The independence of the internal auditor in Maltese companies

Abstract

Purposes: This study seeks to analyse the extent to which the internal auditor is independent in his/her work. Thus, it aims to assess the role of the internal auditor and any changes over the years to evaluate whether certain functions conducted by the internal auditor can impair his/her independence. It also seeks to assess the different areas that affect the internal auditor’s independence and any challenges and threats to independence. Design : To address the objectives of the study, 22 semi-structured interviews were conducted with internal auditors and managers working within Maltese companies. Furthermore, 11 questionnaires were filled in by some internal auditors and managers due to their tight schedules. Findings: The study’s result illustrated that although the main role of the internal auditor is still to provide assurance on the efficiency of internal controls, the provision of consulting services by the internal auditor is increasing. This, may impair the internal auditor’s independence if the necessary precautions are not taken. An important finding is that the character of the internal auditor has a huge impact on whether independence is impaired or not. Furthermore, safeguards are implemented by the companies to ensure that the internal auditor is independent. These include reporting directly to the audit committee, the availability of outsourcing and co-sourcing and the audit committee being responsible for the appointment/dismissal of the internal auditor. Conclusion: The study arrives at a conclusion that although there are certain areas in which the internal auditor’s independence can be strengthened, internal auditors are putting a lot of effort to ensure that independence is not impaired. Even though the role of the internal auditor evolved along the years, s/he must still be independent in his/her work. Implications: While continuing to apply the current procedures in place, more seminars and training sessions on the concept of independence and how it can be enhanced should be organised.