Impact of Internal Audit Function on Internal Control Disclosure

Abstract

Regulation on companies’ reporting in the last few years has changed. Such changes appear as a reaction to the corporate reporting scandals around the world. In August 2012, Indonesian Capital Market and Financial Institutions Supervisory Agency issued rules relating to the submission of annual reports, which include disclosure of internal control. This study aims to examine whether there are differences in the disclosure of internal control in companies included and excluded in superior category and the influence of the internal audit function. Internal audit is a function of the control structure of entities, while in corporate governance, audit committee responsible for assisting the board of directors to ensure that the financial statements and internal control structure are presented adequately. This research was conducted using content analysis of the company’s annual report, which samples were grouped into two categories: included and excluded in superior category, following previous study. The result of the study found that: (1) there are differences in the disclosure of internal control in companies included and excluded in superior category , (2) there are many role of internal auditor in internal control, and (3) internal audit function directly influence the disclosure of internal control.