Effect of internal audit function on corporate governance quality

Abstract

The internal audit function is a compliance mechanism that promotes good corporate governance. Recent studies detected a need to improve corporate governance structures in developing countries. This study evaluates the effects of the internal audit function on the quality of corporate governance in the context of multinational corporations operating in Lebanon. The results revealed that the quality of internal audit function significantly affects corporate governance, particularly on its audit committee and management aspects. Moreover, the results showed that maintaining a high level of independence and expertise in the audit department can have a great influence on the overall quality of corporate governance, as well as on the effectiveness of both the audit committee and management. The results also indicated that the reliability of the internal audit significantly influences the management characteristic of corporate governance. In contrast, the board of directors and external auditors are less influenced by the internal audit.