Marco Allegrini

The European literature review on internal auditing

Purpose – By conducting the 2006 global Common Body of Knowledge (CBOK) study, The Institute of Internal Auditors (IIA) attempts to better understand the expanding scope of internal auditing practice throughout the world. The purpose of this review of recent internal auditing literature in Europe is to document how the internal audit function is changing in response to the shifts in global business practices.Design/methodology/approach – The literature in Europe is reviewed with a focus on developments that have implications for the expanded scope of internal auditing and the changing skill sets of internal auditors and their role in enhancing good corporate governance. This focus has implications for CBOK 2006.Findings – The literature indicates changes in the activities performed by internal auditors. The increasing complexity of business transactions, a more dynamic regulatory environment in Europe, and significant advances in information technology have resulted in opportunities and challenges for int...

Are internal auditing practices related to the age of the internal audit function?: Exploratory evidence and directions for future research

Purpose - This study seeks to analyze and explore whether the organizational profile, the size of the internal audit function (IAF) and internal audit (IA) practices are related to the age of the IAF. Design/methodology/approach - This study is based on data collected from the Common Body of Knowledge study conducted by the Institute of Internal Auditors Research Foundation in 2006. In total, 9,366 practitioners completed the questionnaire, representing 92 countries. Findings - This study has identified three clusters of IAF based on their age. The findings show that: the organizational profile is significantly different between these three clusters; the current size of the IAF is related to the age of the IAF; those IAFs that were set up in the early days of the IIA (established in 1941) are more likely to use the IIA Standards and have more internal auditors with internal auditing qualifications; a quality assurance and improvement program is more common within older IAFs; and older IAFs have a more diversified IA agenda and more frequently perform advanced IA activities. Research limitations/implications - This paper does not allow conclusions to be reached on causality: the results in this paper are based only on univariate association tests. Given that age of the IAF is not a proxy for its maturity, a multidimensional measure of the maturity of an IAF could be developed. Practical implications - The results reported in this paper can be useful for practitioners who wish to benchmark their IAF and for the IIA to continue implementing their mission “progress through sharing”. Originality/value - This is the first large-scale study focusing on the age of the IAF. The results of this study have resulted in interesting directions for future research.

Full cost accounting in the analysis of separated waste collection efficiency: A methodological proposal.

Recycling implies additional costs for separated municipal solid waste (MSW) collection. The aim of the present study is to propose and implement a management tool - the full cost accounting (FCA) method - to calculate the full collection costs of different types of waste. Our analysis aims for a better understanding of the difficulties of putting FCA into practice in the MSW sector. We propose a FCA methodology that uses standard cost and actual quantities to calculate the collection costs of separate and undifferentiated waste. Our methodology allows cost efficiency analysis and benchmarking, overcoming problems related to firm-specific accounting choices, earnings management policies and purchase policies. Our methodology allows benchmarking and variance analysis that can be used to identify the causes of off-standards performance and guide managers to deploy resources more efficiently. Our methodology can be implemented by companies lacking a sophisticated management accounting system.

Exploring intellectual capital in family firms. An empirical investigation

We investigate the influence of family ownership and family involvement in the management on the firms intellectual capital (IC). The resource-based theory of the firm predicts both benefits and disadvantages of the family on the firms IC. Using Pulics VAIC as a proxy for the IC of the company, we test two sets of competing hypotheses through multivariate regressions of panel data from Italian listed companies. The results show that family firms have a significantly higher average VAIC than non-family firms. We find a non-linear association between family involvement in the management and IC. At lower levels, the family involvement has a positive association with IC. At higher levels, when the benefits of the family interaction with the business are overcompensated by the disadvantages, the relationship reverses and becomes negative. The research can contribute to both the academic literature on intellectual capital and to family business studies.

