|
on Accounting and Auditing |
| By: | G. SARENS; I. DE BEELDE |
| Abstract: | This study, based on six case studies within a Belgian context, provides a qualitative assessment of the interaction between internal auditors and the audit committee as well as CEOs and CFOs by analysing their expectations and perceptions. It became clear that both groups have high expectations vis-à-vis the internal auditor(s), although the perceptions of the interactions are not universally positive. On the one hand, audit committee members want the internal auditor(s) to be(come) an important information provider. Therefore they expect the internal auditor(s) to demonstrate and communicate as much as possible their contribution to the monitoring and functioning of the organisation as well as to play a (pro)active role in risk management. It became clear that in most cases, due to a mismatch of interests, there is an under-emphasis on the internal audit oversight roles of the audit committee, which is more perceived by the internal auditors than by audit committee members. In order to reduce this mismatch, both parties should broaden their interests in a converging way completed with a clear communication about the mission and roles of internal audit. On the other hand, CEOs and CFOs want the internal auditor(s) to compensate their loss of control that results from an increased organisational complexity. CEOs and CFOs expect the internal auditor(s) to fulfil an active management supporting role with a strong focus on continuous improvement in risk management, internal controls, organisational processes and strategic important projects. Thereby, internal auditor(s) are expected to create a sufficient level of risk and control awareness within the organisation. Although the interaction with CEOs and CFOs is stronger than the interaction with audit committee members, we found that the expression of findings and suggestions in more quantitative terms and regular informal contacts can still improve this interaction. |
| Date: | 2005–12 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:05/353&r=acc |
| By: | G. SARENS; I. DE BEELDE |
| Abstract: | This study, based on six case studies within a Belgian context, provides a qualitative assessment of the interaction between internal auditors (IA) and audit committees (AC), by analysing their expectations and perceptions. It became clear that both groups have high expectations vis-à-vis each other, although perceptions of IA-AC interactions are not universally positive. Our empirical data indicate that audit committee members want internal auditors to be an important information provider. Therefore they expect internal auditors to demonstrate and communicate, as much as possible, their contribution to the monitoring and functioning of the organisation, and to play both an active and proactive role in risk management. It became clear that, in most cases, due to a mismatch of interests, there is an under-emphasis on the internal audit oversight role of the audit committee, which is more perceived by the internal auditors than by audit committee members. In order to reduce this mismatch, both parties should broaden their interests in a converging way, in conjunction with clear communication about the mission and roles of internal audit. |
| Keywords: | internal audit, audit committee, interaction, corporate governance, case studies. |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:06/357&r=acc |
| By: | G. SARENS; I. DE BEELDE |
| Abstract: | This study, based on six case studies within a Belgian context, provides a qualitative assessment of the interaction between internal auditors and senior management (CEOs and CFOs) by analysing their expectations and perceptions. Moreover, this analysis is completed with suggestions to further improve the interaction. CEOs and CFOs want the internal auditors to compensate their loss of control that results from an increased organisational complexity. They expect the internal auditors to fulfil an active management supporting role with a strong focus on continuous improvement in risk management, internal controls, organisational processes and strategic important projects. Thereby, internal auditors are expected to create a sufficient level of risk and control awareness within the organisation. Although CEOs and CFOs are generally satisfied about their interaction with the internal auditors, we found that the expression of findings and suggestions in more quantitative terms and regular informal contacts can still improve this interaction. |
| Keywords: | internal audit, audit committee, interaction, corporate govern |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:06/358&r=acc |
| By: | James K. Galbraith |
| Abstract: | From this paper's Preface, by Dr. Dimitri B. Papadimitriou, President: For some time, Levy Institute scholars have been engaged with issues related to the current account, government, and private sector balances. We have argued that the existing imbalances in these accounts are unsustainable and will ultimately present a serious challenge to the performance of the U.S. economy. Other scholars are also concerned, but for reasons that we do not share. They argue that the interest rate is determined by the supply and demand of saving.When the government reduces its saving, the total supply of saving falls, and the interest rate inevitably rises. The result, they say, is that interest-sensitive spending, and investment in particular, falls. Finally, these scholars say, less investment now necessarily implies less output in the future. In this new brief, Senior Scholar James K. Galbraith evaluates a recent article by William G. Gale and Peter R. Orszag, two economists who regard this view of deficits as plausible. He forwards an alternative, Keynesian view. This alternative suggests that deficits can increase overall output, possibly enabling the government to spend more money without increasing the ratio of the debt to GDP. He casts doubt on the notion that the interest rate is determined by the supply and demand of saving, arguing that monetary policy plays a much larger role than Gale and Orszag allow for. Moreover, he writes, strong demand for goods and services is more important than the supply of capital in determining the pace of technological advance and the rate of growth of output per worker. Though he is skeptical about Gale and OrszagÕs theoretical framework, Galbraith calls attention to some important econometric findings in their paper. Gale and Orszag calculate the effects of deficits on the interest rate. Consistent with GalbraithÕs view, monetary policy turns out to be a major determinant of long-term interest rates. When interest rates are measured as the current cost of funds, Gale and Orszag find that deficits have no significant impact on interest rates. GalbraithÕs theoretical view of interest rate determination, together with Gale and OrszagÕs empirical findings, constitutes a powerful rebuttal of the reflexively antideficit view. Recent economic history suggests that this rebuttal is plausible. The recent increase in the U.S. federal deficit has not yet resulted in high interest rates. Interest rates in Japan, where deficits have been very large, remain at rock-bottom levels. The Levy Institute continues to believe that, together, unsustainable economic imbalances amount to one of the nationÕs most pressing issues, as we believe our Strategic Analysis series has documented. As Galbraith demonstrates, however, some observers are placing an undue emphasis on government deficit reduction, as if the government were the source of all that ails the economy. A more balanced approach would take into account the pernicious effects of excessive private debt and the need to devalue the dollar. We believe that our readers, especially those who follow the Strategic Analysis series, will find this brief to be a helpful look at another facet of the complex and knotty deficits problem. |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levppb:ppb81&r=acc |
| By: | Smart, Michael; Mintz, Jack M. |
| Abstract: | The authors explore the relationship between fiscal rules and capital budgeting. The current budgetary approach to limit deficits to a fixed portion of GDP or to balance budgets could undermine incentives to invest in public capital with long-run returns since politicians concerned about electoral prospects would favor expenditures providing immediate benefits to their voters. An alternative budgetary approach is to separate capital from current revenues and expenditures and relax fiscal constraints by allowing governments to finance capital expenditures with debt, as suggested by the golden rule approach to capital funding. But the effect of capital budgeting would be to provide opportunities to politicians to escape the fiscal rule constraints by shifting current expenditures into capital accounts that are difficult to measure properly, thereby leading to increased borrowing. As an alternative, the authors propose a modified golden rule limiting debt finance to a proportion of the government ' s investment in self-liquidating assets. |
| Keywords: | Public Sector Economics & Finance,Investment and Investment Climate,Economic Theory & Research,Public & Municipal Finance,Urban Economics |
| Date: | 2006–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3860&r=acc |