Abstract

Using a unique database of Italian companies, we perform structural equation modeling technique to test the association between organizational, processes and relationship measure of internal audit effectiveness and firm pressures and performances. We find that size, listing and Big4 are significantly and positively associated with the internal audit effectiveness. We contribute to literature showing that organizational (e.g. presence of a charter, chief auditing executive experience), processes (audit plan risk based, quality assurance program, guidelines), and relationship (with auditee, senior management, chief financial officer, audit committee) measures are useful to evaluate the internal audit effectiveness. We provide support for profession, agency and institutional theories. We implement the measure of internal audit effectiveness with a structural equation model to be able to consider the different components of organizational, processes and relationship separately in a single model. Extending previous literature, we show that this measure of internal audit effectiveness is effective in discovering significant determinant of internal audit effectiveness and could be used in future research.

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