Philomena Leung

A critical analysis of the independence of the internal audit function : evidence from Australia

Purpose – This study aims to critically analyse the independence of the internal audit function through its relationship with management and the audit committee. Design/methodology/approach – Results are based on a critical comparison of responses from questionnaires sent out to Australian chief audit executives (CAEs) versus existing literature and best practice guidelines. Findings – With respect to the internal audit functions relationship with management, threats identified include: using the internal audit function as a stepping stone to other positions; having the chief executive officer (CEO) or chief finance officer (CFO) approve the internal audit functions budget and provide input for the internal audit plan; and considering the internal auditor to be a “partner”, especially when combined with other indirect threats. With respect to the relationship with the audit committee, significant threats identified include CAEs not reporting functionally to the audit committee; the audit committee not having sole responsibility for appointing, dismissing and evaluating the CAE; and not having all audit committee members or at least one member qualified in accounting. Originality/value – This study introduces independence threat scores, thereby generating analysis of the internal audit functions independence taking into account a combination of threats.

Cultural impact on Chinese corporate disclosure – a corporate governance perspective

Purpose – The purpose of this preliminary study is to explore the impact of changed cultural environment on the voluntary disclosure behaviour of Chinese listed companies.Design/methodology/approach – A theoretical framework of the relationship between corporate disclosure and governance forms the basis of the research. A composite checklist of corporate disclosure was developed using relevant corporate governance indices and analyses were carried out on the 2003 financial reports of 120 Chinese listed companies. Six areas of voluntary disclosure of the sample companies were analysed and reported. These areas are: board structure and functioning, employees related issues, director remuneration, audit committee, related party transactions and stakeholder interest.Findings – The results suggest that as Chinas cultural and social norms change, there was willingness of Chinese listed companies to provide voluntary information in addition to the disclosure requirements. Information relating to stakeholder int...

The Asia Pacific 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 Asia Pacific 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 Asia Pacific 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. This focus has implications for CBOK 2006.Findings – The literature indicates a paradigm shift in the activities performed by internal auditors. The increasing complexity of business transactions, a more dynamic regulatory environment in Asia Pacific, and significant advances in information technology have resulted in opportunities and challenges for internal auditors. Although in...

Ethics Education for Accounting Students—a Toolkit Approach

In 2006, the International Accounting Education Standards Board (IAESB), an independent standard-setting board of the International Federation of Accountants (IFAC) released an information paper entitled Approaches to the Development and Maintenance of Professional Values, Ethics and Attitudes in Accounting Education Programs. The information paper stems from a global research project on ethics education in the accounting profession. The paper is designed to stimulate discussion and debate on the subject of ethics education and includes the provision of an Ethics Education Toolkit to encourage and assist accounting educators and member bodies of IFAC to implement ethics education programmes. Through a review of the literature, this paper considers why we should teach ethics, the types of ethics interventions that have been undertaken and the issues in teaching ethics to accountancy students. The paper then describes in detail the Ethics Education Toolkit and provides some evidence on the positive reaction of a group of students who are taught ethics, based on the principles and practice included in the toolkit.

The Mad Hatter's corporate tea party

This paper aims to provide an insight into the corporate greed and consequent corporate collapses of companies such as HIH, One.Tel and Harris Scarfe in Australia, while concurrently, Enron, WorldCom and other companies were attracting the attention of the accounting profession, the regulators and the general public in the USA. It is argued that the rise in economic rationalism and the related increased materialism of both the public and company directors and managers, fed the corporate excesses that resulted in spectacular corporate collapses, including one of the world’s largest accounting firms. The opportunistic behaviour of directors, and managers and the lack of transparency and integrity in corporations, was compounded by the failure of the corporate watch‐dogs, such as auditors and regulators, to protect the public interest. If the history of bad corporate behaviour is not to be repeated, the religion of materialism needs to be recognised and addressed, to ensure any corporate governance reforms proposed for the future will be effective.

Benchmarking - a comparison of internal audit in Australia, Malaysia and Hong Kong

Benchmarking is a continuous process of comparing and measuring an organization’s business processes against those of business leaders anywhere in the world. Attempts to benchmark internal auditing in Australia, Malaysia and Hong Kong. Bases the analysis on surveys undertaken in all three countries. The surveys of both chief executives and internal audit managers establish benchmarks for international comparisons of internal audit practice. A number of issues were addressed by the surveys including attitudes and recognition, professionalism, role and scope, career opportunities, education and training and the future role of internal audit. The comparison provides useful insights into the internal audit profession in Australia, Malaysia and Hong Kong.

