Lean auditing and its corporate governance relevance in Maltese listed companies

Abstract

Purpose: The objectives of this study are threefold. The first is to ascertain the level of awareness and knowledge about Lean Auditing techniques of those charged with corporate governance, namely Audit Committees, as well as Chief Audit Executives. Such ascertainment will be effected in respect of governance, risk and assurance. The second objective aims to ascertain and assess the extent to which these techniques are being used in Maltese Listed Companies. The third objective is to assess the level of satisfaction of those charged with governance. Design: A qualitative mixed methodology approach was used to achieve the objectives of the study. A total of eighteen semi-structured interviews with Chief Audit Executives and Audit Committee Chairs were carried out. Only Maltese Listed Companies which have an in house audit function were considered for this study. Findings: The findings established that the interviewees agreed on the importance of engaging with different stakeholders as to what they value from audit, in order to determine where added value may be provided. The majority of Chief Audit Executives referred to Directors who are responsible for corporate governance as their prime customer. The findings also indicated that many of the respondents are probably adopting Lean Auditing techniques without being conscious and knowledgeable of this. Some are adopting lean techniques in their audit program, others in parts of the audit process. A few have not even initiated their journey towards lean, progressive auditing. A further major finding was that the Audit Committee Chairs who are responsible for corporate governance are in their majority satisfied with Chief Audit Executives adopting Lean Auditing techniques. Conclusions: The study concludes that the level of awareness and knowledge about Lean Auditing may clearly be improved. Internal Audit Functions operate differently from each other and each applies a different degree of lean audit techniques. In some cases these techniques are negligible whilst in others a good amount of lean methodologies are applied. One can say that each Function is on a journey towards Lean Auditing as all aim to provide added value to corporate governance by being effective and efficient. The potential of Lean Auditing techniques if properly exploited can enhance the performance of the Internal Audit Functions, make them more purposeful and insightful and assist Audit Committees in their governance responsibilities. Value: It is hoped that study will contribute towards raising more awareness about Lean Auditing techniques and how these can benefit the Internal Audit Function to become more efficient and effective and to add value to corporate governance.