Research on internal audit process includes: (1) Developing annual audit plan, 2 Plan for each audit, (3) How to perform audit work, (4) Prepare and submit audit report, 5 Save audit records and documents, (6) Monitor and check implementation of post-audit recommendations.
The Internal Audit Textbook of Commercial Banks [3] of the Department of Banking Accounting (2009) approaches the auditing process more concisely in 4 steps: Audit planning, Audit implementation, Report preparation and Post-audit monitoring.
2.6. Research on influencing factors
Research on factors affecting Internal Audit is still quite limited. In Vietnam, Master of CPA Nguyen Thi Le Thanh [38] showed that the Internal Audit activities of Vietnamese commercial banks still have some shortcomings. For Internal Audit activities to be effective, the most influential objective factor is the system of legal documents regulating and guiding Internal Audit activities, from building organizational models; selecting personnel; designing audit procedures for each business activity; requirements for internal auditors; guidance on designing and applying information technology to Internal Audit activities;... of the State and the industry, as well as of each commercial bank itself.
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Author Nguyen Thi Hien [12] in her PhD thesis with the topic: "Solutions to improve the effectiveness of internal audit in State-owned commercial banks in Vietnam" identified criteria for evaluating the effectiveness of internal audit and pointed out that the human factor is the factor that has the strongest impact on the effectiveness of internal audit.
In foreign studies, in the work “The influence of factors on the objectivity of internal audit in banking activities”, Muqattash collected data from internal audit directors of banks [83] to determine the factors affecting the effectiveness of internal audit. Descriptive statistics and regression methods were used (Muqattash, 2011). The results of the study showed that there was a significant positive relationship between factors in internal audit departments and the objectivity of internal auditors, such as: employee turnover, audit outsourcing, having an audit charter and having a quality assurance department.
In 2010, Sayag [89] conducted a rather elaborate study to identify the factors that determine the effectiveness of internal audit:
(i) Professional competence of internal auditors: Good professional competence of auditors will bring higher efficiency to internal audit.
(ii) Quality of audit work => Good quality will be related to better internal audit effectiveness;
(iii) Independent organization => If there is independence in the organization, it will bring higher efficiency in internal audit (independence in programming, independence in implementation and independence in reporting);
(iv) Support from senior management: Support from senior management has the greatest impact on the effectiveness of internal audit.
A study considered quite comprehensive, overall, and of good quality is the PhD thesis at the University of Queensland, Australia by researcher Mihret in 2010 [80]. Mihret pointed out the factors affecting internal audit including: Type of enterprise, Size, enterprise policy on internal audit, Enterprise risk status, Coordination between internal audit and internal audit. In addition, an important part of the author's thesis is to provide indicators to measure the effectiveness of internal audit: professional proficiency of auditors, Independence-objectivity, Audit scope, Quality of audit plan and implementation of audit plan, Quality of audit report and monitoring of implementation of recommendations. Using quantitative methods, the author has tested the relationship between auditors' qualifications, independence and objectivity, which has a clearer relationship with audit effectiveness in state-owned enterprises and then in private enterprises.
In addition, Matarneh's work 2011 [79] briefly analyzed the factors affecting the quality of internal audit including: Professional competence, Independence, Objectivity. Then, each factor is affected by other sub-factors.
However, the major contribution of the work is that the author, through mathematical equations and quantitative methods, shows that professional competence is the factor with the strongest influence on internal auditing, followed by independence and objectivity...
From the above analysis, the researcher summarizes the research gaps as follows:
- In general, although domestic research has industry-level topics or doctoral theses and master's theses related to internal audit activities at commercial banks,:
There has not been any study that has measured the current status of Internal Audit at commercial banks in a convincing quantitative way through software, but most of them only give qualitative conclusions.
There are also very few domestic studies that have measured the impact of objective and subjective factors on the results of internal audit.
