DR. TAMER M.RFAAH DR. DAAS I.KATRIB. University of Philadelphia, Amman, Jordan Faculty of Administrative & financial sciences Accounting Department

Transcription

1 ASSESS THE EXTENT OF THE APPLICATION INTERNAL CONTROL ELEMENTS EVALUATION AND ITS EFFECTIVENESS WHEN DOING AUDIT PROCESS -AN ANALYTICAL STUDY ON THE JORDANIAN BANKS AUDITORS- Abstract DR. TAMER M.RFAAH DR. DAAS I.KATRIB University of Philadelphia, Amman, Jordan Faculty of Administrative & financial sciences Accounting Department This research aimed to recognizing the elements of the internal control and developing them in accounting literature. It also aimed to detecting the extent of commitments of auditors in Jordanian banks to evaluate the components of internal control while doing the auditing process according to SAS NO.78. Issued by AICPA and to what the committee of supporting organization COSO recommends. All this has been done by a survey of a sample of auditors and by carrying out the necessary statistical test to check the assumptions. The researchers argue that it is necessary to expand when we examine the internal control to include all its five components. The researcher has also found out through field studies that the surveyed sample has medium commitments as far as the extant of dependence on the evaluation of internal control is concerned through testing its five components. The study shows that there are no differences in the points of views of the surveyed sample too. It also insists that auditors should expand in doing the evaluation in the internal control system. It is also recommended to make the administration of the enterprise aware of the importance of implementation the internal control system evaluation. On the other hand auditors should be technically and scientifically qualified with all the skills necessary to enable them to evaluate the elements of internal control effectively. Keywords: ASSESS ; EXTENT ; APPLICATION ; INTERNAL CONTROL ELEMENTS ; EVALUATION ; EFFECTIVENESS ; AUDIT PROCESS; ANALYTICAL STUDY ; JORDANIAN BANKS AUDITORS 1. Introduction: Internal control has a great interest by most auditors. The second standard of field work insists on the necessity of understanding, studying and evaluating the internal control as the foundation to plan the process of auditing and estimating the nature and size of auditing sample and time needed. It should also be the basis of the tests to carried out as well as determine the volume and the nature of the evidences to be collected. The importance of the internal control has been reflected on the auditing literature which has been explored because, in general, this leads to the best and most effective use when auditing is carried out. The concept of internal control has been greatly developed, it is no longer a mere means which COPY RIGHT 2013 Institute of Interdisciplinary Business Research 416

2 assures keeping properties, but it also becomes a set of integrated elements or components applied by highest administrations to make sure that the aims of the economic entity will be achieved. This will also help auditor to do the auditing and reaching to a neutral technical view showing how far do the financial statements prepared by the economic entity correspond to what is shown in the books and records, as well as going a real and fair idea about the financial position of the economic entity at the end of a financial period. 2. Research problems: The main problem lies in the little attention given to the test and checking of internal control components in the economic entity being under auditing. This, in truth, affects the final result of the auditor's final report. These two questions may summarize the problem: 1) Do the Jordanian banks auditors evaluate internal control elements according to COSO modeling when conducting the audit process? 2) How effective application of internal control standards elements by the auditors of the Jordanian banks, when doing auditing process. 3. The importance of the study: The importance of this study lies in the fact that the evaluation of internal control is the starting point in an auditor work. On the light of this evaluation auditors prepare other auditing procedures and determine the nature, size and the time of the samples to be checked. As a result the accuracy and safety of this step as well as the commitment to rules and standards of evaluating the efficiency of internal control will be the foundation to assure that other audit procedures are correct and accurate. 4. previous studies: 4.1: AL-Azimi study, 2012, titled: The role of administration council in applying the standards of internal control and its effects on achieving the goals of Kuwaiti industrial firms. This study aimed at knowing the role of administrative boards (councils) in applying the standards of internal control according to COSO and its effect on the achieving the goals of Kuwaiti industrial firms enrolled in the Kuwaiti stock market. The study assures that there is a strong relation between applying internal control standards and achieving the goals of financial reports and operating targets of the firm of the studied sample. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 417

