Submit your papersSubmit Now
For Enquiries: [email protected]
IIARD LogoIIARD

The Effect of the Internal Audit Attributes' on the Probability of Fraud Occurrences' in the Financial Statements of Iraq Companies

Abbas Hamid Abbas Al Khazali

Abstract

The existence of an internal audit unit is an undeniable necessity for strengthening corporate governance, upgrading the internal control system, assisting in strategic risk management and ensuring transparency in internal and external reporting. The purpose of this study is to investigate the effect of the characteristics of the internal audit unit on the probability of fraud in the financial statements. For this purpose, the data of 96 companies listed on the Iraqi Stock Exchange during the years 2014 to 2020 have been used. The number of employees, tenure, experience and degree have been the characteristics of internal audit that have been investigated in this study. Inventories are measured in current assets, equity liabilities, cash in current liabilities and the absolute value of changes in the current ratio. The research hypotheses were analyzed using regression model and Eviews software. The findings indicate that the experience, tenure and education of the audit unit manager have a significant negative effect on the likelihood of fraud in the financial statements of Iraqi stock exchange companies. However, no significant effect was observed on the probability of fraud in the financial statements of the companies under study due to the nature of the number of internal audit staff.

Keywords

FraudInternal AuditFinancial StatementsIraqi Stock Exchange

References

1) Spathis, C. (2002). Detecting False Financial Statements Using Published Data: Some Evidence from Greece. Managerial Auditing Journal, Vol. 17(4), pp. 179-191. 2) Barra R.A,(2010) The Impact of Internal Controls and Penalties on Fraud, Journal of Information Systems, 2010 3) Usman. H. (2015). Internal audit techniques and fraud prevention: A case study of selected local government councils in batch state. Mediterranean journal of social sciences MCSER publishing, romeitaiy. July 4) Topor, D. L. (2017). The Auditor’s Responsibility for Finding Errors and Fraud from Financial Situations: Case Study, International Journal of Academic Research in Accounting, Finance and Management Sciences. Vol. 7, No.1, pp. 342–352. 5) Sahiti. C. A. Lutolli. C. L. Asmajli. H. and Aliu. M. (2017). The role of internal audit as starting point for the discovery of irregularities in the financial statements of public companies in kosovo. European journal of economics business studies. Vol 7. No 1, pp. 153159 6) Muchiri, N.W. and Jagongo (2017) internal auditing and financial performance of public institions in Kenya. African journal of business management. Vol. 11(8). pp: 168- 174 7) Kanapickien?, R. and Grundien?, Z. (2015). The Model of Fraud Detection in Financial Statements by Means of Financial Ratios. Social and Behavioral Sciences, Vol 213, PP 321327 8) -Jancsics, D. (2014). Interdisciplinary perspectives on corruption, Sociology Compass, 8(4), 358-372. 9) Ima. J. N. (2015). Effective internal audit as a tool for fraud deterrence in Nigerian organizations: Humanity& social sciences journal 10 (2):7380 10) Alazzabi, W. Y. E., Mustafa, H., & Karage, A. I. (2020). Risk management, top management support, internal audit activities and fraud mitigation. Journal of Financial Crime. 11) Adetiloye, K. A, Olokoyo, F. O and Taiwo, J.N. (2016). Fraud prevention and internal control in the Nigerian banking system. International journal of economics and financial issues, Vol: 6(3). PP. 1172-1179. 12) Sorrunke. O. A. (2017). Internal audit and fraud control in public institutions in Nigeria. International journal of academic research in business and social scinces. Vol 6. No 2, pp. 153-158 13) Hosmer Jr, D. W., & Lemeshow, S. (2000). Applied logistic regression. John Wiley & Sons. 14) Wuensch, K. L. (2008). Binary logistic regression with SPSS. Retrieved on September, 6, 2009 15) Bewick, V., Cheek, L., & Ball, J. (2005). Statistics review 14: Logistic regression. Critical Care, 9(1), 112-118. 16) Jeppesen, K. K. (2019). The role of auditing in the fight against corruption. The British Accounting Review, 51(5), 100798. 17) Petra?cu, D., & Tieanu, A. (2014). The role of internal audit in fraud prevention and detection. Procedia Economics and Finance, 16, 489-497 18) Charles W. Bame-Aldred, Duane M. Brandon, William F. Messier, Jr., Larry E. Rittenberg, and Chad M. Stefaniak (2013) a Summary of Research on External Auditor Reliance on the Internal Audit Function. AUDITING: A Journal of Practice & Theory:Vol. 32, No. Supplement 1, pp. 251286 19) Shelton, S W, Whittington, O R & Landsittel, D. (2000), “Auditing firms fraud risk assessment practices”, Accounting Horizons, vol. 15, no. 1, pp1933- 20) Summers, S. L. and J. T. Sweeney. (1998). Fradulently Misstated Financial Statements and Insider Trading: An Empirical Analysis. Accounting Review, Vol. 73 (1), pp. 131- 146 21) Bell T. and Carcello J. (2000). A Decision Aid for Assessing the Likelihood of Fraudulent Financial Reporting. Auditing: A Journal of Practice & Theory, Vol. 9 (1), pp. 169- 178 22) Piques, M. (1989). Sense and Certainty: A Dissolution of Scepticism. New York, NY: Basil Blackwell, Inc. 23) Leweak, D. A., Funk, D. P., & Strang, J. (1996), “Attributional Retraining Increases Career Decision Making self efficacy”, The Career Development Quarterly, 44. 24) Lawback, B. and R. Weinberg (1998). “Using Benford’s Law and Neural Networks as An Review Procedure”, Managerial Auditing Journal, Vol. 13, pp. 356366 25) Owusu?Ansah, S., Moyes, G.D., Babangida Oyelere, P. and Hay, D. (2002), An empirical analysis of the likelihood of detecting fraud in New Zealand, Managerial Auditing Journal, Vol. 17 No. 4, pp. 192-204. 26) Sahiti. C. A. Lutolli. C. L. Asmajli. H. and Aliu. M. (2017). The role of internal audit as starting point for the discovery of irregularities in the financial statements of public companies in kosovo. European journal of economics business studies. Vol 7. No 1, pp. 153159-. 27) Debbie Lasher, Kennesaw (2010). Firm characteristics associated with the investment in internal auditing in family businesses, 19th EDAMBA Summer Academy Soreze, France.

More Articles from INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT

Bridging Legal, Financial, and Data Governance in Enterprise AI: Emerging Trends

Author: Funmilayo Ashore-Onisemo, Ebehiremen Faith Iziduh, Uchechi Mary-Linda Unamma, Ifeanyichukwu Jeffrey Okwesa

Macroeconomic Policies and Economic Stability in Nigeria

Author: Abel-Tariah Emmanuel Onate, Okon, Ekanem Nsikhe, Nwenyi Francis Onwe

Determinants of Bank Liquidity in Nigeria

Author: Nelson Johnny Ebifemo-ere Stephen