The Effects of internal audit structure on perceived financial statement fraud prevention.

SYNOPSIS: This inquiry examines whether internal audit reporting manner of making and internal audit sourcing arrangement affect financial statement users' perceptions of ability of the internal audit function to intercept financial statement fraud. A scan of lending officers finds that in-house internal audit departments that report to senior management are perceived as les able to provide protection against fraudulent reporting compared to in-house departments that report solely to the board of directors' audit committee. This finding is particularly important in light of the SEC's novel consideration of whether the audit committee should be directly responsible for oversight of the internal auditor.