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THE ROLE OF EXTERNAL AUDITING IN ACTIVATING THE GOVERNANCE FOR CONTROLLING BANKING RISK
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Hussein Mohammed Alrabba 
, Muhannad Akram Ahmad
Abstract
This study was done to investigate the role of external auditing in activating the governance for controlling banking risk. The study was mainly focused on Jordanian banking sector. Data for this study was collected using structured and non-structured questionnaires. The questionnaires were distributed randomly to internal auditors in different banks in Jordan. To ensure that accurate result was achieved, hypotheses testing was done using sample-t-test where alternative hypotheses were accepted and null hypotheses rejected. The most valid result that was obtained in this study was that external auditing was the main tool that is able to activate the governance of banking risk. The result showed that with the existence of external auditors, the management of a bank has to be very vigilant to ensure that there are no financial risks affecting banking sector of Jordan. Most vital recommendation determined by the researcher was to ensure that the banking sector of Jordan keeps proper financial records in order to mitigate the extent of financial risk. It is also recommended for all financial institutions in Jordan to adopt the use of accounting information technology to improve accounting functions of the banks. In this research study, 11 different banks were investigated to provide actual evidence of the roles external auditing play in activating governance to mitigate financial risk. 70% of the banks showed that external audit activate the management governance while only 30% of the Jordan banks denied that fact. The aim of this research was to determine the roles played by external audit to manage risk. The main focus was on banking sector of Jordan. In this analysis, were able to determine different risks which affects banking sector of Jordan. Finally, the banking sector of Jordan must adopt international accounting standards such as transparency, accountability, integrity and objectivity when preparing financial statements.
Keywords: External Auditing, Controlling, Banking Risk
Date received: 11 December 2016
Date accepted: 15 February 2017
How to cite this paper: Ahmad, M. A., & Alrabba, H. M. (2017). The role of external auditing in activating the governance for controlling banking risk. Corporate Ownership & Control, 14(3), 96-112. https://doi.org/10.22495/cocv14i3art10