3 4.2: Tucker, 2011, a study titled: An E- risk Primer. This study aimed at showing the effect of applying high technology on auditing as a profession on a sample of American industrial firms. The results can be summed up as follows 1. Information technology affects all the five components of the internal control. (Control environment, risks assessment, control activities, information and communication system, monitoring) 2. SAS94 standards require that the auditor has enough understanding of the internal control to plan the auditing process. 3. Information technology system contains a special internal control relating to important accounts. 4. the auditors should have a specific skills to understand the effect of information technology on the auditing process. For this reason, the auditor has to describe the specifications of general control and its applications. It is necessary to get all evidences relating to the efficiency of internal control when electronically tests are designed. 4.3: Ahmad's study (2002) "how far should an auditor depend on the components of internal control" This study concentrates on evaluating the internal control using classical approach in addition to asking about the internal control components adapted by auditors when they planned auditing procedures. The following points can be considered the most important ones in the study: 1. Much more attention is paid by auditors to the components of the internal control in the economic entity which are being checked. 2. The study shows that the order of the internal control according to their importance as follows: a. Communication and information system b. Control activities c. monitoring d. internal Control environment e. Risks assessment. 4.4: Beasly et. Al (2001) study. This study tried to analyze the causes which led to the failure of auditing in 46 cases in the U.S.A between 1987 and The study shows that 11 cases forming 24% out of the total failures were because of the overrated dependence by auditors on the internal control procedures being checked. This also results in the fact that they didn't do the necessary tests to discover the causes of the failure COPY RIGHT 2013 Institute of Interdisciplinary Business Research 418

4 and the weak internal control. The study also suggests a number of approaches to avoid that failure. The study recommends that the auditors should do more evaluation. It is also recommended that the internal control should not be carried apart from the other auditing procedures. It should be associated with auditing tests, taking into consideration the rang, nature and time of the tests to be done. 4.5: COSO study (1996) It is one of the most prominent studies relating to internal control. The main goal of this study is to develop a suggested model for evaluating internal control and to provide auditors with instructions which enable them to evaluate the checking of internal control systems of the units being under auditing. The study offers a complete frame for internal control and limits its five components (control environment, risk assessment, information and communication system, following up) This study also develops the process of testing the internal control system. which was limited to the evaluation of some traditional control activities such as: policies, procedures and ratifications is made by this study more comprehensive and more detailed. The study obligates auditors to study and evaluate the five components already mentioned when decide how far they should depend on the internal control while executing auditing procedures. Generally speaking, this study caused a real modification in the concept of internal control and its components. What differentiates the above study from the previous ones? this study has dealt with the environment of Jordanian firms through identifying to what degree auditors of Jordanian banks have applied testing the internal control effectiveness and its components according to COSO. 5. The goal research: This research aims at evaluating to what extent is the verification and testing of internal control components is applied effectively while auditing Jordanian banks. A sample of auditors of these banks have been surveyed to know the weaknesses of the checking process of the internal control and how to make sure that the evaluation of the internal control is carried out according to international auditing standards and COSO model requirements. The Ideal completion of an auditor's job can be summed up as follows: 1. To get introduced on the round to the real application of the internal control components evaluating according to COSO model by Jordanian auditors while carrying out the auditing process. 2. To determine the efficiency of applying these components evaluating by Jordanian auditors. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 419

