A new research article in Accounting Horizons shows the efficacy of Center for Internal Auditing Excellence (CIAE) programs in raising the quality of Internal Audit Functions (IAFs) of nearby companies.
A lack of domain knowledge in internal auditing could lead to lower-quality and less effective IAFs. The CIAE program produces new practitioners with greater internal audit knowledge and ability. The study found that companies located near CIAE universities exhibit greater financial reporting quality, especially in internal controls over financial reporting (ICFRs) and reliance on the IAF by external auditors. That is, because students tend to remain near their university after graduation and therefore start to work in companies that are near them.
Additionally, these companies benefit from a reduction in audit lag and audit fees, providing empirical support for the efficacy of investments in internal audit education. The study highlights the need for increased internal audit-specific education and training during early career development to enhance the value placed on the profession.
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