Determinants of internal audit efficiency

Abacus, 2002

This article demonstrates how data envelopment analysis can be used to weight audit risk factors. Data from a previously reported study applying the analytic hierarchy process is used to facilitate a comparison between these two methods. Data envelopment analysis (DEA) has several advantages, including the ability to accommodate a range of expert opinions on the importance of a specific risk factor, rather than using the median or mean value. DEA can be used to provide high-risk and low-risk assessments and provides benchmark audit units from which other units can be evaluated.

Abacus, 2005

This paper, which reinterprets previous work by Bradbury and Rouse (2002), addresses the risk quantification issue at an intuitive level. The insights provided by such quantification are discussed. Risk factors are associated with the risk-return concept. This allows measuring whether risks taken on are appropriately rewarded. The paper gives a non-technical exposition of DEA and outlines possible applications to accounting and finance. Using data for a large multinational, it shows how DEA analysis can be combined with internal audit procedures. It explains how the results obtained can be used to improve risk management.

Management of Innovation eJournal, 2018

Although financial indicators are most often used to measure organizational efficiency, contemporary research suggests that more consideration should be given to non-material factors that can be enveloped by different non-parametric techniques. However, there is no method powerful enough to cover all the relevant aspects of the efficiency problem, i.e. each of them has its advantages and disadvantages. The paper discusses possible combined use of Balanced Scorecard (BSC) method and Data Envelopment Analysis (DEA) in the measurement of organizational efficiency, starting from the deficiencies of the single method use. The main goal of the research in the paper is to show that by combining these methods certain deficiencies in their independent application are eliminated, as well as to indicate the possibilities and limitations, advantages and disadvantages of their combined application. The paper explains that if BSC method is applied first, as a framework for defining goals and perf...

Applied Mathematical …, 2010

The performance measurement of companies has been the subject of numerous surveys during the last few years. In the present study, the Data Envelopment Analysis (DEA) technique as well as the financial-based variables such as Return On Investment (ROI), Residual Income (RI), Return On Sale (ROS), Earnings Per Share (EPS), Price to Earnings ratio (P/E), Return On Assets (ROA), and Operating Cash Flows to owners' equity (OCF) have been applied to measure the performance and efficiency of companies belonging to the metal industries and accepted in Tehran Stock Exchange Corporation. To do so, a six-year data of 24 companies, totally 144 observations, has been collected and used. Moreover, the multivariate regression has been employed to study the relationship between the financial variables and DEA. The results of the test show that there are significant relationships between three variables (ROS, EPS, and OCF) and the efficiency results of DEA. So such variables can be considered as appropriate criteria and introduced as substitute variables to measure the performance and efficiency of enterprises.

The South African Journal of Industrial Engineering, 2012

Human resource management has become ever more important to organisational success. Many organisations have therefore realised that human resource management and performance can provide competitive advantage. The purpose of this study is to introduce a practical model for assessing employees' efficiency. In this paper, a model related to the data envelopment analysis (DEA) approach is developed to calculate such efficiency. Physical working conditions, salary, responsibilities allocated, and the amount of work to be done are considered the main factors that may influence employees' efficiency. The Andersen-Petersen model and a brief statistical analysis are used to rank employees and to analyse their efficiency value, based on demographic characteristics. The study confirms that physical working conditions and organisational commitment are the main factors that affect employees' efficiency.

The Accounting Review, 2009

ABSTRACT: We develop a model of audit production based on Data Envelopment Analysis (DEA) using labor cost as input and hours spent on evidence-gathering activities that determine the level of assurance as output. Client characteristics are considered exogenous factors that affect audit production as a whole. We apply the model to a sample of U.S.-based engagements from an international accounting firm. Results indicate that a constrained DEA model using variable returns to scale is appropriate for modeling audit production. We find that audits are more efficient for clients that are larger, have a December year-end, and are highly automated. Audits are less efficient when the auditor relies on internal control, tax services are provided, and the client has subsidiaries. We also find that a well-specified regression-based production model can control for factors that influence auditor efficiency. Finally, we find that inefficiencies are impounded in fees for some industries and firm...