5 6. Research hypotheses: This research depends on one of two basic hypotheses: 1. Auditors don't evaluate the efficiency of the internal control when they plan the auditing procedure. This leads to other sub- hypotheses: a. Auditors don't evaluate the environment of the control as one of the components of the internal control. b. Auditors don't take risk assessment as a component of the internal control. c. Auditors don't take into consideration the system of information and communication as one of components of internal control. d. Auditors neglect the control activities as one of the internal control components. e. Auditors don't evaluate the monitoring as one of the components of the internal control. 2. There is no contrast in the auditor's dependence in evaluation the internal control components while planning the auditing procedures. 7. Research methodology: The two researchers adapted the deductive and inductive methodology in order to achieve the goals of the research which depends on two integrated approaches. 1. Theoretical aspect: by reference to many resources, books, published researches in English and Arabic as well versions of standards and international organization in relation with the subject to introduce and elucidate the different sides of the internal control environment and the necessity to evaluate it in accordance with different rules and standards. 2. The practical aspect: this is done through a field study through which the scientific and practical application for evaluation components of the internal control in the Jordanian banks is by the point of view of the studied sample by using a questionnaire for this purpose. 8. The theoretical aspect: The theoretical section of the study includes: 1. The concept of internal control 2. The components of the internal control according to the model of committee of supporting organization (COSO): 1 st. internal control environment 2 nd. Risk assessment 3 rd. information and communication COPY RIGHT 2013 Institute of Interdisciplinary Business Research 420

6 4 th. Control activities 5 th. Monitoring 1. The concept of internal control The concept of the internal control has witnessed a gradual development to meet the fast successive changes in the economic life. Internal control is no longer only a means which ensures the maintenance of the company's assets from theft and embezzlement. The most important factors which affect the increasing importance of internal control are: (Kell et al, 1984:138) 1. The expansion of business scope of the economic entity which results in difficulty for the administration to directly follow up these works. 2. To prevent or minimize the occurrences of material misstatements by the auditors provided by the internal control. 3. Going to adopt the style of the sample to shorten the time and minimize the cost, taking into the consideration that there is an efficient internal control. The COSO, which is emerged from tread way, has defined internal control as being a set of processes accomplished by the administrative board of an organization, the administration and other people. Internal control is designed to provide a reasonable assurance as far as the goals of the organization are concerned (Frazier & Spradling, 1962:2) In the 8 th paragraph of the international standard on auditing titled as risk assessment and internal control of accountants (IFAC) has defined the internal control as being "all the policies and procedures taken by the economic entity to help in reaching its goals, namely to ensure a practical organized execution of all processes including commitments to administrative polices, protection of stocks, detecting and preventing fraud and mistakes, ensuring the accuracy and completeness of accounting records and providing financial information that can be relied up on in due course ". (IFAC, 1999:127). 2. Internal control components according to the committee of supporting organization (COSO). In the 1988 the AICPA issued the auditing standard SAS NO.55 titled as consideration of the internal control structure in a financial statement audit. According to this standard the structure of internal control is consisted of three main components (AICPA, 1988:158): 1. Control environment 2. Risk assessment 3. Control activities The following table shows the main and sub_ components of the internal control structure according to SAS NO.55. *The sub_ components of the internal control structure. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 421

7 1.Environment control 2. Risk assessment 3.Control procedures The sub_ components of the internal control environment The aims to be reached Kinds of control procedures 1. The philosophy of the administration and its operational type 2. organizational Structure 3. auditing committee 4. methods to determine the authority and responsibility 5. Administration control methods 6. The internal audit function. 7. Policies and procedures of personal management. 8. External influences 1. Legitimacy 2. Authorization 3. Completion 4. Evaluation 5. Classification 6. Timing 7. posting and summarizing 1. Adequate segregation of duties. 2. Suitable authorization procedures. 3. Appropriate vouchers an records for authorization. 4. material control on assets and records. 5. An independent verification of performance. (Arenes & lobbecke, 1988:281) The COSO went further in determining the internal control components by issuing a report in That report is titled "Internal control _ Integrated framework " The report included five components for internal control as follows: (Boynton, et al, 2001:329_330). 1. Internal Control environment. 2. Risk assessment. 3. Information and communication. 4. Control activities. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 422

