Cameron K.J. Morrill

Internal auditors and the external audit: a transaction cost perspective

Questions exist regarding the extent to which internal auditors should participate in the external audit, and wide variations are observed in practice. Many professional bodies increasingly advocate the view that increased coordination between the internal and external auditors, including increased use of the internal auditor for the external audit, provides more efficient and effective audit coverage. However, others maintain that internal auditors should not focus on areas that are the subject of external audit interest. This article attempts to shed light on this debate by using insights from transaction cost economics (TCE) to identify conditions under which organizations encourage internal audit participation in the external audit. An analysis of survey data collected from directors of Canadian internal audit departments indicate that some (TCE) variables, particularly transaction‐specific investment, are significantly associated with internal audit participation in the external audit.

Corporate governance rating and financial performance: a Canadian study

Purpose – This paper aims to examine whether the corporate governance rankings published by a market information intermediary are reflected in the values that investors accord to firms.Design/methodology/approach – Panel data from 289 Canadian firms in the four‐year period 2002‐2005 were analyzed using a price model.Findings – The results suggest that the corporate governance rankings published by the market information intermediary are related to not only firm market value, but also to accounting results.Practical implications – This study provides empirical observations that would be useful for various organizations involved in the regulation of corporate governance practices and the standardization of relevant data elements.Originality/value – This study contributes to the literature by demonstrating that information published by an information intermediary is reflected in firm market values. Moreover, this information appears to be related to the accounting results. Thus, good governance rankings are ...