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Risk management and ethical environment : effects on internal audit and accounting control procedures

journal contribution
posted on 2008-01-01, 00:00 authored by K Rae, Navaneetham Subramaniam, J Sands
This study examines the impact of the scope of risk management and ethical environment on internal audit activities and the quality of accounting control procedures (ACPQ). The conceptual framework for the study is guided by COSO’s frameworks on internal controls and enterprise risk management and data from a questionnaire survey of 64 Australian firms are analysed using a structural equation model. The results of the study support that (1) internal audit activities have a significant intervening effect on the relationship between the scope of risk management and ACPQ, and (2) a direct and positive relationship exists between ethical environment and ACPQ. Our findings suggest that widening the scope of risk management activities do not directly improve ACPQ, but that it leads to more extensive internal audit activities and in turn such activities promote better ACPQ. Further, the results indicate that fostering a more ethical environment directly leads to higher ACPQ. These results have implications for the design of internal controls, namely with respect to the role of internal audit activities and ethical environment in enhancing ACPQ.

History

Journal

Journal of applied management accounting research

Volume

6

Issue

1

Pagination

11 - 31

Publisher

Institute of Certified Management Accountants

Location

Clayton, Vic.

ISSN

1443-9905

eISSN

1443-9913

Language

eng

Publication classification

C1 Refereed article in a scholarly journal; C Journal article

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