8 5. Monitoring. The paragraph NO. AU 319 of SAS NO.78 refers to the five components and explains them as follows: 1. Internal Control environment: It means all policies and procedures that reflect the trends of the supreme administration and the owners of the economic entity far as the importance of internal control is concerned. There are other factors which affect the internal control (AL_ Quassimi, 2000:8-9). There are several factors can be summed up as: a. Integrity and ethical values of the economic entity's administration. This includes integrity and ethical values in the administration's procedures to reduce or eliminate all temptations which pushes the workers to commit illegal acts. This can be determined through policies, instructions and regulations inside the economic entity in order to find the perfect model (arense, et al, 2005: p274), including integrity and ethical values in the relation of the economic entity with other parties like (customers, workers, stockholders, an whole society (Ingram et al.2005:239). b. Commitment to efficiency. If the system of the internal control should work well, it is a must that those who are in charge if carrying out. This system should be highly qualified, trained and having all the skills needed. This in turn, imposes on the administration to put job description which show the duties required for each of the jobs and the knowledge and skills needed to carry out the tasks efficiently. c. Administrative board and auditing committee: The auditing committee is the junction between the administrative board and the internal auditor. Its function is to suggest and assign the manager of the internal control, his salary and accepting his resignation. Another job of the committee is to suggest assigning the auditor to the general board or the administrative board. The committee also discusses all his reports including his final report concerning the financial statements. d. Administration's philosophy and operating system: It means the administration idea about managing the operational systems. Some managers take care of the financial reports and of preparing and using the estimated budget to acquire the goals of the economic entity, while others don't. in some administration the authority is concentrated in a limited number of individuals. Other administrations depend on decentralized power. In all cases, administration is regarded as an important factor in evaluating the risks of control. e. Organizational structure: The organizational structure shoes the relation between the sub_ administrations and determines the communicating channel among them. The structure also points out the responsibilities and powers. Thus, understanding and studying the organizational structure enables auditors to evaluate the control environment correctly. Giving big and many responsibilities to a limited number of individuals may results in mistakes due to the work pressure. On the other hand, the concentration of power in hands of a limited group of peoples creates a suitable climate for cheating and manipulation f. Authorization and responsibility determination: A clear authorization and responsibilities determination motivate individuals to do their best while doing their jobs and increases the efficiency. Individuals usually COPY RIGHT 2013 Institute of Interdisciplinary Business Research 423

9 care to do things well if they already know that they will be questioned for any failure and will be awarded if they are efficient (Noor, 1996:172). More than that, the determination of authorization responsibilities increases the efficiency of the administrative control on the different tasks and functions in the economic entity. g. Personnel procedures and practices: It is taken for granted that efficient personnel ensure the accuracy and strength of the control system. To achieve this, the economic entity should found the suitable policies and procedures to assign employees specially the accountant's staff, which in turn reduces the possibility of committing material mistakes in the financial reports. 2. Risk assessment: Regardless to their size, structure or their industrial zone, all economic entity suffers from internal and external real risks. (WILKINSON ET AL. 2000:240), Examples of these risks are: Changes in consumers' tastes, threats of competitions, system changes, changes in economical factors (interest rate for example) And individuals who break down the policies and procedures for the economic unit (Warren, 2000: 183). It is very essential for the economic unit to try to know the size of these risks and other expected ones by assessing them. The risks of control have been defined by the IFAC in the international standard of auditing ISA NO. 400 titled "risk assessment and internal control" paragraph 5 as "the risks of mistaken information which accurse in an account balance or in a set of transactions which may be physical by themselves or when they are added to other mistaken information in other balances. Generally speaking, this mistaken information can't be detected or corrected by the accounting system or the appropriate internal control in due course. (IFAC, 1999:127). An auditor assesses the control risks and determines their level to help him to determine the range and nature of the required evidences in the auditing process. He also evaluates the efficiency and procedures of the control structures in detecting, preventing and correcting the material misstatements in the financial records. An auditor estimates the control risks and lower levels when he believes that the internal control is well designed and works as described. On the contrary control risks will be estimated at a higher level when the auditor doesn't work as described. In case of the evaluation of the internal control can't be relied on, the auditor has to ignore it and follow the detailed auditing. (AL_ Taimimi, 1998:85) 3. Information and communication: The system of information and communication identifies, collects, analysis, classifies and records the operations of the economic entity. The information system related to financial reports _ including the accounting system _ consists of : 'ways and records set for recording, processing, summarizing and reporting the transactions of the economic entity, as well as maintaining the financial accountability of the assets, liabilities and ownership equities.(moscove et al. : ). An effective communicating system ensures : a. Legality for recording the transactions since control procedures don't allow recording fake transactions in accounting journals and records. b. The Accuracy of process authorization to ensure the maintenance of the assets in the economic entity. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 424

