnings Management and Annual Report ReadabilityCGN: Disclosure & Accounting Decisions (Topic)
Z. Rezaee (2002)
The three Cs of Fraudulent Financial ReportingThe internal auditor, 59
Keith Jones, Gopal Krishnan, Kevin Melendrez (2008)
Do Models of Discretionary Accruals Detect Actual Cases of Fraudulent and Restated Earnings? An Empirical EvaluationIO: Empirical Studies of Firms & Markets
(2018a)
Definition of internal auditing
(2004)
The role of the internal audit function in corporate governance: a synthesis of the extant internal auditing literature and directions for future research
(2000)
Theory of the Firm : Managerial Behavior , Agency Costs and Ownership Structure
(2002)
Internal auditors’ roles in overcoming the financial reporting crisis
P. Hribar, Craig Nichols (2007)
The Use of Unsigned Earnings Quality Measures in Tests of Earnings ManagementFinancial Accounting
F. Gul, S. Fung, B. Jaggi (2009)
Earnings Quality: Some Evidence on the Role of Auditor Tenure and Auditors' Industry ExpertiseMicroeconomics: Information
Biao Xie, Wallace Davidson, Peter Dadalt (2001)
Earnings Management and Corporate Governance: The Roles of the Board and the Audit CommitteeCorporate Finance: Governance
K. Asiedu, E. Deffor (2017)
Fighting Corruption by Means of Effective Internal Audit Function: Evidence from the Ghanaian Public SectorARN Wiley-Blackwell Publishers Journals
G. Iatridis, George Kadorinis (2009)
Earnings management and firm financial motives: A financial investigation of UK listed firmsInternational Review of Financial Analysis, 18
Shireenjit Johl, S. Johl, N. Subramaniam, B. Cooper (2013)
Internal audit function, board quality and financial reporting quality: evidence from MalaysiaManagerial Auditing Journal, 28
Lawrence Abbott, Brian Daugherty, Susan Parker, Gary Peters (2016)
Internal Audit Quality and Financial Reporting Quality: The Joint Importance of Independence and Competence: INTERNAL AUDIT QUALITY AND FINANCIAL REPORTING QUALITYJournal of Accounting Research, 54
(2017)
International standards for the professional practice of internal auditing (standards)
Hazem Ismael (2019)
The association between firm characteristics and the quality characteristics of the internal audit function in the UK: an agency perspectiveInternational Journal of Accounting, Auditing and Performance Evaluation
Douglas Prawitt, Jason Smith, David Wood (2008)
Internal Audit Quality and Earnings ManagementFinancial Accounting eJournal
Connie Becker, Mark Defond, J. Jiambalvo, K. Subramanyam (1998)
The Effect of Audit Quality on Earnings ManagementContemporary Accounting Research, 15
Jihad Al‐Okaily, Nourhene Benyoussef, S. Chahine (2020)
Economic bonding, corporate governance and earnings management: Evidence from UK publicly traded family firmsInternational Journal of Auditing, 24
R. Watts, J. Zimmerman (2006)
Positive Accounting Theory: A Ten Year Perspective
Laura García, E. Barbadillo, Manuel Pérez (2012)
Audit committee and internal audit and the quality of earnings: empirical evidence from Spanish companiesJournal of Management & Governance, 16
Journal of Business Finance and Accounting, 32
P. Kent, J. Routledge (2010)
Innate and Discretionary Accruals Quality and Corporate GovernanceAccounting
M. Beasley, Joseph Carcello, D. Hermanson, Paul Lapides (2000)
Fraudulent Financial Reporting: Consideration of Industry Traits and Corporate Governance MechanismsAccounting Horizons, 14
Nooraisah Katmon, O. Farooque (2017)
Exploring the Impact of Internal Corporate Governance on the Relation Between Disclosure Quality and Earnings Management in the UK Listed CompaniesJournal of Business Ethics, 142
Contemporary Accounting Research, 25
Patricia Dechow, Richard Sloan, A. Sweeney (1994)
DETECTING EARNINGS MANAGEMENTAccounting review: A quarterly journal of the American Accounting Association, 70
A. Zalata, C. Roberts (2017)
Managing earnings using classification shifting: UK evidenceJournal of International Accounting, Auditing and Taxation, 29
Murad Qamhan, M. Haat, H. Hashim, Zalailah Salleh (2018)
Earnings management: do attendance and changes of audit committee members matter?Managerial Auditing Journal
