Alignment of Traditional Audit Practices to International Accounting Standards: Annotation of Scholarly Literature

This study expanded the discussion of the developmental or evolutionary milestones in auditing and international accounting through combined research efforts in positive accounting theory, behavioral accounting research, and institutional theory of accounting. I applied insights from these theoretical approaches to explore recent developments in internal control systems. I reviewed twenty-nine annotated scholarly articles on internal control systems. I analyzed the COSO and COCO models of internal control systems, which are precursors to modern internal control systems. In addition, this study reviewed articles on internal control effectiveness and weaknesses to understand the determinants of internal control effectiveness and deficiencies. Evidence from the literature review indicates that implementing various internal control measures does not guarantee that an organization will accomplish its goals. The study concluded that organizations achieve their goals and objectives by balancing available internal control measures. This study is a scholarly annotation of various articles on internal control, followed by a narrative, integrated essay on emerging themes.

Accountability; Accounting Theory; Disclosures; Financial Reporting; Internal Control

1. Bizarro, P. A., Boudreaux, C. D., & Garcia, A. (2011). Are companies that report material weaknesses in internal control more likely to restate their financial statements?. Academy Of Accounting & Financial Studies Journal, 15(3), 73-94. [Google Scholar] [Crossref]

2. Cavelius, F. (2011). Opening the “black box”: How internal reporting systems contribute to the quality of financial disclosure, Journal of Applied Accounting Research, 12(3), 187–211. doi: 10.1108/09675421111187665 [Google Scholar] [Crossref]

3. Cheh, J. J., Lee, J., & Kim, I. (2010). Determinants of internal control weaknesses, Contemporary Management Research, 6(2), 159-176. [Google Scholar] [Crossref]

4. Cristina, P., & Cristina, B. (2009). Information and communication in banks- Key elements of the internal control system- An empirical analysis between Romanian, American and Canadian models of control. Annals of the University of Oradea, Economic Science Series, 18(3), 1091 – 1096. [Google Scholar] [Crossref]

5. Danescu, T., Prozan, M., & Danescu, A. C. (2011). Internal control activities: Cause and effect of a good governance of accounting reporting’s and fiscal declarations, Annals Universitastis Apulensis Series Oeconomica, 13(2), 339–349. [Google Scholar] [Crossref]

6. Dhaliwal, D., Hogan, C., Trezevant, R., & Wilkins, M. (2011). Internal control disclosures, monitoring, and the cost of debt, The Accounting Review, 86(4), 1131-1156. doi: 10.2308/accr-10043 [Google Scholar] [Crossref]

7. Doyle, J., Ge, W., & McVay, S (2007). Determinants of weaknesses in internal control over financial reporting. Journal of Accounting and Economics, 44, 193 – 223. doi: 10.1016/j.jacceco.2006.10.003 [Google Scholar] [Crossref]

8. El-Gazzar, S. M., Chung, K., & Jacob, R. A. (2011). Reporting of internal control weaknesses and debt rating changes, International Advances on Economic Research, 17(4), 421–435. doi: 10.1007/s11294-011-9313-4 [Google Scholar] [Crossref]

9. Ettredge, M.L., Li, C., & Sun, L. (2006). The impact of SOX Section 404 internal control quality assessment on audit delay in the SOX era. Auditing: A Journal of Practice & Theory 25 (2), 1-23, 2006. https://doi.org/10.2308/aud.2006.25.2.1 [Google Scholar] [Crossref]

10. Frazer, L. (2012). The effect of internal control on the operating activities of small restaurants. Journal of Business & Economics Research, 10(6), 361–373. [Google Scholar] [Crossref]

11. Goh, B. W., & Li, D. (2011). Internal control and conditional conservatism, The Accounting Review, 86(3), 975-1005. doi: 10.2308/accr.00000041 [Google Scholar] [Crossref]

12. Gumb, B. & Noel, C. (2009). CEOs’ reports about internal control: A content analysis. Accounting in Europe, 6(1), 81-106. doi: 10.1080/17449480902896478 [Google Scholar] [Crossref]

13. Hammersley, J. S., Myers, L. A., & Zhou, J. (2012). The failure to remediate previously disclosed material weaknesses in internal controls, Auditing: A Journal of Practice & Theory, 31(2), 73-111. doi: 10.2308 /ajpt-10268 [Google Scholar] [Crossref]

14. Haron, H., Ibrahim, D. N., Jeyaraman, K., Chye, O. H. (2010). Determinants of internal control characteristics influencing voluntary and mandatory disclosures: A Malaysian perspective, Managerial Auditing Journal, 25(2), 140–159. doi: 10.1108/02686901011008954 [Google Scholar] [Crossref]