10 c. A comprehensive recording of the transactions so that the control procedures will prevent the omission of any transactions which has already been recorded. d. Accuracy in measuring the value of the transactions and safety in calculating and recording the transactions which ensure that they will be shown in the financial statements in their correct value. e. Accuracy in classifying the transactions according to the accounting index to ensure that they will be displayed in the financial statements. f. The recording of the transactions in due time to ensure the recording of all the transactions which have taken place in their relative accounting period. g. Safety in posting transactions in sub records to ensure the correctness of summarization and the preparation of the financial statements. 4. Control activities: They are defined as all polices and procedures taken by the administration to achieve aims of the economic entity. They help us to make sure that all necessary steps have been taken to meet risks which threaten fulfilling the goals of the economic entity.(boockholdt:1999:404). Though the economic unit may take any of the many available measures. The following set of measures is considered the most convenient for auditing financial statements. (Rittenberg & Schweiger : ). a. Appropriate segregation of duties. b. Accuracy of processes and activities authorization c. Appropriate documents and records. d. Material control on assets and records. e. Independent verification from the efficiency of the control activities. 5. Monitoring: The administration carries out the monitoring process to detect the extent of control execution in accordance with its design and possibility to modify them according to the surrounding circumstances (Arens et al. 2005:281). This can be done through continuous follow _ up may include supervising training programs, helping the employees, performance monitoring, correcting mistakes and the protection of assets in the economic entity through supervising the employees who are authorized to use these assets. (Romney & Steinbart :2003: 212). The independent evaluation can be fulfilled when the administration decides from time to time to do independent concerning the efficiency of the internal control for the economic entity. This evaluation can be applied on all processes of the internal control or on a selected set of processes. The evaluation can be carried out by the managers through evaluating the internal control within their responsibilities. (Bookholdt, 1999: 412). COPY RIGHT 2013 Institute of Interdisciplinary Business Research 425

11 The practical frame of the study 1. Study sample and society: To select the study assumption and verify their correctness, a questionnaire has been designed and its stability and validity for scientific research has been tested through stability tests. This questionnaire has been applied on the members included in the research, namely Jordanian auditors in Jordanian banks. The questionnaire has been distributed to a sample of auditors. Stability: The stability of the questionnaire _ "the study Toole" _ has been verified by applying the reliability coefficient according to alpha cronbach. As it is indicated in the following table, the reliability coefficient amounts to 97.1% which is a high percentage. For this reason we can accept the questionnaire as a suitable Toole for the scientific research. Case processing summary Cases N % Valid Excluded Total List wise deletion based on all variable in the procedures Reliability statistics Cronbach's alpha n. of items Test of normal distribution of data: The one _sample kolomogrorov _ simirnov (K-S) test below shows that the sign values of the five axes are 0.818, 0.186, 0.634, and respectively. All these values are more than 5% which means that the data follows the normal distribution. For this reason the researcher will use special parametric devices for the data which follows the normal distribution to do needed tests necessary to verify the research assumption. (The committee of authors and translators, Dar Al_Shoa'a, ). COPY RIGHT 2013 Institute of Interdisciplinary Business Research 426

