Introduction
Saudi Arabia is one of the most rapidly growing economies of the world. However, most of the business empires have traditionally not employed the elements of internal auditing in their financial mechanisms. This has resulted in the companies losing huge amounts of revenue to poor accountability frameworks. This project shall be carried out to illustrate the importance of accountability in particular under the influence of internal auditing in companies best in Saudi Arabia.
Literature review
Corporate governance
Corporate governance is an entity comprising policies, rules and regulations that determine how a business enterprise is run administratively (Du Plessis, McConvill & Bagaric 2005). Aside from these, corporate governance is also influenced by the relationship between the stakeholders of the enterprise as well as the mission of the business. Amongst these stakeholders are members of staff, business partners and advisors amongst others (Shoult & Anwar 2009). Accountability is probably the most important aspect of corporate governance as it helps ensure that the business administration is both competitive and professional aside from ensuring that the company reaps its finest from its trade. In most business enterprises, the issue of accountability is taken care of by the use of regular internal audit practices. The major role of internal audit is the provision of a systemic analysis of the institution’s financial processes and methods of control within the firm itself.
Role of internal auditing
Internal auditing has a number of functions in relation to corporate governance of an enterprise. Top on the list is that internal audit helps the management figure out the types of business strategies that can be applied in order to achieve maximum returns (Coderre 2008). The key objective of internal auditing is to provide the highest possible level of accountability assurance to the management and board of directors as regards the professional discharge of service by their staff.
The internal audit practice is controlled by an audit committee which comes directly under the board of directors. The management and ownership of the business enterprise should ideally not have any influence on the delivery undertaken by the audit committee if openness is to be maintained (Kagermann, Kinney & KĂĽting 2007). During the process of internal auditing, this committee is allowed full access to the internal machinations of the company alongside all the administrative data and financial records.
The internal audit team is supposed to carry out its functions in a way that is systematic and disciplined. This should be followed by a constant review of the progress made in order to ensure that each and every part of the institution is essentially analyzed.
There are a number of the steps that the internal audit team can and should probably use to ensure that all the necessary information is obtained. First, is the utilization of regular reviews of the major financial departments of the enterprise (Colley 2005). All the administrative and accounting functions of these departments are well studied in ways that are agreeable to the company’s policies in order to establish whether the potential of each department is well utilized. To this end the effectiveness of each department is given clear focus.
The second step, in the internal audit practice is the prompt reporting of the findings to the relevant authorities (Fazlollahi 2002). This will enable the management to come up with adequate measures to tackle issues that have been reported on as well as reduce the incidence of the records being tampered with.
The audit procedure should also be evaluated from time to time. a good audit procedure should appeal to all members involved and should not include oppressive measures to the staff of the company. If complaints are raised about the audit committee, measures should be taken to ensure that the team is restructured all the particular issues raised are addressed with immediate effect (Monks & Minow 2008).
If any reports of fraud and probable existence of corruption are noted, the audit committee should take particular interest in ensuring that thorough checks are carried out (Mukendi & Mukendi 2007). This should be carried out in a speedy manner so that the culprits are not given the chance to cover up.
Once the audit committee has completed its work, it should provide a thorough report to all the stake holders clearly citing all the elements of weakness in accountability and offering advice on how effectiveness can be maintained (Colley 2005).
Research questions
The major research question that shall govern the development of the argument is the importance of internal auditing as a tool for corporate governance. This shall be supported by the following questions:
- How has internal audit has gained prominence in the business environment is Saudi Arabia?
- What are the different roles of internal audit necessary for the application of corporate governance particularly in Saudi Arabian companies?
- What are the determinants of internal audit and their roles in the application of corporate governance from the perspective of professionals in Saudi Companies?
Methodology
Methodology Statement
The research will be based on secondary data collection. Data will be extracted from various journals, articles and books. The criteria of selection for the literature will be the relevance to the research topic as well as the year of publication. Both public and private libraries as well as online libraries will be visited in order to access the data. This research will be partly evidence based and partly founded on professional research by professionals in the field. Various articles will be studied in order to provide background information which will essentially give credibility to the final essay. Internal audit being a critical aspect of business analysis cannot be effectively analysed without obtaining information from real case scenarios. Saudi Institutions that have incorporated regular internal audit measures into their systems will be sampled and the efficacy of this application be evaluated. This will definitely make for some interesting research and in as much most of the information will only be used for reference purposes, it will effectively came round to form the back-born of the paper.
