Professional Documents
Culture Documents
Control Effectiveness
(Case of PT. Garuda Indonesia, (Persero) Tbk.)
Undergraduate Thesis
A thesis submitted as a partial fulfillment of the requirements for the degree of Sarjana Ekonomi
in Faculty if Economics and Business
By:
Nadhira Astari Prasetyaningtyas
11/311426/EK/18231
CHAPTER I
INTRODUCTION
1.1.
1.2.
Research Problems
The problems that need to be addressed in this research will be:
1)
How internal auditor independency affect the PT. Garuda Indonesia (Persero)
Tbk. internal control effectiveness?
2)
How internal auditor competency affect the PT. Garuda Indonesia (Persero) Tbk.
internal control effectiveness?
3)
How internal auditor integrity affect the PT. Garuda Indonesia (Persero) Tbk.
1.4.
1)
2)
3)
1.5.
Research Method
This research will use the mixed methods approach which brings together approaches
that the included in both the quantitative and qualitative formats (Creswell, 1999). The
variables used are internal auditors quality as the independent variable and internal control
effectiveness as the dependent variables.
Researcher will conduct the research on PT. Garuda Indonesia (Persero) Tbk to collect
the necessary data, with some basic approaches as follows:
a. Survey to the respndents through questionnaire
b. Interview
c. Documentation
After the date have been collected, the next step is to analyze and test the data through
several kinds of statistical tests, they are validity and reliability test, classic assumption test.
Then to test the hypotheses will be using multiple linear regression, T-test and F-test
1.6.
CHAPTER I: INTRODUCTION
This chapter describes the background of the research, the importance of it,
problems formulation, purpose if the research, contribution of the research, border
of the problems, and the writing system
CHAPTER II: LITERATURE REVIEW AND HYPOTHESES DEVELOPMENT
This chapter consists of some relevant literature reviews to support the research
about SOEs internal control, internal auditor quality, and of COSO Internal
Control-Integrated Framework. In this chapter, researcher also discuss the
research framework and hypotheses development.
CHAPTER III:
RESEARCH METHOD
This chapter give general view on how the research will be conducted. As well as
discussion about the population and samples used in this research, data collection
method, data development technique, and data analysis and interpretation
technique
CHAPTER IV:
This chapter consists of two sections, they are (1) company profile section, which
explain briefly about the company; and (2) the data analysis section, will cover
the discussion on the result of both validity and reliability test, data analysis, and
the result.
CHAPTER V: DISCUSSION AND CONCLUSION
This chapter consists of the conclusion of the research, the implication of the
research result, limitation of the research and suggestions for the next researches.
CHAPTER II
LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT
2.1.
Internal Audit
The Institute of Internal Auditors (IIA) defines internal auditing as:
Internal auditing is an independent, objective assurance and conducting activity designed
to add value and improve an organizations operations. It helps an organization accomplish
its objectives by bringing a systematic, disciplined approach to evaluate and improve the
effectiveness of risk management, control, and governance processes
Boynton and Johnson (2006) later elaborate the definition then it can be derived that
there are four essential parts of internal audit:
1. Internal which indicates the auditing activities are conducted within an organization.
The organizations employees are able to do the auditing activities, or it can be from
external parties and outsourced to serve the entity
2. Independent and objective which obviously stated that the auditors judgement
should be free of bias to have value.
3. Systematic, disciplined approach, implies that auditors should follow professional
standards as the guidance to conducting auditing activities.
4. Helps an organization accomplish its objective, indicates that internal auditing is
exist to benefit the entire organization with the guidance of organizational goals.
Internal audit is likely to be the only function within an organisation that has deep
understanding of risk and control. They work with the board, the audit committee to
embed risk management and internal control into the organisation as a whole with
provide risk management and control advice to relevant staff accross organisation,
provide independent and objective assurance to the board about the adequacy and
effectiveness of key controls and other risk management activities across the
organisation, and act as risk and control educators across the organisation (Pickett, 2005)
The Institute of Internal Auditors (IIA) is recognized nationally and
internationally as leaders in establishing professional audit standards that provide a
framework which is essential to meet the responsibilities of internal auditors and the
internal audit activities. IIA standards number 2120 explain that one of internal audit role
is to evaluate the effectiveness and contribute the improvement of risk management
process. Continue to standard number 2030, audit activity must assist the organization in
maintaining effective controls respnding with risks by evaluating the effectiveness and
efficiency and promoting continuous improvement.
2.1.2.
familiar called as IIA standards in 2008 and have been updated the latest was October 2012.