12 One sample kolmogorov _ smirnov test N Normal parameters a,,b mean Std. deviation Most extreme differences absolute Positive Negative Kolmogorov_smirnov z Asymp. sig. (2_tailed) Meanx1 Meanx2 Meanx3 Meanx4 Meanx _ _ _ _ _ A: test distribution is normal. B: calculated from data Distributed questionna ires Percent age % 2. Data analysis and hypotheses verification a. Results of the questionnaire distribution. After designing, arbitrating and distributing the questionnaire on the research sample the following results have been achieved after distribution and sorting. The following table shows a number of questionnaires distributed on the research sample. Refunded Percent Non_ Percent Questionn Percent Questionnaire questionna age % refund age % aire that age % s that can't be ires ed can be analyzed analyzed Percent age % From the previous table it can be noticed that the number of the analyzable questionnaire is 23 and the percentage of the refunded one is 87.5 which is a sufficient and acceptable percentage to analyze the statement. b. The results of the statically analysis and hypotheses test. To analyze data and test hypotheses the researcher has adapted the statically program SPSS. The researcher uses one sample T test (one _ sample) according the supposition which states that: the average of the items in each group exceeds the standard value _ neutrality _ of each of the research variables COPY RIGHT 2013 Institute of Interdisciplinary Business Research 427

13 Standard of acceptance or rejection: The null hypothesis is accepted when the mathematical average is less than 3 of the standard value whether it is for all the variables of the hypothesis or for each one of them. When significance level is at 0.05 the test is considered of statically significance (meaningful) but not over Results of analyzing for the first hypothesis: The first hypothesis states that: the auditor doesn't evaluate the extent of efficiency of internal control while planning the auditing process: From this supposition the sub - hypothesis: 1. The auditors don't evaluate the internal control environment as one of the internal control components. 2. The auditors don't evaluate risk assessment as one of the internal control components. 3. Auditors don't evaluate the information and communication system as one of the internal control components. 4. Auditors don't evaluate the control activities as one of the internal control components. 5. Auditors don't evaluate monitoring as one of the internal components. The following table shows the results of the statistical analysis of the first sub - hypothesis relating to the commitment to evaluate the control environment as one of the internal control components. The set of questions in the questionnaire concerning the mean symbolize these results.(questions 1_13). One sample statistics: N Mean Std. Std. error Deviation Mean Meanx One sample test: Test value = 3 95% confidence Interval of the T Df Sig.(2_ Men Difference Tailed) Difference Lower upper Menx COPY RIGHT 2013 Institute of Interdisciplinary Business Research 428

14 From the above table it is noticed that the mathematical average is 3.83 and with a standard deviation of The average is larger than the standard value (3). The significance of the test is also clear. The significance value is 0.00 and is less than 5% so the results can be relied up on. This result has pushed the researchers to accept the alternative hypothesis for the first sub_ hypothesis. Consequently, auditors commit to evaluate the environment control as one of the components of the internal control when doing the auditing process. the following table shows the results of statistical analysis of second hypothesis relating to commitment to risk assessment as one of the internal control components, the set of questions in the questioners summarized by the questions (14-24) One_ sample statistics N Mean Std. Std. error deviation mean Meanx One _ sample test Test value =3 95%confidence Interval of the Sig.(2_ Mean Difference T Df Tailed) Differences Lower Upper Meanx o o From the above mentioned table you can notice that the mathematical average amount to 3.69 with a standard deviation of The average is bigger than the standard significance value (3). The high significance of this test is very clear. It amounts to 0.00 which Is less than 5%. This percentage gives the test a reliability of 95% and consequently it results can be dependable. All of this pushes the researcher to accept the alternative supposition for the second sub_ hypothesis. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 429

