Changes in Internal Auditing During the Time of the Major U.S. Accounting Scandals

11 Pages Posted: 21 Sep 2005

See all articles by Joseph V. Carcello

Joseph V. Carcello

University of Tennessee

Dana R. Hermanson

Kennesaw State University - Department of Accounting

Kannan Raghunandan

Florida International University (FIU) - School of Accounting

Abstract

We examine changes in internal auditing during the time of the Enron and WorldCom disasters and the related legislative and media focus on internal control and corporate governance. Data gathered from 271 mid-sized US public companies reveal that internal audit budgets, staffing levels, meetings with the audit committee, and meeting length increased markedly during this time. Regression analyses provide some evidence of (a) larger budget increases among smaller companies, (b) larger budget and staff increases in companies with greater financial resources (i.e., stronger operating cash flows) or with greater liquidity risk (i.e., lower current ratios), and (c) industry differences in the change in internal auditing. We encourage additional research on recent changes in internal auditing, including research in other countries.

JEL Classification: M49, M41, M43

Suggested Citation

Carcello, Joseph V. and Hermanson, Dana R. and Raghunandan, Kannan, Changes in Internal Auditing During the Time of the Major U.S. Accounting Scandals. International Journal of Auditing, Vol. 9, No. 2, pp. 117-127, July 2005, Available at SSRN: https://ssrn.com/abstract=789000

Joseph V. Carcello (Contact Author)

University of Tennessee ( email )

Department of Accounting & Information Management
629 Stokely Management Center
Knoxville, TN 37996-0560
United States
865-974-1757 (Phone)
865-974-4631 (Fax)

Dana R. Hermanson

Kennesaw State University - Department of Accounting ( email )

1000 Chastain Road
Kennesaw, GA 30144
United States
770-423-6077 (Phone)
770-499-3420 (Fax)

Kannan Raghunandan

Florida International University (FIU) - School of Accounting ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States
305-348-2582 (Phone)

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