Jenny Goodwin-Stewart, P. Kent (2006)
The use of internal audit by Australian companiesManagerial Auditing Journal, 21
(2016)
The UK corporate governance code
(2018b)
IIA position paper: internal auditing's role in corporate governance
T. Arun, Yousf Almahrog, Z. Aribi (2015)
Female Directors and Earnings Management: Evidence from UK CompaniesInternational Review of Financial Analysis, 39
Mark Defond, J. Jiambalvo (1993)
Factors Related to Auditor-Client Disagreements over Income-Increasing Accounting Methods*Contemporary Accounting Research, 9
Ying Chen, B. Lin, Li-Wei Lu, G. Zhou (2020)
Can internal audit functions improve firm operational efficiency? Evidence from ChinaManagerial Auditing Journal
L. Paape, J. Scheffe, Pim Snoep (2003)
The Relationship Between the Internal Audit Function and Corporate Governance in the EU – a SurveyInternational Journal of Auditing, 7
Journal of Multinational Financial Management, 19
Ahmed Oussii, Neila Taktak (2018)
The impact of internal audit function characteristics on internal control qualityManagerial Auditing Journal, 33
S. Ramamoorti (2003)
Internal Auditing: History, Evolution, and Prospects
(1984)
An analysis of the factors associated with lawsuits against public accountants
T. Kaawaase, Catherine Nairuba, Brendah Akankunda, J. Bananuka (2021)
Corporate governance, internal audit quality and financial reporting quality of financial institutions
Pervin Shroff, Ramgopal Venkataraman, Suning Zhang (2013)
The Conservatism Principle and the Asymmetric Timeliness of Earnings: An Event-Based ApproachContemporary Accounting Research, 30
Michael Jensen, W. Meckling (1976)
Theory of the Firm
S. Yoon, Gary Miller, P. Jiraporn (2006)
Earnings Management Vehicles for Korean FirmsS&P Global Market Intelligence Research Paper Series
Hazem Ismael, C. Roberts (2018)
Factors affecting the voluntary use of internal audit: evidence from the UKManagerial Auditing Journal, 33
Constantinos Caramanis, C. Lennox (2008)
Audit effort and earnings managementJournal of Accounting and Economics, 45
(2014)
Tone management
Management Science, 62
J. Goodwin (2003)
The Relationship Between the Audit Committee and the Internal Audit Function: Evidence from Australia and New ZealandInternational Journal of Auditing, 7
Nurlan Orazalin, Rassul Akhmetzhanov (2019)
Earnings management, audit quality, and cost of debt: evidence from a Central Asian economyManagerial Auditing Journal
Matthew Ege (2015)
Does Internal Audit Function Quality Deter Management MisconductThe Accounting Review, 90
C. Charoenwong, P. Jiraporn (2008)
Earnings Management to Exceed Thresholds: Evidence from Singapore and ThailandEmerging Markets: Economics
S. Kothari, A. Leone, Charles Wasley (2002)
Performance Matched Discretionary Accrual MeasuresMIT Sloan School of Management Working Paper Series
(1994)
Does auditing reduce bias in financial reporting? A review of audit-related adjustment studies
K. Peasnell, P. Pope, S. Young (2000)
Board Monitoring and Earnings Management: Do Outside Directors Influence Abnormal Accruals?Financial Accounting
Journal of Accounting and Economics, 39
M. Adams (1994)
Agency Theory and the Internal AuditManagerial Auditing Journal, 9
Soo-yeon Park, Hyun-Young Park (2019)
Do statutory internal auditors influence stock price crash risk? Firm-level evidence from KoreaManagerial Auditing Journal
J. Goodwin, Teck Yeo (2001)
Two factors affecting internal audit independence and objectivity: Evidence from SingaporeInternational Journal of Auditing, 5
D. Breger, Mark Edmonds, Marc Ortegren (2019)
Internal audit standard compliance, potentially competing duties, and external auditors' reliance decisionJournal of Corporate Accounting & Finance, 31
Georgina Morais, Mário Franco (2019)
Deciding Factors in Cooperation and Trust between Internal and External Auditors in Organizations: An Exploratory AnalysisWiley-Blackwell: International Journal of Auditing
(2021)
NYSE listed company manual
S. Baatwah, W. Omer, K. Aljaaidi (2021)
