The internal audit function : audit committee interaction within Maltese extra budgetary units and public corporations

Abstract

PURPOSE: The main aim of this study is to analyse the current state of the IAF/AC interaction and identify the factors affecting the IAF/AC relationship. The current roles of internal auditors and the AC are also examined, along with investigating the reasons for an AC absence in certain EBUs/PCs. Through doing so, this study sets out to address existing research gaps whilst highlighting the importance of a strong IAF/AC interaction in the public sector. DESIGN: This study adopted a mainly qualitative approach. Semi-structured interviews were held with 19 interviewees; 14 of which were held with EBU/PC officials that had both an IAF and AC set up, whilst the other 5 were held with EBU/PC representatives that did not have an AC set up. FINDINGS: The findings indicate that the internal auditor’s role has become more proactive whilst the role of the AC remains that of providing oversight on various areas as well as assisting the Board in executing its responsibilities. The findings also ascertain a satisfactory level of interaction between the IAF/AC in Maltese EBUs/PCs, with the most prominent factor affecting the IAF/AC relationship being the element of communication. Moreover, the lack of legal requirement for EBUs/PCs to establish an AC emerged as the main reason for this occurrence. CONCLUSIONS: This study concludes that whilst a satisfactory level of IAF/AC interaction is present, certain improvements can be undertaken to improve such a working relationship in the future. Furthermore, there is also the potential for an AC to be set up in the future in those EBUs/PCs where it is not currently present. VALUE: This study continues to shed light on the importance of the IAF/AC interaction, especially in the public sector where it may be overlooked by some. This is since an adequate IAF/AC interaction will not only benefit the entity itself, but also the whole public.