Determinants influencing the effectiveness of internal auditing and the responsibility of auditors in fraud detection in an emerging country

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Abstract

Internal audit has become an essential part of firms in the age of Industry 4.0 due to its ability to identify errors or violations leading to fraud in firms (Alzeban & Gwilliam, 2014; Cohen & Sayag, 2010). This study is conducted to investigate the relationship between variables such as the quality of internal audit, the capability of the internal audit team, the independence of internal audit, and the support of leadership on the effectiveness of internal audit (EIA). Specifically, the study also examines the relationship between the EIA and the responsibility of auditors in detecting fraud. Data were gathered through a survey of 325 questionnaires from joint stock firms in the context of Vietnam, using SPSS 22 software and SmartPLS 3.0 software to analyze the regression of influencing determinants. The results reveal that: 1) the quality of the internal audit, the capability of the internal audit team, the independence of the internal audit, and the support of leadership have an impact on the internal audit effectiveness; 2) the EIA, the responsibility of auditors, and auditor training have a positive and significant impact on fraud detection. Therefore, the importance of internal audit in identifying accounting fraud and the need for firms to design internal audit processes and training to improve the effectiveness of their operations are highlighted.

Keywords: Internal Audit, Audit Effectiveness, Firms, Fraud Detection, Vietnam

Authors’ individual contribution: Conceptualization — T.Q.N.; Methodology — T.Q.N., T.H.T., and V.H.P.; Validation — M.D.T. and T.L.N.; Writing — Review & Editing — T.Q.N., M.D.T., and V.H.P.; Visualization — T.H.T. and B.M.T.; Supervision — T.Q.N., T.H.T., M.D.T., V.H.P., and B.M.T.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G34, H83, M42

Received: 25.05.2023
Accepted: 23.02.2024
Published online: 28.02.2024

How to cite this paper: Nguyen, T. Q., Truong, T. H., Tran, M. D., Phung, V. H., Nguyen, T. L., & Tran, B. M. (2024). Determinants influencing the effectiveness of internal auditing and the responsibility of auditors in fraud detection in an emerging country [Special issue]. Journal of Governance & Regulation, 13(1), 310–321. https://doi.org/10.22495/jgrv13i1siart5