The study examined the effect of internal audit practices on allocative efficiencyof government organisations in Nigeria. The population of the study consist of 350 staff in the five surveyed government organizations in Nigeria. The study through the use of Monkey Survey, sampled 310 respondents from Central Bank of Nigeria (CBN), Nigerian Ports Authority (NPA), Nigerian Maritime Administration and Safety Agency (NIMASA), Niger Delta Development Commission (NDDC) and Nigerian National Petroleum Corporation (NNPC) and validly used 310 respondents representing 89% response rate for data analysis. Risk assessment, Asset safeguard and Auditor's independence were used as the dimensions of internal audit practices in this study. The study used allocative efficiency as both dependent and measurable variable. The study used a questionnaire to elicit information from the respondents. The study applied descriptive and inferential statistical tools to analyze the data and test the hypotheses with the help of SPSS 22.0. The study found that risk assessment has a negative and significant effect on allocative efficiency of government organizations. This means that risk assessment as a veritable element for internal audit practices significantly affects allocative efficiency of government organisations even though negatively. Asset safeguard has a positive and insignificant effect on allocative efficiency of government organizations. Auditor independence has a positive and significant effect on allocative efficiency of government organizations. The study therefore recommends that government organizations should encourage auditor independence in order to boost allocative efficiency in public sector organizations.

2021

This study examines the impact of the Internal Audit Control System on Operational Efficiency, a study of Akwa Ibom State Transport Company. The study was a survey design, and the population comprised all the 34 administrative staff of the AKTC finance, administrative and internal audit departments. A sample size of 31 staff was selected for the three chosen departments of the company for the study, and the sampling technique used was a single stage. The data for the study was purely primary data, where information was collected from the staff of the company via a questionnaire. The data obtained were analysed using simple regression analysis. The study's findings revealed a significant relationship between internal audit control and increased revenue generation and net profit. The findings also revealed a statistically significant impact of the internal audit control system on operational efficiency. The relationship between the internal audit control system and further expansi...

EUROPEAN RESEARCH STUDIES JOURNAL, 2020

Purpose: Efficiency and performance measurements in the public sector represent a problematic area considering the nature of public administration's activities. The authors attempt to define the efficiency metrics for internal audit as exemplified by one of the European Union countries and its contribution in improving the performance of public entities and the efficiency of public spending. Design/Methodology/Approach: A mixed methodology combining the results of qualitative and quantitative research is used to empirically verify the hypotheses related to the research problem presented. Qualitative research is based on descriptive analysis, and the quantitative research will include the method of statistical information systemization, based on statistical source data analysis. Findings: Empirical research confirmed a positive impact of internal audit efficiency metrics on the completion of public service tasks at an operational level while no impact was recorded on the scale of completion for the areas at the strategic level of the Council of Ministers. Practical Implications: Managers in the public skateboard should decide to increase the performance budget and decide to link it to an internal audit. Originality/value: Internal audit should be more focused on examining the effectiveness of public administration and, to a lesser extent, only hardening the assessment of the decisionmaking process.

Computers & Operations Research, 2009

This paper develops a method based on data envelopment analysis (DEA) for efficiency assessments taking into account the effect of non-discretionary factors. A typology that classifies the non-discretionary factors into two groups is proposed: the factors that characterize the external conditions where the decision making units (DMUs) operate (external factors), and the factors that are internal to the production process but cannot be controlled by the decision makers (internal factors). This paper proposes an enhanced DEA model that accommodates non-discretionary inputs and outputs and treats them differently depending on their classification as internal or external to the production process. This generalized model integrates the previous approaches for dealing with non-discretionary variables described in the DEA literature. The model defines the efficient frontier based exclusively on the discretionary variables and internal non-discretionary factors, but the potential peers of each DMU are restricted to other units facing comparable external conditions (represented by the external nondiscretionary factors). The peer selection criteria implemented in the DEA model is informed by decision makers' opinion. The applicability of the model developed is illustrated with a real-world assessment of retailing stores.