A STUDY OF THE INTERACTIONS BETWEEN INTERNAL AUDIT FUNCTION AND EXTERNAL AUDITORS IN ITALY

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Carlo Regoliosi, Davide Martino

DOI:10.22495/cocv16i2art4

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Abstract

This paper shows the results of a research study whose main objectives have been to understand the way and the extent of dependence and consideration which the directors of internal audit departments and the partners in external audit firms have of each other. We relied on the exploratory research methods that examine the level of operative co-operation and activity co-ordination between Internal audit functions and auditing firms through questionnaires and interviews. The findings suggest that mutual collaboration increases the reliability of controls and that, at least in part, avoids duplication of work, although there is no full agreement on the usefulness of the internal audit outcome for the external auditor activities. These findings are particularly relevant given the growing emphasis on the role of Internal Audit as an important corporate governance mechanism and on the new challenges faced by external auditors in the form of greater audit requirements. Overall, our findings have practical implications for both (i) external auditors who are evaluating the role of internal audit functions and its usefulness and (ii) CAEs who could on their turn increase the efficiency and effectiveness of internal audit functions. This article also provides a contribution to the literature examining public companies internal and external audit interrelationships as well as the literature on audit effectiveness and performance.

Keywords: Corporate Governance, Internal Audit Function, External Audit, Auditing, Co-operation

JEL Classification: G34, G32, M42

Received: 17.11.2018

Accepted: 01.02.2019

Published online: 09.02.2019

How to cite this paper: Regoliosi, C., & Martino, D. (2019). A study of the interactions between internal audit function and external auditors in Italy. Corporate Ownership & Control, 16(2), 38-47. http://doi.org/10.22495/cocv16i2art4