- In foreign countries , there are many studies on internal audit in commercial banks, but due to the young level and capacity of internal audit in Vietnamese commercial banks, the applicability is not high. Moreover, determining the factors affecting internal audit in a commercial bank in a developed country with a legal, technical, technological and highly transparent foundation is very different and sometimes not suitable for the context of Vietnamese commercial banks with their own characteristics in terms of ownership, level and capacity. In addition, most of the topics focus on improving the effectiveness of Internal Audit, while research on Perfecting Internal Audit has hardly been carried out.
3. PURPOSE OF THE THESIS
3.1. Theoretical aspect
The researcher tries to study the theory of Internal Audit in general, Internal Audit of Commercial Banks in particular, internal and external factors of Commercial Banks affecting internal audit... from there, there is a solid theoretical basis system that can be used for research for students, colleagues, and interested people. The topic also focuses on closely following the principles of Basel 2, international standards and practices on internal audit to see the continuous strong development as well as the increasingly strict requirements for internal audit in general and at Commercial Banks in particular.
3.2. On practical aspects
The researcher chose the method of practical research on internal auditing using questionnaires and in-depth interviews. The main purpose of the researcher was to answer the following questions:
- What is the current situation of Internal Audit at Agribank, in terms of some main areas such as: organizational structure, content, methods, and audit process?
- What factors affect internal audit at Agribank?
- What are the main reasons that limit the role and effectiveness of internal audit at Agribank?
- What solutions to improve Internal Audit at Agribank?
4. OBJECTS AND SCOPE OF THE THESIS
- The research object of the thesis is internal audit at Agribank.
- The research period is Agribank's internal audit activities in 4 years 2012, 2013, 2014, 2015.
5. RESEARCH METHODS
The thesis uses the following research methods:
- The document research method includes stages such as analysis, synthesis, systematization and generalization of theories as well as practical research works of domestic and foreign authors published in books, newspapers and magazines on issues related to Internal Audit at commercial banks.
- The expert method is conducted to seek the opinions of experienced professionals in the field of Internal Audit in particular and commercial bank management in general.
- In particular, to increase the persuasiveness of the statements, the researcher used the Questionnaire method to conduct research on the current status of internal auditing at Agribank, using Epidata and SPSS software to analyze descriptive statistics, including:
Research sample (Survey subjects) are internal auditors, audit department leaders, some control officers, senior leaders under the Board of Control, Board of Directors of Agribank. These are subjects directly or indirectly related to auditing work and therefore they clearly understand the current situation, quality of internal auditing, factors affecting internal auditing work. NCS conducted
58 people were directly polled, and Google Drive was used to create an electronic questionnaire so that remote technicians (11 people) could answer via the link:
https://docs.google.com/forms/d/10gTNlfHwYPg3CQALO_dByCaHuWLCh Hj-1O5BNcCIGb0/viewform.
Of the 69 questionnaires received, 3 invalid questionnaires were eliminated during the research data cleaning process. Of the remaining 66 questionnaires, all showed that the respondents were qualified, experienced, responsible and representative.
The survey questionnaire design includes 15 questions related to: content, methods, internal audit processes, factors affecting internal audit at Agribank including subjective and objective factors, questions about personal information of interviewees... From the results obtained, the researcher used Epidata software version 3 and SPSS version 21 to conduct descriptive statistical analysis, combined with reliability statistics of the Cronbach's Alpha scale.
6. STRUCTURE OF THESIS
In addition to the introduction, conclusion, list of references, list of published works of the author, appendix, list of diagrams and tables, the Thesis includes 3 chapters as follows:
- Chapter 1 : Theoretical basis of internal audit at commercial banks.
- Chapter 2 : Current status of internal audit at Vietnam Bank for Agriculture and Rural Development.
- Chapter 3 : Solutions to improve internal audit at the Bank for Agriculture and Rural Development of Vietnam.
CHAPTER 1
THEORETICAL BASIS OF INTERNAL AUDIT AT COMMERCIAL BANKS
1.1. GENERAL ISSUES ON INTERNAL AUDIT
Internal auditing includes the following basic issues: Concepts, codes of ethics and conduct, core principles, standards, mission and guidelines.
