Internal Audit - Research Proposal Example

Research Proposal on Untimely Internal Audits Introduction Technically, an internal audit refers to the process of objectively evaluating an organization’s processes in order to improve effectiveness of operation structures. In practical application, organizations may deviate from pre-established rules of operations with stakeholders. In such cases, an internal audit process measures actual operations of an organization. Whenever there is deviation from pre-established standards, the process recommends ways of ensuring compliance of daily operations with best business practices. In conventional settings, internal audits are conducted annually by auditors who are part of an organization. According to Richard (2007), clients of these internal processes are an organization’s governors, managers and staff members. In most cases, adherence to professional regulations governs internal audits. However, the aspect of an audit’s timeliness features as the primary concern of clients. Allegedly, internal audits which violate timeline practices cause substantial disruption of workplaces. In this regard, clients like managers and staff members are usually uncomfortable during untimely audits because the process causes undue hindrance to execution of their specific tasks. 2. Literature Review Relevant findings from previous exercises show that employee and intermediate managers feels they are most disrupted during internal audit exercises. These employees agreed with the fact that internal audit processes are inevitably necessary (Jason & Wood, 2009, p. 1258). However, most of the research’s respondents were concerned with only timeliness aspect of the process. In another study involving comparison between effects of internal and external audits, results showed that 34% of clients who were subjects of an external audit process complained of workplace disruption while 75% of clients who were subjects of internal audit complained of undue disruption (Newton, 2010, p. 659). The main reason for this difference is because most external audit processes are conducted when managers and staff members are on a short break from normal workplace duties. However, internal audits are done during normal working days; hence incorporation of untimely procedures in internal audits cause substantial disturbance of employees in workplace settings. 3. Research Question Does untimely execution of internal audit procedures cause undue disruption of workplace environments? 4. Theoretical Framework The concept of timeliness in internal audit processes means adherence to prescribed deadlines. Internal auditors usually work with a timetable where inception and termination of procedures are definitely stated. Typically, auditing involves interviewing of employees, review of an organization’s operation documents and administration of survey questionnaires to relevant stakeholders. Occasionally, a given procedure like examination of documents in an office may take longer than prescribed (Krishnan, 2013, p. 231). In such cases, employees working inside the office under examination will be restricted from accessing their respective work stations. On the other hand, those restricted employees have duties and responsibilities which need completion before a stipulated deadline. In this context, the hitch of workplace restriction experienced by employees causes substantial inefficiencies that can negatively impact on an organization’s practices. Aside from workplace restriction, undue disruption of work environments manifest in form of safeguarding logistical tools of operation. As acknowledged earlier, the main aim of internal auditors is to examine actual operational practices of an organization. In order to execute this task, auditors must access documents and related files containing information regarding to individual workflows. In case of limited clarity, auditors may be forced to mix up documents from different departments as a means of facilitating reconciliation of ledgers (Kothari & Smith, 2004). Undeniably, mixing of files coupled with restriction of employees to work stations will cause substantial disorganization and even loss of documents. After completion of an internal audit exercise, managers and staff members will be forced to sort out mixed-up documents and at the same time required to recover the time wasted during restricted access to facilities. 5. Hypothesis With respect to the aforementioned research question, the proposal’s hypothesis statement is, “Untimely internal audit processes causes increased disruption of workplace environments.” This statement contains both the dependent and the independent variable. According to David (2009), an untimely audit is the independent variable because the aspect of timeliness can be manipulated during audit processes. On the contrary, disruption of workplace environments is the dependent variable. The degree of disruption experienced depends on the deviation of audit procedures to prescribed timelines. 