Does Internal Audit Functions Effectiveness influence External Auditors’ Reliance on Internal Audit Work?
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Date
2022-12-31
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TIA
Abstract
This study examines the influence of internal audit function effectiveness on the extent to which external auditors rely on internal audit function work. A sample of 100 senior external auditors of Tanzanian-listed companies was purposively selected to provide the data. A questionnaire was employed to collect the data which were then analysed using a Partial Least Square Structural Equation Modelling. The result shows that internal audit function effectiveness has a significant positive effect on the extent of external auditors’ reliance on internal audit function work. This suggests that external auditors adjust their audit efforts in response to the effectiveness of the internal audit function, consistent with the audit risk model. The result contributes a new dimension, the internal audit function
effectiveness and reliance, to the audit risk model. The result has practical implications for clients and external auditors looking to obtain a cost-effective audit of financial statements, by recognising the impact of internal audit functions on external audits.
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Keywords
Audit Risk Model, Internal Audit function effectiveness, External auditors’ reliance, External auditors’ audit effort, Dar es Salaam Stock listed companies.