We examine external auditors’ decisions to use the evidence or direct assistance of internal auditors when those auditors engage in consulting on enterprise risk management. Although such consulting provides value to an organization, it can also put the objectivity and independence of internal auditors at risk. We hypothesize that external auditors’ reliance on the internal audit function depends on the effectiveness of the audit committee monitoring the internal auditors’ activities. We also hypothesize that external auditors’ perception of the objectivity and independence of internal auditors mediates the reliance decision. We analyze these hypotheses using a 2 × 2 between-subjects design with 92 certified external auditors. Confirming the hypotheses, we find that external auditors’ reliance on the internal audit function is highest when the latter provides risk management consulting under the supervision of a strong audit committee. It is lower if the internal audit function provides only assurance (under either a weak or strong audit committee) and lowest if it provides consulting under a weak audit committee. The mediation analysis shows that the effect of audit committee effectiveness on the reliance decision is mediated by external auditors’ perception of internal auditors’ objectivity.

The aim of this paper is to investigate determinants of audit delay. Audit delay is measured as the length of time (i.e. the number of calendar days) from the fiscal year-end to the audit report date. It is important to understand...

The aim of this paper is to analyse which factors explain the effectiveness of internal audit in providing assurance about cybersecurity risk management. On the basis of neo‐institutional theory, we hypothesize that coercive (cybersecurity regulation), normative (professionalization of internal auditors and Boards) and mimetic forces (outsourcing of cyber security assurance services) positively contribute to cybersecurity audit (CSA) effectiveness. As these forces do not come about in an interest free model, we study the role of and the interaction with other actors who shape the CSA practices—Boards and security experts. We hypothesize that Board's support to CSA and the level of internal auditors' cooperation with the first and the second line of defence positively affect CSA effectiveness. To test our hypothesis, we conducted a survey involving IT auditors and Chief Audit Executives from various industries, organizations of different sizes and countries. We examined the hypothesized relationships in a series of regression analyses. We find that normative forces (professionalization of the internal auditors and Boards' competences), Board's support to CSA and cooperation between the internal audit function (IAF) and the first two line of defence significantly explain the CSA effectiveness. We find no support for the effect of regulation as a coercive force and outsourcing as a mimetic force. We discuss potential reasons for our findings and their implications. The paper is an original analysis that advances our understanding of key drivers of CSA effectiveness and their relationships.

This research is striving to provide an insight into the importance of Corporate Social Responsibility (CSR) for the insurance sector while aiming to examine various corporate social responsibility initiatives undertaken by insurance companies in Croatia. There is a broad range of potential benefits from CSR for insurance companies such as long-term sustainability and profitability, yet only several research studies on CSR practices have thus far been conducted on the insurance sector. Hence, the purpose of this research is to determine the level of CSR reporting for insurance and reinsurance companies in Croatia and its impact on reporting quality. The empirical research is based on online reporting of six aspects of corporate social responsibility to determine Corporate Social Disclosure Index (CSDI). Reporting quality is measured with Disclosure Quality Index of annual report (DQI) which is structured in five phases. This research includes all 24 insurance and reinsurance companies in Croatia and the research findings show that all insurance and reinsurance companies in Croatia publish information at least concerning two aspects of CSR. It was found that they are the most transparent regarding the human resources aspect of CSR activities and the least transparent concerning environmental aspect of CSR activities. The overall level of CSR disclosure for insurance sector in Croatia is quite low, so we can conclude that insurance and reinsurance companies in Croatia do not have a high level of CSR online disclosure. Considering the issue of reporting quality, insurance and reinsurance companies have an average quality of annual report (AR), measured by DQI of annual report. According to research findings, CSR reporting on the Internet is positively associated with DQI which leads to the conclusion that more socially responsible insurance and reinsurance companies provide annual reports of a more superior quality. Business and society interact and exert a mutual influence through their specific objectives and goals. Consequently, the link between business and society is indisputable. Companies, as one of the key segments of a society, can achieve a number of economic benefits, such as superior business results and considerable competitive advantage if they implement CSR and if they provide high quality information through their annual reports. Moreover, society benefits from socially responsible companies as it enjoys better care both for its own well-being and for that of the environment.

This paper investigates nonfinancial disclosure using GRI Standards for large public interest entities in Croatia and Serbia. First, we created an index of compliance with the GRI Standards to measure nonfinancial disclosure. Second, the research was conducted on a sample of listed companies from Croatia and Serbia for 2018 (with more than 500 employees). We used a regression analysis, modeling the GRI Compliance Index as a function of the following explanatory determinants: CSR reporting, annual report pages, company size, leverage, ROA, and industry. Our results indicate that the GRI Compliance Index size for Croatian companies is influenced by CSR reporting, annual report pages, and company size, while for Serbian companies, it is only influenced by the annual report pages. In addition, there is no difference in the level of compliance with the GRI Standards in the observed countries. However, Croatian companies provide better disclosures from the GRI modules (economic, environmental, and social). These results are unexpected, given that Croatian regulations are harmonized with the EU Directive and the GRI Standards. The findings could be of interest to all users of corporate disclosure, especially large public interest entities seeking to improve the quality process of their nonfinancial reporting.

Cilj je ovog rada ispitati percepcije internih revizora u Hrvatskoj o njihovoj uključenosti u izvještavanje o održivosti. Istraživanje je provedeno anketom među članovima Hrvatskog instituta interne revizije te Sekcije interne revizije Hrvatske zajednice računovođa i financijskih djelatnika. Rezultati pokazuju da interni revizori još uvijek nisu intenzivno uključeni u aktivnosti povezane s izvještavanjem o ESG-u, bilo pružanjem uvjerenja ili savjetodavnim aktivnostima. Procjena postojećih kompetencija u području ESG-a kreće se oko sredine Likertove ljestvice, bez značajnih odstupanja, što upućuje na nesigurnost u pogledu adekvatnosti revizorske uloge u ovom području unatoč visokoj percepciji važnosti ESG rizika i izvještavanja o ESG-u. Podrška revizijskog odbora pozitivno je povezana s uključenošću interne revizije, osobito u pružanju uvjerenja nad ESG izvještavanjem. Istraživanje ističe potrebu za jačanjem uloge interne revizije u ESG izvještavanju razvojem specifičnih znanja i vještina te kontinuiranom podrškom revizijskog odbora, osobito u kontekstu novih regulatornih zahtjeva i rastuće važnosti održivosti za organizacije u Hrvatskoj.