Internal Audit Function and Enterprise Risk Management Effectiveness Among Malaysia Consumer Products Industry

Internal audit function (IAF) plays an increasingly important role in the corporate governance landscape in Malaysia. Besides that, IAF also involved in risk management in providing an assurance on the effectiveness of the risk management process. Bursa Malaysia has mandated that companies have to disclose whether the IAF is performed in-house or outsourced, and the costs incurred in the financial year. Therefore, the purpose of this study is to investigate the association by using these unique data concerning on IAF have any influence on the enterprise risk management (ERM) effectiveness. The final sample of this study consists of companies from consumer industry which are listed in Bursa Malaysia for the year 2012 to 2015. Data was further analysed using multiple regression analysis to examine the relationship between internal audit function attributes and ERM effectiveness. The findings show that, the amount of investment in internal audit function is significantly related to ERM. However, this study did not find any association between the IAF sourcing arrangement and ERM. The results can only be generalised to the consumer industry companies listed in Bursa Malaysia. This study provides with valuable insights into the importance of effectiveness of IAF in process for monitoring and thus help increase the effectiveness of ERM.