Information from the books will serve to provide explanation as regards the internal machinations of financial departments of a company. This will be very crucial information that will make the research report appeal to both professionals and the general public. For the latter, it may require that some of the information obtained from the books and other publications be broken down into simple language and at the same time illustrations drawn from the commonly applied systems of internal audit.
Empirical data will be collected from recent studies with numbers and figures used to show the costs and economical impact internal audit in a particular institution and how it could effectively be used to serve as a guide for other organisations that would like to make the switch. Like with any other professional field of study, business researches have to be conducted in such a way that the offer credibility to the practitioner. In such a scientific field, the strength lies in the figures and particularly the numbers obtained from real life scenarios to support collected evidence. With this knowledge in mind, effort will be made to obtain relevant information to the particular topic in question and this will be accompanied by proper citation.
Reasons for Selecting the Above Methodology
For any professional topic, chances are that extensive research has been carried out by professionals in the field before. Consequently, in order to establish the backbone of a given research project, it is only necessary that extensive review of literature be carried before identifying seeking first hand information from the field. The latter, i.e. information collected from the field is also necessary since it helps give professional credibility to the project. Combining results from both sources would serve to foster their symbiotic relationship with one offering background information and the other presenting up-to-date information on the topic.
Research Process Plan
The first step in conducting the research will come in the form of extensive review of literature from various secondary sources. Information on the topic of internal auditing and its integration processes will be collected from books, journals, Magazines, conference proceedings and websites.
The second step in the process is the collection of data directly from the field. This will to a large extent depend on various forms of interviews including one-to-one interviews as well as the use of questionnaires. Some of the people expected to be targeted for this part of the process include economic specialists, administrators of enterprises and financial analysts.
The above two steps would make it easy to come up with a survey question which will guide us into the third step of the process. In this stage, an analysis of the data obtained shall be carried out and the negative issues that are raised regarding the process of internal auditing shall be picked out and effectively compared with the positive ones. In this phase as well an evaluation of the financial backlog that face a company due to poor accountability and lack auditing will also be carried out.
Expected Outcome
The outcome expected out of this research process is results that would make professionals and organizations involve corporate governance aspects and in particular internal auditing as well as re-evaluate the benefits of the procedure as compared to the demerits. The research and subsequent paper will show the various loopholes which if sealed can increase the profitability of Saudi Arabian companies.
Research Time Plan
Conclusion
Saudi Arabia is a growing economy and because of the availability of the market-controlling mineral-oil in the country the number of business establishments shall continue to grow (Vallabhaneni 2005). However, for the emerging businesses to have some sense of stability, proper accountability measures have to be implemented and this is mainly by the use of methods such as internal auditing (Malin 2007). This project has clearly defined the importance of internal auditing to an enterprise and research has been conducted in the specific market of Saudi Arabia, drawing relevant examples to illustrate the importance of the said aspect.
Reference List
Coderre, D., 2008 Internal Audit: Efficiency Through Automation, New Jersey, John Wiley & Sons.
Colley, J.L., 2005 What is corporate governance? New York City, McGraw-Hill Professional.
Du Plessis J.J., McConvill, J. & Bagaric, M., 2005, Principles of contemporary corporate governance, Cambridge University Press.
Fazlollahi, B., 2002 Strategies for ecommerce success, Canada, Idea Group Inc.
Kagermann, H., Kinney, W. and KĂĽting, K., 2007 Internal Audit Handbook:Â Management with the SAP-Audit Roadmap, United Kingdom, Springer.
Malin, C.A., 2007 Corporate governance, Oxford, Oxford University Press.
Monks, R.A.G. & Minow, N., 2008 Corporate governance, New Jersey, John Wiley & Sons.
Mukendi, E.F. & Mukendi, N. 2007Internal audit: a practical, step-by-step customised approach, United Kingdom, De Claire de Lune Trust.
Shoult, A. & Anwar, H., 2009 Doing business with Saudi Arabia. London, GMB Publishing Ltd
Vallabhaneni, S.R., 2005 Wiley CIA Exam Review: Internal audit activity’s role in governance, risk, and control, Volume1, New, Jersey, Wiley.