The Influence of Family Ownership on Long-Lived Asset Write-Offs

Building on agency theory, this article investigates whether family firms’ accounting behavior regarding long-lived asset write-offs differs from that of nonfamily firms. We provide evidence that nonfamily firms use write-offs for earnings management purposes, while family firms report write-offs coherent with the firm performance. Family firms experience dwindling sales and lower profitability in the years following the write-offs, consistently with an effective decline in their assets value. The findings are consistent with reduced owner-manager agency conflicts in family firms. We find no indication of family entrenchment, which is consistent with family owners being concerned with the reputational damage associated with a loss of a firm’s asset value.

Corporate governance, risk management e responsabilità sociale fra presente e futuro dell’attività di internal auditing

Negli studi piu recenti condotti sull’internal auditing si evidenzia come, in un numero via via maggiore di aziende, il raggio di azione di tale funzione tenda ad estendersi dalle tradizionali attivita di compliance e di revisione gestionale alla verifica dei sistemi di corporate governance e di gestione dei rischi. Alcuni studiosi ritengono, inoltre, che nei prossimi anni, gli internal auditor saranno coinvolti con maggior frequenza nelle attivita di verifica dei programmi di responsabilita sociale. Il presente lavoro si propone di contribuire al dibattito in corso in ambito nazionale ed internazionale sugli scenari evolutivi dell’attivita di IA. Partendo dai risultati di due ricerche empiriche condotte a livello mondiale, in questo articolo si analizzano i cambiamenti intervenuti nell’attivita di internal auditing nel corso degli ultimi anni, esaminano le probabili tendenze evolutive ed evidenziano analogie e differenze che sussistono fra aree geografiche e settori di attivita.

Does intellectual capital help predict bankruptcy

The purpose of this paper is to explore whether intellectual capital affects the probability that a particular firm will default. The authors also test whether including intellectual capital performance in bankruptcy prediction models improves their predictive ability.,Using a sample of US public companies from the period stretching from 1985 to 2015, the authors test whether intellectual capital performance reduces the probability of bankruptcy. The authors use the VAIC as an aggregate measure of corporate intellectual capital performance.,The findings show that the intellectual capital performance is negatively associated with the probability of default. The findings also indicate that the bankruptcy prediction models that include intellectual capital have a superior predictive ability over the standard models.,This paper contributes to prior research on intellectual capital and firm performance. To the best of the knowledge, this is the first study to show that the benefits of intellectual capital extend from superior performance to long-term financial stability. The research can also contribute to bankruptcy studies. By using a time frame covering decades, the findings suggest that intellectual capital performance measures can be included in bankruptcy prediction models and can effectively complement traditional performance measures.,This paper highlights that intellectual capital is associated with long-term financial stability and a lower bankruptcy risk. Firms realising the potential of their intellectual capital can produce a virtuous circle between higher performance and greater financial stability.

The internal auditing of corporate governance, risk management and ethics: comparing banks with other industries

This paper empirically tests whether the internal auditing function (IAF) in banks is more focused on corporate governance, risk management and ethics than it is in other industries. This study is grounded on theory triangulation, which involves agency, institutional and contingency theory. The results indicate that banks are more likely than other industries to devote auditing activities to corporate governance, risk management and ethics. With reference to risk management internal auditors in banks are more likely to cover the following areas of responsibility relating to risk: assurance on individual risks; assurance on risk management system as a whole and advice/consulting on risk management. As predicted, banks are more likely to have a corporate ethics policy (i.e., a code of ethics or conduct). Nevertheless, there is no significant difference between banks and other industries regarding the amount of ethics-related auditing.

Some notes about financial accounting research: Research methodology, epistemological approaches and practical implications

In this paper, we discuss three issues of current debate about financial accounting research. Firstly, we discuss the popularity of quantitative methods in financial accounting and the research limitations related to this dominance. As second issue, we critically discuss the epistemological approach underlying research methodologies. Finally, we discuss the practical implications of current financial accounting research and the need to search for a real impact factor besides the academic contribution.