AN EXAMINATION OF THE CONFORMANCE OF BANK INTERNAL AUDITORS WITH INTERNAL AUDITING STANDARDS

This study was conducted to determine the degree of compliance of internal bank auditors to the professional practice standards for internal auditing adopted by the members of The Institute of Internal Auditors in 1978. The first phase of the study consisted of a review of the historical perspective of internal auditing from approximately 1900 to present. The changes in the environment in which business was conducted was reviewed, and those changes were related to the development of the field of internal auditing. Particular emphasis was devoted toward the development of internal auditing in the banking industry.; The need for the development and adoption of standards was then explored, and the process through which the internal auditing standards were developed was compared and contrasted with that of the public accounting profession. The standards development process for both professions were related to the changing environment which had previously been discussed.; A questionnaire was designed and mailed to the director of internal auditing at 400 of the largest 1,000 banks in the United States. A response rate of approximately 77 percent was obtained. Since the data were primarily nominal and ordinal in nature, statistical tests were limited to various nonparametric tests in which the distribution of the population need not be known.; The results of the study indicated a statistically significant degree of correlation between certain attributes of a bank's internal audit department and the degree of compliance with the standards. The size of the bank as measured by total deposits, the number of personnel on the audit staff, and the number of the staff holding a professional accounting certification were correlated to the degree of compliance. In addition, the results also revealed that banks in which the director of internal auditing was a member of The Institute of Internal Auditors are able to achieve a higher degree of conformance to the standards.; Recommendations were made as to where bank internal auditors should devote their efforts in order to achieve a higher degree of conformance to the standards in the future. Several areas for future research were also identified.