The perception gap in Maltese internal auditing of large companies

Abstract

Purpose: The purpose of this study is to analyse whether a perception gap exists between IAors and auditees (namely, BOD/AC and SM) within Maltese large companies having an IAD, by evaluating the relationship and communication between the two. It seeks to establish the relative importance and effectiveness of having an IAF and to assess the level of quality within Maltese IAUs and the relevant characteristics associated therewith. Design: The objectives of this study were achieved through thirteen semi-structured interviews with HIAs, members of the BOD/AC and SM of the aforementioned companies. Findings: This study ascertained that currently a barrier exists between the IAor and the auditees, provided that the latter generally views the IAor as an ‘inspector’. This was mainly evident in those organisations where not all departments have been internally audited and thus, auditees were unaware of the IAF’s mix of services. It was evident that although a strong relationship exists between IAors and auditees, there is still room for improvement, particularly in terms of management support. Despite this barrier, Maltese IADs have a considerably high level of audit quality, yet more importance should be given to conducting quality assessments. Conclusion: This study concludes that a perception gap does exist between IAors and auditees, however, steps are being taken to reduce such gap to an acceptable level. Value: It is hoped that this study, together with the proposed recommendations, will continue to reduce the existing perception gap. Proposed recommendations relate to induced training, the adoption of a three lines of defence system, the increased use of internal and external quality assessments and increased communication within the audit process, by holding additional discussions with auditees and inviting management and external auditors to AC meetings.