Academy of Entrepreneurship Journal (Print ISSN: 1087-9595; Online ISSN: 1528-2686)

Abstract

A COMPREHENSIVE REVIEW OF THE INTERNAL AND EXTERNAL AUDITING IN SAUDI ARABIA

Author(s): Thamer Al-Wadai, Ahmed Alsenosy, Aza Azlina Kassim

Auditing proficiency is significant so that financial scandals occurring worldwide are attributed to a lack of audit efficiency. All parties involved in the decision-making process rely on audited financial accounts. However, existing studies are outdated, necessitating a renewed investigation into this context. The current paper addresses this gap by shedding light on the factors influencing External Auditors' (EAs) reliance on the Internal Audit Function (IAF) within Saudi businesses. The objectives are three-fold: To introduce an overview on the characteristics of the auditing profession in Saudi Arabia 2) To discuss the challenges the Saudi auditing profession faces, and 3) To identify key factors influencing EAs' reliance decisions. Through a thorough literature review and exploration of the relevant studies, it was found that auditing proficiency is crucial for preventing financial scandals, and reliance on IAF is pivotal, particularly in audit report preparation. Saudi auditing profession faces several challenges include the absence of IAF in public organizations, a shortage of qualified professionals, difficulty assessing audit firm quality, a professional services monopoly, regulatory non-compliance, and low audit fees. To overcome such challenges, the paper suggests measures like education, resources, training programs, and enhanced collaboration between internal and external reviewers. Additionally, the review reveals that the existing studies that assess the relationship between external and internal auditing in the Saudi Arabian context often offer superficial insights and are dated. Even recent studies are infrequent and tend to adopt a narrow perspective, addressing only a limited set of factors. By identifying the most prominent factors of reliance, Saudi internal auditing departments need to show superior objectivity, competency, and work performance for enhanced collaboration and increased EAs’ reliance. High-quality corporate governance and Internal Control Systems are also essential. For future research, empirical examinations to identify the topmost precursors of reliance that are influential in the unique context of Saudi Arabia.

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