The effectiveness of internal auditing – Overview of measurement methods

nd a good reference for researchers. Also taking the second approach, Kwadwo Obeng (2016) measures the effectiveness of internal auditing across stakeholders' expectations: if independent auditors can take advantage of the IA’s work or not; if the internal auditor can achieve the objectives set by the management or not and if the recommendations of the internal auditor are related to the decision of the management board or not. In addition, the author examines the IA effectiveness through some of other statements, including: If the internal auditor may detect the risks associated with the financial statements in the auditee or not and if the internal auditors are assigned to this task or not. With the above questions, the author measured in binary scale: yes and no. Although it has developed a comprehensive scale of effectiveness, in this measurement method, on the detection of risk, the author only mentioned the risks associated with the financial statements, but not yet addressing risks in the course of operation or other business operations. Arena & Azzone (2009) view internal audits as a function of creating value for the organization, taking into account the recent changes of the internal auditing and its central role in corporate governance. The data used for this study were collected through a questionnaire, which was sent to 364 Italian companies, and a response rate of 47% was obtained. On the basis of data from 153 Italian companies, Arena & Azzone (2009) survey emphasizes that the effectiveness of internal auditing is influenced by factors like: • the characteristics of the internal audit team, • the audit processes and activities, and • the organizational links. It was observed an increasing of internal audit effectiveness, particulary, when: • the ratio between the number of internal auditors and employees grows, • the Chief Audit Executive is affiliated to the Institute of Internal Auditors, • the company adopts control risk self-assessment techniques, and • the audit committee is involved in the activities of the internal auditors. 3. Discussion and conclusion The new definition of Internal Auditing issued by the IIA in 2004 required the internal auditors to focus on consulting activity and the risk management function in order to add value to the organization rather than traditional functions of compliance audit. This shift has 629 required internal auditors to have new capabilities to fulfill the extended areas and required managers to have new measurement methods to evaluate the effectiveness of internal audit. However, the studies on methods of measuring the effectiveness of internal auditing have not been abundant. The effectiveness and efficiency of IA is the degree (including quality) to which IA achieves established objectives. The objectives of the organization have tended to be balanced among the stakeholder’s expectations, both internal and external stakeholders. Therefore, using a Balanced scorecard to set objectives and metrics to measure the effectiveness of internal auditing is becoming a trend in the enterprises around the world. Internal audit practices for evaluating the performance used by leading international companies are various among companies, ranging from simple to complex. This is quite reasonable due to the perception of managers about the importance of IA in those organizations is not the same and the objectives set by organizations are quite different. This implies that the learning and application of a set of metrics to assess the effectiveness of internal auditing is a voluntary and subjective decision from the management rather than compulsory obliged compliance, so the professional associations should provide entreprises with more supportive guidances, and regulators should not issue too detailed obligations for them. The researches on internal auditing in general and the effectiveness of internal auditing in particular are relatively scanty, in comparision with those on the external audit. In addition, the previous studies were mainly carried out in the developed countries. This also raises the need to study the performance of IA in the developing countries, the perception of auditors and managers about IA's new functions as well as its contribution to the organization's development. The paper presents an overview on the effectiveness of IA and the methods of measuring the effectiveness of IA. However, as mentioned above, the reviewed studies are mainly conducted in the developed countries and the data are collected from very big international companies. The results of the paper may not completely suitable to apply to the developing countries. This also implies a call for more new researches in this area to be conducted in the context of the developing countries. References Aaron Cohen & Gabriel Sayag (2010), “The Effectiveness of Internal Auditing: An Empirical Examination of its Determinants in Israeli Organisations”, Australian Accounting Review, 20, (3) 296-307. Albrecht, W.S., Howe, K.R., Schueler, D.R. and Stocks, K.D. (1988), Evaluating the Effectiveness of Internal Audit Departments, Institute of Internal Auditors, Altamonte Springs, FL. Anderson, U. (1983), Quality Assurance for Internal Auditing, Institute of Internal Auditors, Altamonte Springs, FL. 630 Arena, M. and Azzone, G. 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