In the post–Sarbanes-Oxley world, internal auditors have increasingly assumed a larger role in corporate governance. For example, Deloitte notes that “if not for the internal audit profession, the business landscape would likely be littered with significantly more disclosures of material weaknesses and revelations of noncompliance with the [Sarbanes-Oxley] Act” (“Optimizing the Role of Internal Audit in the Sarbanes-Oxley Era.”
Investors have mandated disclosures that help them in assessing the quality of the traditional corporate governance parties. Examples of these required disclosures include management’s discussion and analysis (MD&A), audit committee reports, and external audit opinions. Investors, however, typically are only able to obtain information related to a company’s internal audit through voluntary corporate disclosures.
Academic research has begun to investigate voluntary disclosures related to internal audit. A survey of this research provides valuable information related to assessing the need for and benefits of increased internal audit transparency, and this research has potentially important implications for management and audit committees…