15. Ibanez, P. C. (2007). Internal control risk influence when planning an audit: An empirical study of the COSO conceptual framework. Revista De Contabilidad- Spanish Accounting Review, 10(2), 11-31 [Google Scholar] [Crossref]

16. Janvrin, D. (2008). To what extent does internal control effectiveness increase the value of internal evidence? Managerial Auditing Journal, 23(3), 262–282. doi: 10.1108/02686900810857712 [Google Scholar] [Crossref]

17. Jeong-Bon, K., Byron, Y. S., & Liandong, Z. (2011). Internal control weaknesses and bank loan contracting: Evidence from SOX section 404 disclosures, The Accounting Review, 86(4), 1157–1188. doi: 10.2308/accr-10036 [Google Scholar] [Crossref]

18. Jokipii, A. (2010). Determinants and consequences of internal control in firms: A contingency theory-based analysis, Journal of Managerial Governance, 14, 115–144. doi: 10.1007/s10997-009-9085-x [Google Scholar] [Crossref]

19. Krstic, J. & Dordevic, M. (2012). Internal control and enterprise risk management-From traditional to revised COSO model. Economic Themes, 50(2), 151-166. [Google Scholar] [Crossref]

20. Lenghel, D. (2012). Particularities of internal control in the context of current accounting regulations. Review of Management and Economic Engineering, 11(2), 155-169. [Google Scholar] [Crossref]

21. Lin, S., Pizzini, M., Vargus, M., & Bardhan, I. R. (2011). The role of the internal audit function in the disclosure of material weaknesses. The Accounting Review, 86(1), 287- 232. doi: 10.2308/accr.00000016 [Google Scholar] [Crossref]

22. Masli, A., Peters, G. F., Richardson, V. J., & Sanchez, J. M. (2010). Examining the potential benefits of internal control monitoring technology, The Accounting Review, 85(3), 1001-1034. doi: 10.2308/accr.2010.85.3.1001 [Google Scholar] [Crossref]

23. Munsif, V., Raghunandan, K., & Rama, D. V. (2012). Internal control reporting and audit report lags: Further evidence, Auditing: A Journal of Practice and Theory, 31(3), 203- 218. doi: 10.2308 /ajpt-50190 [Google Scholar] [Crossref]

24. Palfi, C. (2009). Control environment in banking system: An empirical study on Romanian framework vs. COSO and COCO models. International Journal of Business Research, 9(1), 93–102. [Google Scholar] [Crossref]

25. Petrovits, C. (2011). The causes and consequences of internal control problems in nonprofit organizations, The Accounting Review, 86(1), 325–357. doi: 10.2308/accr.00000012 [Google Scholar] [Crossref]

26. Poel, K. V., & Vanstraelen, A. (2011). Management reporting on internal control and accruals quality: Insights from a “comply-or-explain” internal control regime, Auditing: A Journal of Practice and Theory, 30(3), 181–209. doi: 10.2308 /ajpt-10052 [Google Scholar] [Crossref]

27. Schneider, K. N. & Becker, L. L. (2011). Using the COSO model of internal control as a framework for ethics initiatives in business schools. Journal of Academic and Business Ethics, 4, 1-18. [Google Scholar] [Crossref]

28. Stefanescu, C. & Muresan, M. (2010). An empirical analysis on control activities in credit institutions: The case of Romanian framework vs. international models of control. Journal of International Business & Economics, 10(1), 149-157. [Google Scholar] [Crossref]

29. Verovska, L. (2012). Internal control system as continuous basis of efficient and stable company development. Journal of Social Sciences, 3(8), 240–246. [Google Scholar] [Crossref]

30. Wittayamon, K. (2012). How does internal control effectiveness create reliability of financial reporting? An empirical research of Thai listed firms, The Journal of International Business and Economics, 12(2), 80-96. [Google Scholar] [Crossref]

• The Role of Value and Growth Stocks in Portfolio Returns: Insights From the Nigerian Stock Market
• The Impact of Environmental, Social, Governance (ESG) and Profitability on Firm Value Moderated by Firm Size
• Assessment of the Impact of Environmental Operating Costs on Return on Assets: Evidence from Listed Breweries in Nigeria
• Mobile Money and Digital Financial Services Ecosystem in Adamawa State
• A Quantitative Approach of Professional Skepticism and Fraud Detection among Malaysian Internal Auditors