1. Bailey et al.

(2003) edited a monograph published by the IIA Research Foundation on research opportunities
in internal auditing. There were two key objectives of this monograph. It was intended, first, to inspire
academic research on topics of relevance to internal auditing and, second, to bridge the gap between
academics and practitioners. As such, it is a blend of theory and practice, designed to familiarize academic
researchers with internal audit practice (Editorial Preface, xi – xii). Each chapter of the monograph raises a
series of research questions related to a specific topic in internal auditing and we refer to these where
relevant. Two previous reviews have examined the literature and future research opportunities relating to
the role of the internal audit function in corporate governance. Gramling et al. (2004) focus on the
relationship between internal audit and the other cornerstones of governance (i.e. external auditors, the
audit committee and management). They also evaluate the literature on internal audit quality (including
objectivity and independence), with a particular emphasis on external auditors’ evaluations of internal audit
and their 5 reliance on internal audit work. Cohen et al. (2004) provide an extensive review of research on
corporate governance and its impact on financial reporting quality. The authors introduce the notion of a
corporate governance mosaic, comprising interactions among the board of directors and the audit
committee, management, external audit and internal audit. As such, they summarize the research literature
relating to internal auditors’ governance role and suggest opportunities for future research. Both of these
reviews provide an excellent synthesis of the literature in this area, but largely from a North American
perspective. Given the growth in international research on internal audit independence and objectivity, we
extend this work to include studies from Europe, Australasia and other parts of the world. 1 In 2006, the IIA
commissioned the global Common Body of Knowledge 2006 (CBOK) study, engaging researchers from
around the world “to better understand the expanding scope of internal audit practice” (Cooper et al.,
2006). This study has resulted in three related literature reviews. Cooper et al. (2006) examined the internal
auditing literature in the Asia Pacific region, Hass et al. (2006) studied the literature from the Americas, while
Allegrini et al. (2006) performed a similar review of the European literature. The purpose of these reviews
was to document changes in internal audit as a result of shifts in global business practices. Where relevant,
we draw on aspects of these reviews that relate to internal audit objectivity. We also refer to the findings of
the CBOK study (Burnaby et al., 2007) throughout our discussion of the literature.

The IIA (1999) definition of internal auditing is now familiar and well accepted: “Internal auditing is an independent,
objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps
an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the
effectiveness of risk management, control, and governance processes.” This definition highlights the independence
and objectivity of internal auditing with respect to both assurance services and consulting. Independence and
objectivity are closely related. However, the Glossary to the IIA Standards distinguishes between the two concepts in
the following way: “Independence – The freedom from conditions that threaten objectivity or the appearance of
objectivity. Such threats to objectivity must be managed at the individual auditor, engagement, functional and
organizational levels.” “Objectivity – An unbiased mental attitude that allows internal auditors to perform
engagements in such a manner that they have an honest belief in their work product and that no significant quality
compromises are made. Objectivity requires internal auditors not to subordinate their judgment on audit matters to
that of others.”
1. an internal audit is a significant part of the CG structure in an organization and CG encompasses oversight
activities taken by the board of directors and audit committees to make sure that the financial reporting
process is credible (Public Oversight Board, 1994).
2. Three monitoring mechanisms have been highlighted in the CG literature, namely, external auditing, internal
auditing and directorship (Al Matarneh, 2011; Anderson et al. 1993; Blue Ribbon Committee, 1999; IIA,
2003).
3. The financial and corporate strategy of a company is underpinned by effective internal systems in which the
internal audit has an important role in raising the reliability of the internal control system, improving the
process of risk management and above all, satisfying the needs of internal users. The internal audit support
enhances the system of responsibility that the executive directors and employees have towards the owners
and other stakeholders (Eighme & Cashell, 2002).
4. Taken together, the internal audit department provides a reliable, objective, and neutral service to the
management, board of directors, and audit committee, while stakeholders are interested in return on
investments, sustainable growth, strong leadership, and reliable reporting on the financial performance and
business practices of a company.Internal audit makes a large contribution to the achievement of company
goals, and the implementation of strategies for their achievement. internal audit determines the reliability,
reality, and integrity of financial and operational information that comes from different organizational units,
on which appropriate business decisions at all levels of management are based. Successful implementation
of internal audit tasks means that it must be independent, i.e., company management should in no way
influenced by its work, information, conclusions, and evaluations. In this way the internal audit report
becomes a means of communication between internal audit and management, and an important guideline
for the successful management of the company (Ljubisavljević & Jovanovi, 2011).
5. the internal audit function is responsible for reinforcing management and audit committee (Hutchinson &
Zain, 2009).
6. the internal audit function facilitates the operation and effective working of the audit committee as the
audit function goals are consistent with the former’s financial reporting oversight responsibilities (Goodwin
and Yeo, 2001; Goodwin, 2003; Scarbrough, Rama & Raghunandan, 1998).
7. In today’s dynamic business environment, it is imperative that internal auditors are qualified as they should
be thorough in their knowledge of business, systems, developments and other business topics. They should
be able to decipher what works and what doesn’t, the strengths, weaknesses of standards, code systems and
procedures (Hala, 2003; Clikeman, 2003).
8. From the perspective of resource dependence theory, it postulates that larger board size would result in
superior corporate performance owing to the various skills, knowledge, and expertise contributed into the
boardroom debate. In addition, large boards could also offer the diversity that would assist companies to
obtain critical resources and minimize environmental risks (Goodstein, Goodstein, Gautam & Boeker1994;
Ghazal, 2010; Pearce & Zahra, 1992; Pfeffer, 1987).
9. an internal audit is considered as a significant part of the CG structure in the organization and CG covers the
activities of oversight by the board of directors and audit committees to ensure credible financial reporting
process (Public Oversight Board, 1994).
10.