The structure of the standards is divided into two: (1) Attribute standards, and (2)
performance standards. Attribute standards address the attributes of organizations and
individuals who perform internal audit activities, while the performance standards provide
the quality criteria against the performance of internal audit services.
Researcher will emphasize more on the three categories of independency,
competency, and integrity of internal auditor, which will be used as the independent variable
of the research.
2.1.2.1.
2.1.2.2.
The IIAs IPPF (2011) elaborate the rules of conduct about internal auditors
competencies are:
1. Internal auditors should engage only in those services if which they have the
necessary knowledge & experience.
2. Internal auditors should perform internal auditing services in accordance with the
international standards for the professional practice of internal auditing
3. Internal auditors should improve their proficiency and the effectiveness and quality of
the services.
2.1.2.3.
2.2.
Internal Control
Moeller (2009), internal control is one of the most important and fundamental
concepts that business professionals at all levels and both internal and external auditors must
understand.
The importance of internal control extends beyond only accounting and financial
matters, and includes all enterprise processes. Moeller then add explanation an enterprise
unit or process has good internal controls if meet several criteria:
1. Accomplishes its stated mission in an ethical manner
2. Produces accurate and reliable data
3. Complies with applicable laws and enterprise policies
4. Provides for economical and efficient uses of resources
5. Provides for appropriate safeguarding of assets.
Monitoring
Theoritical Framework
The relationship between variables used in this research can be illustrate as:
H1
H2
H4
2.4.
Hypothesis Development
2.4.1. Relationship between internal auditor independency and internal control
effectiveness
The importance of independent auditor is emphasized by the US Securities and
Exchange Commission (SEC) who required every registrant to include an internal control
report in its annual report, and its independent auditor to issue an attestation report on
managements assessment of the companys internal control over financial reporting
(SEC 2003a, 1).
Krishnan (2004) found a negative association between the proportion of
independent members in the audit committee and the existence of internal control
problems. Independency is not only a slogan but it is crucial to have in order to have an
effective internal control and its function can work properly. It is supported with a
research by Yusrina Adani who found there is a strong relationship between internal
auditor independency and internal control. Another similar research Desyanti and Ratnadi
(2008) showed the independency significantly affect the effectiveness of implementation
CHAPTER III
RESEARCH METHOD
in internal audit unit to collect the primaryboth quantitative and qualitative-data, with
some basic approaches as follow:
a. Survey to the respndents through questionnaire
The questionnaires prepared by a set of questions which later will be weighted
using the Likert scale. This scale has score range from 1 to 5 for each question
answered. Answer varies from satrongly agree (sangat setuju) to strongly disagree
(sangat tidak setuju).
Questions formed are about internal auditor attitudes toward an event by adopting
from several previous researches with similar variables and proxies, which are
reliably and validly tested. Questionnaire about internal auditor independency
adopted from Lintings research (2013), internal auditor competency adopted from
Putras research (2012), integrity questionnaires adopted from Yennys research
(2012), while the Internal control effectiveness questionnaires adopted from Nettys
research (2013).
Questionnaires will be distributed to all population 34 employees, or the
population of the internal audit unit of PT. Garuda Indonesia (Persero) Tbk head
office, Jakarta.
b. Interview
To complement the result of the resarch, primary data will also be collected
through a face-to-face interview scheme with the internal auditors and several auditee
which will be randomly chose. They will be asked several questions about the
independence, competence, and integrity of internal auditors in conducting audit
activities. The interview also will be submitted to the audit committees who are
responsible to reviewing the adequacy and effectiveness of companys internal
control system. Then later the anwers from interview will be intepret qualitatively by
the researcher.
Scale
Ordinal
(6 questions)
Ordinal (6 questions)
Ordinal (8 questions)
Researcher will implement the Cronbachs Alpha statistical test to measure the
reliability. There are three classification of reliability in Cronbachs Alpha
(Sekaran, 2010):
a. Cronbachs Alpha 0.8 1.0 = good reliability
b. Cronbachs Alpha 0.6 0.70 = acceptable reliability
c. Cronbachs Alpha < 0.6 = poor reliability
Hypotetical testing will implement the T-test and F-test:
1. T-test
The objective to have this test is to examine the minor hypothesis,
which is the effect of independent variable to the dependent variable
partially. There are some criterias that should be met in the T-test
(Herawaty, 2014):
2. F-test
a= Constanta
X 1it =
X 2it
Coefficient of Independent
variable
= error
X 3 it=