The Certified Practising Accountant (CPA) Australia carried out a research to investigate the correlation between a company’s internal audit function and its external audit fees. This study is significant in the current era where strong corporate governance practices are emphasized. The aim of this research is to determine how both internal and external auditing work together to ensure the overall financial reporting of a company is reliable. The results of this research will be beneficial for companies and audit firms, as it will reveal whether firms utilize the presence of internal audit to complement their external audit function and strengthen their control/monitoring environment. The study collected data from 300 exchange-listed companies in Australia for the year 2022, including audit fees paid, firm turnover, and the presence of internal audit function within the company. This data is stored in the file “ECOM5005_BR_2023_s1_data.xls”, containing the following variables. Column A: Firm ID • This refers to assigning a unique identification number to each company included in the sample, with the IDs ranging from Firm 1 to Firm 300. Column B: Audit fees • This indicates the overall amount paid by the company to their external auditor/s for their auditing service during the fiscal year ending 2022. Column C: Turnover • The term “Turnover” relates to the yearly revenue earned by the company and it has been classified into three different categories. 1 = firms with turnover less than $30 million (small businesses). 2 = firms with turnover between $30 million and under $300 million (mid-sized businesses). 3 = firms with turnover more than $500 million (large businesses). Column D: Internal audit function • This determines whether a company has its own internal audit function or not Y = the firm has an internal audit function. N = the firm does not have an internal audit function. Present a report of your findings (by answering three questions below) to the CPA Australia. 1. Do the audit fees vary among the three turnover categories? 2. Does the internal audit function of the company relate to its turnover? 3. Is there any indication that firms with an internal audit function pay higher audit fees compared to those without it?
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