1.1.1. Concepts of internal audit
Up to now, there are many different concepts about internal audit (IA), such as:
According to the Association of Chartered Certified Accountants (ACCA), “ Internal audit is an independent and objective assessment of the internal control system to effectively manage risks according to the risk appetite of the unit ”[47]. This concept shows that the subject of internal audit is the entire control system in the unit, with the role of risk management.
Griffiths (2006) expressed the view that “Internal auditing provides independent and objective opinions to the managers of an organization to manage risks at an acceptable level” [62, p.15]. In this concept, we see:
Independence means that internal audit activities should be located outside the normal management hierarchy, preferably at the highest level of the business, reporting directly to the Chairman of the Audit Committee. In addition, internal audit should be outside the audited processes and activities and have the autonomy to carry out its work in any department.
Objectivity means that the internal auditor's opinion is independent of his or her manager. The opinion must be based on verifiable facts, unbiased and free from any interference.
Opinion: This is the key word in the definition. The objective of internal auditing is to communicate to management and through them to stakeholders how well risks are being managed.
It can be said that Griffiths' definition is quite simple and provides a clear relationship between the organization's objectives, internal control and the objectives of IA.
According to the International Auditing and Assurance Standards Board IAASB, in auditing standard No. 610 [65] on "Using the work of internal audit", there is a concept: " Internal audit is a function of an organization that performs assurance and consulting activities to evaluate and improve the effectiveness of the organization's governance, risk management and internal control processes ". With this concept, internal audit has not only stopped at the control system, but also aimed at consulting and ensuring the organization's governance and risk management processes, while emphasizing the consulting function as the most important function of internal audit.
When it comes to internal auditing, it is impossible not to mention the IIA, the Institute of Internal Auditors, which was founded in 1941 when a group of internal auditors wanted to establish a professional organization that could represent their profession and has now become an international organization that can meet the expectations of global internal auditors. Over the years, the IIA has introduced many concepts of internal auditing, through which we can see the changes of internal auditing in parallel with the development of corporate governance.
In 1944, the IIA defined internal audit as “ an independent evaluation activity within an organization of the accounting, financial and other activities of that organization. Internal audit activities are considered as protective and constructive services to support the board of directors ”. The IIA defines internal audit in an enterprise as an activity that provides independent evaluations of financial and accounting activities to support the board of directors, that is, to act as a right-hand man for managers in commenting on the truthfulness and reasonableness of accounting information. In fact, this work is unnecessary and somewhat overlaps with the work of independent audit and does not cover many activities in the enterprise.
More than thirty years later, in 1978, the IIA defined internal auditing as “an independent appraisal function established within an organization to examine and evaluate its activities, as a service to the organization. It is a type of
Control is achieved by examining and evaluating the adequacy and effectiveness of other types of controls. The objective of internal auditing is to help members of the organization perform their tasks effectively. To achieve this objective, internal auditing provides members of the organization with analysis, appraisal, recommendations, advice and information related to the activities under review. The audit objective includes proposing an effective control framework at a reasonable cost ” [66]. Thus, internal auditing has shifted from being concerned only with financial and accounting activities to evaluating and examining the business activities of that organization.
In June 1999, the IIA provided a new, comprehensive definition of the profession, which considers “ Internal auditing as an independent, objective assurance and consulting activity designed to create added value and improve the operations of an organization. Internal auditing helps organizations achieve their objectives by providing a systematic, disciplined approach to evaluating and improving the effectiveness of corporate governance, control, and risk management processes ” [67]. The IIA’s 1999 definition of internal auditing can be considered a pivotal, pivotal definition that describes all the necessary objectives, nature, and scope of internal auditing, in which the above definition can be clarified as follows:
- Independence : Internal audit cannot exist if it is not truly independent. Audit functions need to stand outside of business operations to review and evaluate in order to bring about the most objective results.
- Assurance and advice : This is a major change in the role of internal audit. Internal audit can provide advice and support to business management in the most appropriate way.
- As an independent and objective "activity" , internal audit does not necessarily have to be established within an organization but can hire external auditors to perform internal audit activities.
- Designed to add value : Internal auditing is customer-oriented and understands the needs of an organization, focusing on the interests of the organization rather than its own hidden goals. Adding value to the organization is always