The aim of this study is to clarify the impact of conformity with the internal audit standards on internal audit performance.
To achieve the goal, a measure of conformity level was designed since there has been no measure in earlier studies for comprehensive conformity with the standards. In order to build the questionnaires to the internal audit departments in Japanese corporations to measure the conformity level and audit performance, “The International Professional Practices Framework (IPPF)” and “Quality Assessment Manual for the Internal Audit Activity (QA Manual)” published by the Institute of Internal Auditors (IIA) were carefully considered in this study.
Through the analyses of validity and reliability, five factors in the standards were derived: audit expertise, quality evaluation, follow-up, objectivity and independence, and audit reporting.
Based on the related research, the improvement rate against internal audit findings (hypothesis 1) and feedback from governance organizations (CEO, Board of directors, and Audit committee) (hypothesis 2) were regarded as the performances of internal audit.
As the result of Multiple Regression Analyses, Hypothesis 1 was rejected and Hypothesis 2 was adopted in Japanese corporations. A significant relationship was found between the degree of conformity with the standards and the audit performance in which the higher the level of conformity with above factors in standards, the higher the performance on internal audit was observed.
As an additional analysis, the moderating effect that a statement of conformity affecting the performance of internal audit was verified (hypothesis 3). Through the Moderated Multiple Regression Analysis, it was confirmed that a conformity statement has a positive (+) adjustment when the factor of audit reporting affects the performance on the internal audit.
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