6. Methodology 6.1 Research Design A descriptive research design will be employed throughput the research process. The research seeks to establish the relationship between untimely audits and degree of workplace disruption experienced by audit clients. Technically, descriptive designs are concerned with describing existing conditions rather that understanding why the condition exists (Krista & Martin, 2012). In this case, a descriptive design will be instrumental in establishing the cause-effect relationship between the two variables. 6.2 Population and Sample The research’s population comprised of employees from 5 different organizations. In order to enhance reliability, each of these organizations belonged to a distinct industrial sector. A random sampling method proved effective in selecting a sample size of approximately 50 respondents. The sample size comprised of employees of both genders. Each of the sample’s members will receive a questionnaire through electronic mail. 6.3 Variables and Measures An untimely internal audit is the independent variable. Variation of this variable depends of deviation of an audit’s procedure from a prescribed timelines. Certain procedures may be extended by just a few hours. However, time of other audit procedures may deviate from the prescribed period by more than 12 hours. Therefore, the degree of deviation serves as a variability of an untimely audit. Contrarily, increased disruption of workplace environments indicates the effect of untimely internal audits. As the dependent variable, the degree of disruption manifests in the extent to which employees express their discomfort. Quantifying the expression of discomfort using appropriate scales like a Likert scale allows relation between untimely audits and undue disruption of workplaces (Pickett & Spencer, 2010). With respect to variables, measures include timeliness of procedures and discomfort of an audit’s aftermath. In addition, aspects of age, gender and employee superiority will be measured as a means of ensuring the sample’s representativeness. 6.4 Data Collection Primarily, data collection will be conducted through mailed questionnaires. Each of the sampled respondents will receive a 10-questions questionnaire. After two days, each of the responded will submit a completed questionnaire. Approximately, 80% of respondents will email back completed questionnaires. In addition, secondary sources like databases will yield additional information relating to timeliness of internal audit processes (Munir et al, 2011). 6.5 Data Analysis and Results Apparently, two sets of data will be obtained, one from the primary collection method and the other from secondary sources. In order to ascertain the relationship between the two data sets, student’s t-test will be employed. According to Larry (2005), the t-test will indicate any significant difference between the data sets. In addition, spearman’s rank correlation coefficient will be used in analyzing resultant data. Data will be of numerical nature. In order to establish the underlying relationship between variables, a rank correlation coefficient will be calculated. 6.6 Discussion of Results With respect to the t-test, a t-value exceeding the difference of means of the two data sets indicates significant distinction while a smaller t-value signifies absence of significant difference. A correlation coefficient of 0 indicates absence of relationship between variables. A coefficient exceeding 0 means that there is existence of a positive relationship, while a coefficient value of less than 0 implies a negative relationship between untimely internal audits and workplace disruption (Krista & Martin, 2012). In this context, a positive coefficient will lead to approval of the research hypothesis. 7. Recommendations Approval of the hypothesis means untimely internal audits cause increased disruption of workplace settings. In this case, management may consider minimizing disruption by ensuring strict adherence to audit timelines. On the contrary, disapproval of the hypothesis means the two variables are not related or may have a negative relationship. In this case, it would be recommended that the organization’s management conducts another research meant to ascertain the actual causes of workplace disruptions. References David, C. (2009). Internal audit: Efficiencies through automation. London: Oxford University Press. Jason, F. & Wood, A. (2009). Internal audit quality and earning management. The Accounting Review, 84(4), 1255-1280. Kothari, R. C. & Smith, T. (2004). Research methodology: Methods and techniques. Denver: New Age International. Krishnan, J. (2013). Audit committee on quality and internal control: An empirical analysis. Journal of Audit Practice & Theory, 32(1), 221-245. Krista, D. B. & Martin, W. E. (2012). Quantitative and statistical research methods: From hypothesis to results. Pittsburg: John Wiley & Sons. Larry, H. (2009). Step-by-Step basic statistics: Student guide. New York: SAS Institute. Munir, M., Khallaf., P, Shakir., H & Yass, A. (2011). Characteristics of an internal audit activity. CBOK Study, 12(10), 23-65. Newton, J. D. (2010). Audit delay and the timeliness of corporate reporting. Journal of Contemporary Accounting Research, 5(2), 658-671. Pickett, H. & Spencer, K. (2010). The internal auditor at work: A practical guide to everyday challenges. Pittsburg: John Wiley & Sons. Richard, C. (2007). Internal auditing: An integrated approach. Indianapolis: Juta and Company Ltd. Read More