The Institutional Theory on the Internal Audit Effectiveness: The Case of India

Document Type : Research Paper

Authors

1 ICSSR Senior Fellow, Western Regional Centre (Institute of ICSSR), Mumbai, India

2 Associate Professor of Accounting, Universitas Pelita Harapan, Indonesia

Abstract

The necessity and importance of internal auditing in the Indian listed companies is increasing because of the strengthening of corporate governance practices by regulatory bodies, and the Indian market environment is becoming more competitive. This study attempted to determine some of the critical factors that affect the effectiveness of internal auditing in Indian listed companies. To this end, a sample of 252 Nifty companies was recruited. We mailed questionnaires to the Head of Internal Audit Department, Chief of Accounts, and Chief Executive Officers of the companies. The overall response rate was 29.4%. Companies represented manufacturing, information technology, retail, banking, and financial services. The results of multiple regression analysis revealed that the factors affecting the effectiveness of internal auditing are the competency of internal audit staff and the interaction of internal auditing with audit committee. The study came to the conclusion that institutional theory best explains the effectiveness of internal auditing in Indian context. It thus encourages auditing professionals to develop their core competencies for delivering their services efficiently, and informs them that the continuous interaction with audit committee members will help them to be focused on the organizational performance by improving the IA effectiveness. At the end, the theoretical and practical implications of the study along with the directions for the future research are provided.

Keywords

Main Subjects

References

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Interdisciplinary Journal of Management Studies (Formerly known as Iranian Journal of Management Studies)
Volume 15, Issue 1
January 2022
Pages 35-48

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