Audit Independence On Internal Auditors In Malaysia Professional Organization Accounting Essay

Undertaking background

Harmonizing to Institute of Internal Auditor ( IIA ) , internal auditing is as independent, nonsubjective confidence and consulting activity design to add value and better an organisation ‘s operations. It helps an organisation carry through its aims by conveying a systematic, disciplined attack to measure and better the effectivity of hazard direction, control and administration procedures. Internal Auditor ‘s functions include monitoring, measuring and analysing organisational hazard and controls and reexamining and corroborating information and conformity with policies, processs and Torahs. For an effectual system in the organisation, the internal audit section has to work together with direction and audit commission. Sing to the internal control, an internal hearer has work as a savvy in-house bull non merely in study job but in suggestion sing about the public presentation of the concern. Therefore, internal hearers have to travel through certain jobs which arise by or from the direction and audit commission. One of the major challenges face by internal hearer is Audit Independences.

In general, independencies refer to the turning away of state of affairs which would be given to impair objectiveness or license personal prejudice to act upon delicate judgement. Auditor independences refer to absence of influence or control in the affair of the hearer ‘s behavior, action and sentiment. This sentence related to hearer ‘s ability to show their honestly and besides impartially. Basically auditor independencies are known as basis for scrutinizing because it is related to public trust in the attest map.

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Audit independency can be classs into two, ( 1 ) independency in fact and ( 2 ) independency in visual aspect. Harmonizing to Muatz and Sharaf, Independence in fact can cognize as the hearer ‘s province of head and his/her ability to keep a proper attitude in the planning of his audit plan the public presentation of his confirmation work and the readying of the study. Independence in visual aspect ( or perceived independency ) refers to the populace ‘s or others ‘ perceptual experiences of the hearer ‘s independency.

As been stated before, internal hearer has become the limelight on the function that a robust internal audit system towards the effectual administration, hazard, conformity and quality direction.

Some internal audit group are lifting to the challenges by developing strong working relationship with the audit commission and join forcesing with other hazard supervising groups in the organisation. Internal audit map is to reexamine the adequateness of the range, maps and resources of the internal audit map every bit good as among others to see the major findings of internal probes and direction ‘s response. This description says that the internal hearer may non understand the power of their authorization of the work.

Besides that in the direction point of position, internal hearer is hard to accomplish independencies because internal hearers are the employees of the organisation and they are frequently inquiring to reexamine the public presentation of the direction and besides other undertaking. Furthermore, the board of manager ensures that the independency of the internal audit maps is maintain double coverage relationship to direction and the organisation ‘s most senior inadvertence group. The internal hearer should describe to executive direction for aid in set uping support and administrative interface and typically to the audit commission for strategic way, support and answerability. By this, the internal hearer has to unite with direction to increase the importance of internal control activities in the organisation. In certain state of affairs, internal hearer ‘s cognition and accomplishment are non accepted by the direction which may raise concerns about a possible via media of objectiveness through a deficiency of independency.

Brief description of undertaking aims.


Identify how audit independency can impact internal hearers in transporting on their responsibilities in the professional organisation.

Identify the jobs of independency and objectiveness appears in pattern.

Identify the issues faced by internal hearer in carry oning audit procedure that affect their independency.

How direction have an impact on audit independency on internal hearers.

Solutions to get the better of audit independency for internal hearers.


This research is base on internal hearer and their independency in the organisation. Therefore, this research paper is chiefly focus on organisation in Malaysia. The range of this research is to place the menace of audit independency and analysis the significance.


The restriction of the research is chiefly because of clip frame and besides roll uping primary informations. First, this research merely has 8 months to carry on the research. Therefore, less information will be gathered during this timeline. Besides that, the bound for the research is focus on administration in Kuala Lumpur.

Second, its trouble to garner primary informations because audit independency is a sensitive issue among the hearer ‘s who are working in the organisation. Therefore, face-to-face interview and questionnaire will be behavior for roll uping the primary informations but some interviewee might decline to supply answer to the inquiry because of the sensitivity.


Harmonizing to O’Mally ( 1993 ) the issues related to independency are endangering the endurance of accounting houses of all sizes and so it has the power to destruct the accounting profession as a whole. It is hence, critical that hearer maintain their independency and guarantee that the provide a high quality of scrutinizing to guarantee the credibleness of fiscal information non merely for the intent of cut downing the figure of corporate dirts but most significantly the endurance of their profession and the development of healthy fiscal and capital market. Therefore the importance of this research is to supply better understanding about internal hearer and their independency in audit procedure. Besides that, it besides analysis the independency of the internal audit map through it is relationship with direction and the audit commission by full illumine the ancestors and results of internal hearer independency and objectiveness. Meanwhile, this research is to place factor impacting hearer independency which patterns in the organisation.

Academic research being carried out and other information, techniques being learnt.


Spencer, P, 2004, Internal Auditor at Work: Practical Guide to Everyday Challenges, John Wiley & A ; Sons, Incorporated

Bavly, Dan A, 1999, Corporate Governance and Accountability: What Role for the Regulator, Director and Auditor, Greenwood Publishing Group, Incorporated.

O’Gara, John D, 2004, Corporate fraud: Case Studies in Detection and Prevention, John Wiley & A ; Sons, Incorporated.


