UNIVERSITY OF BUEA
FACULTY OF SOCIAL AND MANAGEMENT SCIENCES (FSMS)
DEPARTMENT OF ACCOUNTING
Course Code: ACC 605
Course Title: Business Research and Report Writing
Topic: Mishiel Said Suwaidan, Amer Qasim, (2010) "External auditors' reliance on internal auditors and its
impact on audit fees: An empirical investigation", Managerial Auditing Journal, Vol. 25 Issue: 6, pp.509-525,
https://doi.org/10.1108/02686901011054845
Read the introduction, identify and explain the nature of the background (historical, contextual, etc...)
- Identify the Research problem, the research objective (s) and observ how the research question is
formulated
- Identify the hypotheses and explain where they come from (How do authors came up with them)
- Define the concept of theory, identify theories in the document if any, and explain why they were
selected by authors
- Summarise the main ideas developped in empirical literature review, relate them to the research
problem, and, based on groups' proper research, update empirical review
- Identify if any (without explaining, just identification) the research design, the population of the study,
the sample, the sampling technique, data collection technique, measurement of variable, and data analysis
technique
-Identify the main findings and recommendations (if any)
Participants (Group 3)
NCHEH HOPE NJUNG SM24P463
AKUM OBEN THOMPSON SM24P019
PERRY BRANDON SM24P057
MBONG ODELIA MPODE SM24P005
NGOZI LILIAN NGUNI SM24P066
KANG VIOLET MBOLE SM24P044
ASONGLEFAC RANIBEL ALENDEM SM24P064
ASHU MBAPAGON RAMSCHE. SM24P047
LONGUE MOUNA NGANGUE SAMUEL DAVID SM24P038
Lecturer:
Dr. HANKO OSEE Date: December 2nd, 2024
1. Introduction and Nature of the Background
Nature of the Background
- The paper provides a contextual background, focusing on Jordan, a developing country with
unique auditing characteristics.
- It explores the collaboration between external and internal auditors and its impact on audit
fees, an under-researched area in the Jordanian context.
- The background highlights the increasing role of internal auditors in supporting external audits
and the cost-saving potential of this reliance.
- The authors emphasize three key factors: objectivity, competence, and work performance,
which are critical in determining external auditors' reliance.
2. Research Problem, Objectives, and Research Question
Research Problem
- The study investigates the extent of external auditors’ reliance on internal auditors and
whether this reliance impacts audit fees.
- It addresses a gap in research specific to Jordan, a developing country with a different auditing
environment compared to developed nations.
Research Objectives
1. To explore external auditors’ perceptions of factors influencing their reliance on internal
auditors (e.g., objectivity, competence, and work performance).
2. To examine the relationship between reliance on internal auditors and external audit fees.
Research Question
- The study implicitly addresses:
- What factors determine external auditors’ reliance on internal auditors?
- Does this reliance affect external audit fees?
3. Hypotheses and Their Origins
Hypotheses
The authors formed hypotheses based on prior research, and theoretical frameworks. These
hypotheses include:
1. External auditors’ reliance on internal auditors is positively influenced by objectivity,
competence, and work performance.
2. Reliance on internal auditors negatively impacts external audit fees.
Origins of Hypotheses
- Derived from empirical studies highlighting the significance of objectivity, competence, and
work performance in reliance decisions.
- Influenced by observations in audit fee literature that suggest company size and reliance on
internal auditors may reduce external audit costs.
4. Concept of Theory and Theories in the Document
Definition of Theory
A theory provides a systematic framework to explain relationships between variables and predict
outcomes.
Theories Identified
While the paper does not explicitly mention a specific theory, it is grounded in:
1. Agency Theory: Explains the relationship between principals (shareholders) and agents
(management), highlighting the role of auditors in mitigating information asymmetry.
2. Cost-Benefit Analysis: Suggests that reliance on internal auditors can reduce the effort and
cost of external audits.
Why These Theories?
- Agency theory aligns with the auditing context, where external auditors evaluate the reliability
of internal auditors to ensure accurate financial reporting.
- Cost-benefit analysis supports the study’s emphasis on cost reduction through reliance on
internal auditors.
5. Empirical Literature Review
Main Ideas in the Review
- The review highlights three critical factors influencing external auditors’ reliance:
1. Objectivity: Internal auditors’ independence from management.
2. Competence: Skills, qualifications, and expertise of internal auditors.
3. Work Performance: Quality of the work conducted by internal auditors.
- Previous studies have suggested that these factors significantly impact external auditors’
reliance decisions.
- The literature also discusses the determinants of audit fees, such as company size and
complexity.
Relation to Research Problem
- The review sets the foundation for investigating whether these factors are relevant in Jordan's
context and whether reliance affects audit fees.
Updating the Review
- Recent studies could explore advancements in internal audit practices and their impact on
reliance, particularly with the rise of technology and automation in auditing.
6. Methodology
Research Design
- Design: Cross-sectional empirical study.
- Population: External auditors in Jordan.
- Sample: 100 external auditors.
- Sampling Technique: Likely non-probability (e.g., convenience sampling).
- Data Collection: Structured survey questionnaire.
Measurement of Variables:
- Independent variables: Objectivity, competence, work performance.
- Dependent variables: Reliance on internal auditors, audit fees.
- Data Analysis Technique: Cross-sectional multiple regression analysis.
7. Main Findings and Recommendations
Main Findings
1. External auditors in Jordan prioritize objectivity (mean score: 4.353) as the most important
factor influencing reliance, followed by competence (4.188) and work performance (4.156).
2. Company size is the most significant determinant of audit fees, while reliance on internal
auditors does not significantly impact fees.
Recommendations
- Companies should enhance the objectivity, competence, and work performance of internal
auditors to strengthen external auditors’ reliance.
- Companies can potentially reduce external audit fees through better collaboration between
internal and external auditors.
Summary Table for Quick Reference
Aspect Details
Background Contextual, focused on reliance and audit fees
in Jordan
Research Problem Investigates reliance factors and impact on
audit fees.
Objectives Assess reliance factors and audit fee
relationships.
Theories Agency theory, cost-benefit analysis.
Empirical Review Focused on objectivity, competence, and
work performance.
Research Design Cross-sectional, survey-based, regression
analysis
Findings Objectivity most important; reliance does not
impact fees significantly
Conclusion
This study provides valuable insights into the interplay between external and internal auditors in
Jordan, highlighting key factors influencing reliance and its limited impact on audit fees.
Understanding these dynamics can guide better auditing practices in developing countries
