Internal Audit in Saudi Companies Essay

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Introduction

General Notions

Business is often considered as a separate sphere of human activity that lives and develops according to its laws and restrictions. However, such an approach presents an incomplete vision of the business, as far as the ideas of accountancy, internal audit, and corporate governance connect business to the social and legislative structures of the society and determine the rates to which business entities are responsible for their activities.

Background

Thus, the ideas of internal audit and corporate governance should be viewed as a single phenomenon. The recent developments in the business environments of Australia, Greece, and some other countries prove this point through specific examples and references to legislative acts supporting the idea. Thus, internal audits should be perceived as a part of successful corporate governance for Saudi companies as well.

Literature Review

The review of the relevant literature on the topic of internal audit’s role in the proper corporate governance proves the above points of view and supports the position that the internal audit is one of the pillars on which corporate governance is based. For example, the work by Christopher et al. (2009) provides a considerable theoretical basis for the above-mentioned ideas, as well as the specific examples from the experiences of Australian companies (pp. 201 – 202). The leitmotif of the work by these authors is the statement that internal audit “has been promoted as the cornerstone upon which effective corporate governance is built” (Christopher et al., 2009, p. 200). Thus, one can see that the scholars have paid considerable attention to the interrelation of internal audit and corporate governance in business companies, and almost all the authors of the considered works agree that both notions are integrally connected.

Another interesting point about the role of the internal audit in the formation and development of effective corporate governance is the potential of the former to enhance the force of the latter in ensuring the transparency of the business (Archambeault et al., 2008, pp. 387 – 388). In simpler terms, an effective and regularly exercised internal audit is capable, according to Archambeault et al. (2008), of saving business companies from scandals regarding their accounting processes and the lawfulness of their operations (p. 380). It is a seeming axiom that a company can better prepare for the public disclosure of its internal operations by carrying out an internal audit. It is also the company’s major interest to ensure the objectivity of the audit, as far as it is the last stage of monitoring at which errors can be eliminated (p. 375).

An important issue about the internal audit and the corporate governance is the legislative basis, by which both procedures are supported and imposed on any business entity in the majority of the world’s countries (Christopher et al., 2009, p. 200; Koutoupis and Tsamis, 2009, p. 101). The examples of such legislative regulations include the Sarbanes Oxley Act (2002) adopted by the Government of the USA, the Australian CLERP Act (2004), Sarbanes Oxley Act (2002) in the USA and the CLERP Act (2004) in Australia (Christopher et al., 2009, p. 201), as well as the Greek Law 3016/17.5.2002, and Bank of Greece Governor’s Act. Number 2577/9-3-2006 (Koutoupis and Tsamis, 2009, p. 107). Moreover, the scholars like Allegrini et al. (2009) support the views expressed by Christopher et al. (2009), Archambeault et al. (2008), and Koutoupis and Tsamis (2009) by first admitting the crucial importance of internal audit for the proper corporate governance in a company, and second by seeing the huge impact of the Sarbanes Oxley Act (2002) for the whole pace of the further development of accounting and auditing procedures in the global stage.

Accordingly, the topic of the role of internal audit in corporate governance has been studied in considerable detail by previous scholars. However, the topic selected for the proposed research does not find any direct evidence in the already existing literature as far as the development of internal audit in the specifically Saudi Arabian setting has not been studied widely. Such a claim can be made based on the fact that the search for the relevant literature did not provide any sources describing the role of internal audits in the corporate governance of Saudi Arabian companies.

Research Aims

Drawing from the above-presented background information and the literature review, the aims of the proposed research can be formulated as the following list of specific objectives:

  • Find any evidence, if it exists in the research works, of the role of internal audit in the corporate governance procedures of Saudi Arabian companies;
  • Study the peculiarities of internal audit in Saudi Arabia as an Arab country with its possible peculiarities of handling business operations;
  • Research the development of corporate governance and its effects on the performance of Saudi companies;
  • Identify the legislative support and the extent of government interventions into internal audit procedures, if any, in the Saudi business environment;
  • Carry out the comparative analysis of findings from Saudi companies and business entities from other countries (based on the literature review data) to see the relative efficiency of internal audit for facilitating the proper corporate governance.

Anticipated Outcomes of the Study

Based on the above-outlined aims of the proposed research, the anticipated outcomes thereof include:

  • Analysis of internal audit as a part of corporate governance in Saudi Arabian companies;
  • Gaining knowledge of Saudi peculiarities of internal audit;
  • Identification of the role of internal audit in the application of corporate governance in Saudi companies.

Methodology

The choice of the methodology used for the purposes of the proposed research will be based on the nature of the very study. Since the analysis of internal audit effects will deal mainly with numerical data, but still the subjective opinions of people will be considered, the research will make use of the mixed qualitative-quantitative method.

In more detail, the data will be collected through one basic strategy, i. e. the use of the specifically designed questionnaire containing the items that are expected to allow retrieving the objective data the researcher is interested in. The Likert scales will be used to approach the answers from the quantitative point of view.

The questionnaires will be distributed among approximately 50 major Saudi companies who provide their consent for participation. The analysis of the data will be a mix of the questionnaire score analysis and the projections of theoretical points upon those scores. Such a methodology is expected to provide the objective and relevant data for the proposed research to achieve its anticipated goals.

Reference List

Allegrini, M. et al. (2009) Special issue on ‘‘Internal audit and corporate governance’’: Introduction. Journal of Management and Governance, 13, 1 – 3.

Archambeault, D. et al. (2008) The Need for an Internal Auditor Report to External Stakeholders to Improve Governance Transparency. Accounting Horizons, 22(4), 375 – 388.

Christopher, J. et al. (2009) A critical analysis of the independence of the internal audit function: evidence from Australia. Accounting, Auditing & Accountability Journal, 22(2), 200 – 220.

Koutoupis, A. and Tsamis, A. (2009) Risk based internal auditing within Greek banks: a case study approach. Journal of Management and Governance, 13, 101 – 130.

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IvyPanda. (2022, March 14). Internal Audit in Saudi Companies. https://ivypanda.com/essays/internal-audit-in-saudi-companies/

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IvyPanda. (2022) 'Internal Audit in Saudi Companies'. 14 March.

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IvyPanda. 2022. "Internal Audit in Saudi Companies." March 14, 2022. https://ivypanda.com/essays/internal-audit-in-saudi-companies/.

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