Outsourced internal audit function and real earnings management: The role of industry and firm expertise of external providersInternational Journal of Auditing, 25
William Felix, Audrey Gramling, Mario Maletta (2001)
The Contribution of Internal Audit as a Determinant of External Audit Fees and Factors Influencing this ContributionJournal of Accounting Research, 39
Tamer Elshandidy, I. Fraser, K. Hussainey (2013)
Aggregated, Voluntary and Mandatory Risk Disclosure Incentives: Evidence from UK FTSE All Share CompaniesAccounting
Gerrit Sarens, I. Beelde, P. Everaert (2009)
Internal audit: A comfort provider to the audit committeeBritish Accounting Review, 41
S. Asare, R. Davidson, Audrey Gramling (2008)
Internal Auditors' Evaluation of Fraud Factors in Planning an Audit: The Importance of Audit Committee Quality and Management IncentivesForensic Accounting eJournal
Lawrence Abbott, Susan Parker, Gary Peters (2012)
Audit Fee Reductions from Internal Audit-Provided Assistance: The Incremental Impact of Internal Audit CharacteristicsContemporary Accounting Research, 29
Lawrence Abbott, Susan Parker, Gary Peters (2010)
Serving Two Masters: The Association between Audit Committee Internal Audit Oversight and Internal Audit ActivitiesAccounting Horizons, 24
Wei Jiang, Picheng Lee, A. Anandarajan (2008)
The association between corporate governance and earnings quality: Further evidence using the GOV-ScoreAdvances in Accounting, 24
M. Beasley, Joseph Carcello, D. Hermanson, T. Neal (2009)
The Audit Committee Oversight ProcessContemporary Accounting Research, 26
This study aims to examine the association between internal audit quality and the involvement of UK companies in earnings management practices.Design/methodology/approachTo measure the internal audit quality, this study uses 115 responses for a postal questionnaire that was addressed to the heads of internal audit departments in a sample of non-financial listed companies in the UK context. The other financial and governance data for the respondent companies were collected from the Datastream and the companies’ annual reports. The present study uses the signed abnormal accruals as a proxy for earnings management and uses both logistic and ordinary least squares regression models to test the research hypothesis.FindingsThis study finds a negative relationship between the internal audit quality and the abnormal accruals, implying the prominent role of internal audit in reducing the upwards earnings management. The study also finds a significant impact of the internal audit competence on reducing the engagement of UK companies in income-increasing earnings management compared to the internal audit independence. This remarkable result suggests the companies need to focus more on enhancing the internal audit competence to reduce the opportunistic management’s behaviour.Practical implicationsThis study has important implications for the internal audit’s practice, regulation and research.Originality/valueThis is the first study that investigates the relationship between internal audit quality and earnings management in the UK context. Furthermore, it uses a comprehensive measure for the internal audit function (IAF) quality covering different aspects of IAF quality based on the global Institute of Internal Auditor standards and prior internal audit literature.
Managerial Auditing Journal – Emerald Publishing
Published: Sep 3, 2021
Keywords: Internal audit; Earnings management; Corporate governance; Audit committee; Financial reporting quality
Read and print from thousands of top scholarly journals.
Already have an account? Log in
Bookmark this article. You can see your Bookmarks on your DeepDyve Library.
To save an article, log in first, or sign up for a DeepDyve account if you don’t already have one.
Copy and paste the desired citation format or use the link below to download a file formatted for EndNote
Access the full text.
Sign up today, get DeepDyve free for 14 days.
All DeepDyve websites use cookies to improve your online experience. They were placed on your computer when you launched this website. You can change your cookie settings through your browser.