Understanding the interactions between external and internal auditors in Indonesia: A theory of collaborative advantage / Fannia Rizal Putri

Fannia , Rizal Putri (2023) Understanding the interactions between external and internal auditors in Indonesia: A theory of collaborative advantage / Fannia Rizal Putri. Masters thesis, Universiti Malaya.

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Abstract

The study explored interactions between external and internal auditors in Indonesia during an audit engagement. This research aims to (1) examine how communications and communication and collaborations between External Auditors and Internal Auditors are operationalised in Indonesia, and (2) to understand how important interactions between external auditors and internal auditors are to the internal control systems in Indonesia. There is a lack of study exploring the interactions between external auditors and internal auditors which examines how they collaborate and communicate and the importance of external auditors and internal auditors’ interactions to the internal control systems, especially in developing countries such as Indonesia. To understand how collaboration between external auditors and internal auditors is operationalised during an audit engagement in Indonesia, a qualitative approach is chosen in this study. The Theory of the Collaborative Advantage lens is used as the framework of this study to assist the data collection phase. Semi-structured interviews were conducted with 16 participants: 8 external auditors and 8 internal auditors. The interview data is analysed using a thematic analysis approach. The Theory of Collaborative Advantage provides insights on the (1) Membership Structure, (2) Trust, (3) Common Aim, and (4) Power between external auditors and internal auditors in Indonesia. The findings indicated that collaborations between external auditors and internal auditors during an audit engagement in Indonesia operate smoothly due to a profound understanding and professionalism between the professions. The study also evidenced that good interaction between external auditors and internal auditors has gained sound internal control systems, specifically in detecting internal control deficiencies. The study contributes to the body of knowledge as the first study using the Theory of Collaborative Advantage in the auditing literature. The study demonstrated the significant importance of the operationalized communication and collaboration in practice between external auditors and internal auditors in Indonesia and its importance to the internal control system. Thus, understanding the operationalised between those professions may strengthen the corporate governance and reporting ecosystem.

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