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Optimal Internal Audit Timing.

John S. Hughes

Associate Professor Graduate School of Business Administration, Duke University. 1

Internal audits derive their utility from the information which they provide about the effectiveness of the firm's system of internal control and from the effects they may have on the behavior of that system, both before and after the audit has been performed. This study concentrates on the informational aspects of internal audits, with particular attention being given to audit timing. A sequential decision process is defined wherein the objective is to minimize expected total discounted costs. The decision process can be characterized as an infinite-state, time-varying Markov decision process, and, accordingly, the decision model can be called a Markov decision model. Solutions to this model are obtainable by dynamic programming.

DOI

10.2308/tar-4493486

Volume

52 (1)

Pages

56-68

Language

en

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BibTeX

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