Jenny Stewart, Nava Subramaniam, ( 2010 ) “ Internal audit independency and objectiveness: rising research chances ” , Managerial Auditing Journal, Vol. 25 Iodine: 4, pp.328 – 360

L.J. Abbott, Y. Park, S. Parker, ( 2000 ) “ The effects of audit commission activity and independency on corporate fraud ” , Managerial Finance, Vol. 26 Iodine: 11, pp.55 – 68

Nur Barizah Abu Bakar, Abdul Rahim Abdul Rahman, Hafiz Majdi Abdul Rashid, ( 2005 ) “ Factors act uponing hearer independency: Malayan loan officers ‘ perceptual experiences ” , Managerial Auditing Journal, Vol. 20 Iodine: 8, pp.804 – 822

Lloyd Yang, Alan Dunk, Alan Kilgore, Qingliang Tang, Z.Jun Lin, ( 2003 ) “ Auditor independency issues in China ” , Managerial Finance, Vol. 29 Iodine: 12, pp.57 – 64

Abu Thahir Abdul Nasser, Emelin Abdul Wahid, Sharifah Nazatul Faiza Syed Mustapha Nazri, Mohammad Hudaib, ( 2006 ) “ Auditor-client relationship: the instance of audit term of office and hearer shift in Malaysia ” , Managerial Auditing Journal, Vol. 21 Iodine: 7, pp.724 – 737

Rocco R. Vanasco, Clifford R. Skousen, L. Roger Santagato, ( 1997 ) “ Auditor independency: an international position ” , Managerial Auditing Journal, Vol. 12 Iodine: 9, pp.498 – 505

Philip Law, ( 2008 ) “ An empirical comparing of non-Big 4 and Big 4 hearers ‘ perceptual experiences of hearer independency ” , Managerial Auditing Journal, Vol. 23 Iodine: 9, pp.917 – 934

Brief description of the materials/methodologies needed by the proposal.

This research is known as explorative research because it is focus on the information gathered from research. The chief beginnings of information are from secondary informations will be collected from assorted beginnings such as diaries, book and besides website. The information which gathered from secondary is from the related country on the literature reappraisal for farther findings. Next is the primary informations aggregation. The method will be utilizing is the face-to-face interview and questionnaire.

The chief signifier informations aggregation is trough face-to-face interview and besides questionnaire. The ground for face-to face interview is to hold an observation of the interviewees. In other words, is to understand the organic structure linguistic communication and besides easy to enter the verbal responses of the interviewees.

Most of informations would be derived from face-to-face interview. The interview was behavior with the internal hearers working in internal audit section. Even thought, most of information is collected by interview but there are certain issue or inquiry can non be asked straight because audit independency is a sensitive issue among the hearer ‘s.

Therefore, questionnaire is the 2nd method in carry oning the study. The inquiry will be intentionally open-ended to enable interviewees to show their apprehension in their ain words. This besides will assist to understand the single perceptual experiences and experiences. Questionnaire inquiry is base on the ( 1 ) range and perceived value of internal audit, ( 2 ) type of activities ( 3 ) organisation attitude to internal audit and ( 4 ) the present and future challenge and potency for alteration.

Brief description of the rating and analysis proposed for this undertaking.


The result of this research is to place the factors which are menace to scrutinize independency and analyze the significance. This will assist the hearer to forestall involve in the direction determination devising. Besides that, it besides help internal hearer to indentify the factor which become the menace to scrutinize independency.

This would besides supply empirical information to all internal hearers in order to avoid future menace to independence issues. Besides it will measure the effectivity of possible precautions for internal hearers including limitations. On the other manus it will find an acceptable degree of independency hazard such as the hazard that the hearer ‘s independency will be compromised.

The internal hearers are besides expected to be incognizant of the benefits of plans and aid provided by assorted parties to assist them in get the better ofing the troubles in menace to independency. Besides it will Increase the range of internal hearers. Furthermore it identifies the methods internal hearers require to get the better of independency issues.

Hypothesis of the research

The expected consequence from this research is that it would profit the internal hearer, direction and besides audit commission. The hypothesis proving would turn out that whether certain factors would impact the quality of scrutinizing. This research would expect that there is a relationship proving would be the relationship between internal hearer and audit independency. Other hypothesis proving would be the relationship between internal hearer and direction and audit commission. This is to place the menace face by internal hearer by this to factor.

Illustration of how this undertaking will profit the hereafter employability.

This research will profit all scrutinizing industries. Besides corporate houses will be able to profit from this research because it will promote and supply the consciousness of importance of heightening audit quality and methods to independent issues with respect to internal hearers. Students who hold Accounting and Finance grade would work as an internal hearer because scrutinizing work could let the internal hearers to derive a broad scope of experience in their related field of work. This research would greatly assist the fresh hearers who have experience at all to derive an insight challenges to independence. As the universe is altering, hearers who are regarded as a “ watchdogs ” as said by Zarinah Anwar ( 2009 ) , need the cognition and expertness to descry possible menace in respect to independency. Based on the topics that I have studied, I believe that this research would besides benefits the board of managers, executive and non-executive managers, audit commissions, internal hearer of the company would greatly profit from this research. Besides it will profit research worker to place the menace to independence for internal hearer as the research worker go in to working environmental.


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