15 As a result we can say that auditors have treated the risk assessment as one of the internal components of the internal control while auditing is done. The following table shows the results of the statically analysis for the sub_ hypothesis relating to the evaluation of the communicate on and information system as one of the internal control components as symbolized in the result of the third set of questions in the questionnaire. (question 25-33). One_ sample statistics N Mean Std. Std. error Deviation mean Meanx One_ sample test Test value=3 95% confidence Interval of T Df Sig.(2_ Mean Difference Tailed) Difference Lower Upper Meanx From the above table we see that the mathematical average amounts to 3.79 with a standard deviation of The average is bigger than the standard value (3). We also noticed the high significance which amounts to sig.=0.00. it is less than 5%. This makes the research accept the alternative hypothesis for the third sub_ hypothesis of the first assumption. This indicates the auditors have evaluated the information and communication as being one of the components of the internal control while doing auditing. The following table expresses the results of the statically analysis of the sub_ hypothesis relating to the application of evaluating control activities as one of the internal control components as shown in the results of the questions in the fourth mean in the questionnaire.(questions 34-41) One_ sample statistics N Mean Std. Std. error Deviation mean Meanx COPY RIGHT 2013 Institute of Interdisciplinary Business Research 430

16 One_ sample test Test value=3 T Df Sig.(2_ Mean 95% confidence Interval of Difference Tailed) Difference Lower Upper Meanx From this table we can see that the mathematical average amounts to 3.88 with a standard deviation of The average is bigger than the standard value (3). The high significance of the test amounts to sig.=0.00, which less than 5%. Consequently the results can be adopted. All this makes the researchers accept the sub_ hypothesis of the forth supposition which states that auditors have committed to evaluate control activities as one of the components of internal control when doing auditing. The following table expresses the results of the statically analysis of the sub_ hypothesis relating to the application of evaluating monitoring as one of the internal control components as shown in the results of the questions in the fifths mean in the questionnaire.(questions 42-47) N One-Sample Statistics Mean Std. Deviation Std. Error Mean meanx t df One-Sample Test Sig. (2- tailed) Test Value = 3 Mean Difference 95% Confidence Interval of the Difference Lower Upper meanx From this table we can see that the mathematical average amounts to 3.89 with a standard deviation of The average is bigger than the standard value(3). COPY RIGHT 2013 Institute of Interdisciplinary Business Research 431

17 The high significance of the test amounts to sig.=0.00, which less than 5%. consequently the results can be adopted. All this makes the researchers accept the sub_ hypothesis of the fifths supposition which states that auditors have committed to evaluate the monitoring as one of the components of internal control when doing auditing. According to the results of testing the five sub_ hypothesis concerning the first hypothesis the researchers accept the sub_ hypothesis relating to the first assumption. That is to say that auditors commit to evaluate the efficiency of internal control when auditing is being done. The results of the analyzation of the second hypothesis: There is no difference among auditors on how far do the adopt the efficiency of the components of the internal components when auditing is being carried out. As far as the internal components are concerned the researcher has adopted ANOVA test to verify the second hypothesis and to know if there are any differences in the answers of the auditors in the studied sample. Regarding to internal control components the results are represented in the following table Anova Levene statistic Df1 Df2 Sig The above table shows that the homogeneity test indicates that the used documents are homogeneous. It amounts to sig.=0.55 which more than 5%. Consequently ANOVA test can be applied on the answers of the individuals in the sample. ANOVA Between Groups Within Groups Total Sum of squares Df Mean square F Sig The above ANOVA test indicates that the significance value is 0.92 which is bigger than 5%. This means that the non_ significance test trust is at level 95%. This in turn shows that there are no statically indication about differences among the COPY RIGHT 2013 Institute of Interdisciplinary Business Research 432