Accountability structures and management relationships of internal audit : an Australian study

Purpose - The purpose of this study is to examine the accountability structures and the management relationships of internal audit. In particular, related issues such as the predominant internal audit objectives and the related functions, the extent to which internal audit addresses any financial reporting risks and the manner in which internal auditors in Australia perform their tasks, are identified. The study also looks at the extent of compliance with the Institute of Internal Auditors (IIA) Standards. Design/methodology/approach - Based on a survey of the chief audit executives in Australia, the study identifies the reporting mechanisms, functions and relationships of internal audit, including the contributions made towards good corporate governance. There is, however, some misalignment between the aspirations of internal auditors and their relationships with management. Findings - While internal audit objectives have been established with a focus on controls, risks and governance, the study has highlighted the fact that there is a lack of correlation between the tasks performed by internal auditors and the important internal audit objectives, with the exception of internal control and risks. The results also suggest that internal auditors have been providing an internal consulting and advisory role in matters concerning IT systems, strategic risks and financial issues. If internal auditors are to proactively contribute to good corporate governance, they need to define how, and in what way, this can be done. In regard to corporate governance processes, the results of the research indicate that issues surrounding internal control, risk assessment and management processes are regarded as the key factors for internal audit to contribute to good corporate governance. Originality/value - This study complements and contributes to the existing literature in providing insights into the evolving role of the internal audit function in terms of accountabilities and relationships with management. It also provides a valuable insight into how the internal audit profession can build upon its inherent strengths and address any apparent areas of concern. This will assist both the profession and policy makers alike, in better understanding and improving the role of the internal audit process.

The nature of voluntary greenhouse gas disclosure – an explanation of the changing rationale: Australian evidence

Purpose This paper aims to explore the nature of voluntary greenhouse gas (GHG) disclosure by non-GHG-registered companies among industry sectors over a period after the introduction of the National Greenhouse and Energy Reporting (NGER) Act 2007 and before the introduction of the Australian ETS. Design/methodology/approach A GHG disclosure index is used to evaluate the levels of GHG disclosure in 2009 and 2011 annual reports. Findings This paper highlights that non-GHG-registered companies seem to improve their disclosure by incorporating more “behavioural management” actions rather than “symbolic” actions. The changing rationale of GHG disclosure is towards more serious GHG reduction strategies. Consistent with voluntary disclosure and signalling theories, companies having good news to tell disclose their superior GHG information to promote their superior environmental performance. Research limitations/implications The findings should be useful for stakeholders who are interested in GHG disclosure strategies. Also, the content analysis of the annual reports provides some clarity in respect of the most common aspects of GHG disclosure by non-GHG-registered companies which is helpful in the evaluation of correspondence between carbon disclosure strategies and the objectives of carbon abatement. Originality/value Previous studies mostly investigate the differences in the type of GHG disclosure among companies subject to mandatory GHG regulations. However, this paper is the first study to examine the changing rationale in the nature of GHG disclosure of non-GHG-registered companies. While much of the prior research uses GHG-registered companies as the sample, no empirical study to date has considered non-GHG-registered companies that encompass 96 per cent of ASX listed companies.

Ethics Education in the Australian Accounting Curriculum: A Longitudinal Study Examining Barriers and Enablers

Abstract The increasing significance of ethics in the accounting profession is evidenced by the seminal events that witnessed the collapse of major corporations (e.g. Enron and WorldCom); regulatory interventions (e.g. Sarbanes-Oxley Act in the USA and the CLERP 9 Act in Australia); and calls for increased ethics interventions in the accounting curriculum. This project has two objectives: to investigate the nature of ethics education in the Australian accounting curriculum and how it has changed from 2000 to 2012; and to analyse the barriers to enhancing ethics education by soliciting the opinions of Heads of Departments/Schools of Australian universities. Compared with early empirical evidence, universities responded to the call for ethics education with increased levels of ethics intervention, but had failed to enhance the extent of ethics education coverage in the intervening period in which the data were collected. The lack of qualified staff and research opportunities represent major obstacles to the enhancement of ethics education.

The Development of Integrated Reporting and the Role of the Accounting and Auditing Profession

A recent significant development in environmental, social and governance (ESG) reporting is the release of the International Integrated Reporting ( ) Framework by the International Integrated Reporting Council (IIRC) in December 2013. While there is widespread acknowledgement of the need to improve corporate reporting, a content analysis of the submissions to the IIRC’s discussion paper, consultation draft and exposure documents present varied views of the accounting and auditing profession in respect of how Integrated Reporting IR might effectively apply its principles of reporting connectivity and relationships within organisations. This chapter examines IR and the participation of the accounting and auditing profession during its development, outlining key aspects of the International Framework. It draws on the profession’s responses to discuss challenges for the accounting and auditing profession in maintaining its relevance in the evolving corporate reporting landscape. It concludes that the initial aims and promise of the International Framework have been somewhat diluted during the development process; the application of integrated thinking is crucial in achieving IR’s potential, but there are significant challenges facing the profession particularly in respect to building its capacity and cultivating integrated thinking.