18 answers of the auditors about their adoption of evaluating the components of the internal control when doing the auditing process. Results and recommendations: Results 1. : the concept of internal control has been developed in the auditing literature to include the five components which are considered as the scale upon which the efficiency of internal control can be evaluated. 2. It is very important that internal control components give great interest by auditors while studying and evaluating the internal control system of the enterprises being audited. 3. The checking and evaluating of internal control components help in determining the sample size for the different auditing procedures. This also will contribute in designing, selecting and executing. The auditing procedures as well as in assuming the volume of auditing risks. 4. The checking and evaluating of internal control components in determining the volume and nature of evidence to be collected and evaluated. This is because the volume of evidence is reversely proportional with the durability, strength and efficiency of internal control. 5. The field studies show that auditors of Jordanian banks give medium interest to the evaluation of the internal control components. The mathematical average of the five components of the internal control is 3.83, 3.69, 379, 3.88 and 3.89 respectively. This rate is slightly higher than the standard average which is (3). The test has a statically significant of 5%. The significant value of all the sub_ hypothesis relating to the internal control components is less than 5%. 6. Because there are not any statistically significant differences in auditors' answers concerning their dependence on evaluating internal control components when doing auditing gives variation test a null significance at trust level of 95%. Recommendations: 1. Expansion of evaluation procedures relating to the internal control system in accordance with SAS NO.78 so that all components of internal control are inducted. 2. Enterprises the management of the establishment to execute a selfevaluation of the internal control system by paying much more attention to reports and planning budgets in a way so that the efficiency and effectiveness of evaluating the internal control components are raised. 3. To held training courses for auditors to be able to put up with all the break offs relating to internal control. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 433

19 4. Qualifying auditors to acquire the scientific and professional skills needed to ensure that they will evaluate the internal control components effectively. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 434

20 References 1. Beasley, Mark S., Carcello, Joseph V.and Hermansons, Dana R., top 10 audit deficiencies, Journal of accountancy, April COSO, internal control- integrated framework excutive summary, Site 3. Tucker, X.L.(2011), an e-risk primer (Altamonte springs, FL:the institute of internal auditors, Research foundation, 4. Frazier, David. and L. Scott Spradling (1996) 'the new SAS NO.78' State society of certified public accountants, CPA journal, New York. 5. Arens, Alivin A. and James K Lloebbecke, (1988), auditing and integrated approach, 4 th ED., Englewood Cliff, N.J:prentice- Hall, Inc. 6. International federation of accountants (IFAC) (1999), HANDBOOK TECHNICAL PRONOUNCEMENTS, ISA American institute of certified public accountants (AICPA) (1988), Professional Standards, New York. 8. Arens, Alvin A., Randal J. Elder and Mark S. Beasley (2005), Auditing: An integrated approach, Person Education, Inc., (10 th ed.). 9. Boockholdt, J. L., (1999), accounting information systems, McGraw-Hill / Irwin, Inc., (5 th ed.). 10. Kell, Wlter G., William C. Boyton, and Richard E. Ziegler, (1984), modern auditing, John Wiley &Sons, Inc., (3 rd ed.). 11. Moscove, Stephen A., Mark G. Simkin, and Nancy A. Bagranoff, (2001), Core concepts of accounting information systems, John Wiley &Sons, Inc., (7 rd ed.). 12. Rittenberg, Larry E., and Bradley J. Schweiger, (2001), auditing: concepts for a changing environment, Harcount, Inc., (3 rd ed.). 13. Romney, Marshall B., and Paul John Steinbart, (2003), accounting information systems, Prentice hall, Inc., (9 th ed.). 14. Vaassen, E. H. J., (2002), accounting information systems: a managerial approach, John Wiley &Sons, Inc., (1 st ed.). 15. Warren, Carl S., James M. Reeve, and Philip E. Fess, (2002), accounting, Thomson / South western, (20 th ed.). 16. Wilkinson, Joseph W., Michael J. Cerullo, Vasant Raval, and Bernard wong-on-wing, (2000), accounting information systems, John Wiley & Sons, Inc., (4 th ed.). 17. Al-Azimi, Fayez Marzouk, the role of boards of directors in applying 18. Ahmad, Muhssen Babiki 2002, how do auditors depend on the evaluation of internal control components. 19. Al-Tamimi, Hadi (1998). An entrance to auditing: practically and theoretical. 20. Al-Quassimi, Hatim Internal control. 21. Jumoha, Ahmad Helmi/ Moaad Raddi/ Abo-Al Nasser nour (1998): basics of auditing. 22. Authors and translations committee, (2007) statistics using SPSS. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 435