Research Espresso | Apr 2022 Issue 14

ISSUE

14 Apr 2022

Impactful Research Insights for Business

Research INSIGHT

Internal audit : from ticking boxes to driving managerial excellence

HKBU School of Business x Meltwater

Why a Financial, Analytical Mindset Could Be Key to the World’s Economic Reboot

on social data and consumer needs, values and motivation

Read More at: partners.wsj.com/hkbu/economy-reboot/

The School of Business joined Meltwater, a global media monitoring and social listening

platform, on 27 April 2022 for a webinar titled "Using social data to understand the needs, values and motivation of your audience". Dr. Su Lei, Associate Professor of the Department of Marketing, presented insights from an academic perspective on consumer judgment and decision-making, examining how social or visual marketing factors influence product evaluations and purchase intentions, and providing practical managerial implications for practitioners. Mr. Melvin Chng, Area Director of Hong Kong at Meltwater, also shared how Social Media data teamed up with AI allows marketers to create a marketing strategy based on audience insights far beyond demographic and socioeconomic factors. The enthusiastic discussion attracted over 140 marketers to attend, followed by a keen Q&A session.

Click on the video below to view a replay of the webinar.

04 Research INSIGHT

Internal audit: From ticking boxes to driving managerial excellence

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Research

EXCELLENCE

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Upcoming

EVENTS

Research Espresso / Apr 2022

4

Research INSIGHT

Internal Audit:

From ticking boxes todriving driving mana to manag manag Chen, Y., Lin, B., Lu, L., & Zhou, G. (2020). Can Internal Audit Function Improve Firm Operational Efficiency?

Evidence from China. Managerial Auditing Journal, 35(8), 1167-1188.

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agerial excellence agerial gerial gerialexcellence excellence

Research Insight

RESEARCH INSIGHT

Research Espresso / Apr 2022

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I

f not as glamorous as the police’s Internal Affairs division tasked with chasing dirty cops, the profile of internal auditors – the people hired to look into what’s happening in their own company before it’s too late – has been on the upswing. Fed by the greed exposed by accounting scandals like Enron and Parmalat and the malfeasance of the financial industry that triggered the 2008 financial crisis, internal audit has become a key corporate function.

Recognised for contributing to good corporate governance in western jurisdictions like the UK and the US, internal audit has been credited with everything from constraining earnings management to deterring management misconduct and reducing fraud. The situation is different in China.

Developed in the 80s as a tool for supplementing state audit, the internal audit function in the PRC has evolved beyond promoting good corporate governance. Acting as corporate sleuths like their western counterparts, internal auditors in China were also initially perceived as governmentempowered management consultants. However, from 2000s onwards, the function has evolved into an important corporate governance mechanism for strengthening internal control and risk management in listed companies. In “Can internal audit functions improve firm operational efficiency? Evidence from China” , a team of researchers investigated whether internal auditors in China can actually help improve firms’ operational efficiency. It turns out they do.

Combining internal audit and financial data from a sample of Chinese listed firms over the 2011–2013 period, the research shows that a quality independent financial audit – defined using factors such as reporting lines as well as the educational background, compensation and professional certification of the audit team – was positively associated with firm’s operational efficiency as measured by a number of financial indicators.

Moving away from merely verifying compliance with regulations, internal audit teams actually helped management deliver better results.

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Interestingly, findings show that if the competence of the internal audit staff appeared instrumental in improving firm’s operational efficiency, its independence seemed irrelevant. This makes sense since an internal audit team composed of qualified staff would be better able to identify important information and work with management to improve processes. Meanwhile, the independence of an audit team makes it more difficult to gain the confidence of managers, effectively precluding it to go beyond verifying compliance.

Perhaps less surprisingly, the positive impact of a quality internal audit on efficiency only shows up in firms that already have effective corporate governance to begin with, or in companies operating in Chinese provinces known for having high-level market-based institutions. Both these elements help entrench the credibility and authority of internal audit teams. Validated by the board and regulators, internal audit teams are thus accepted as partners by management instead of being viewed as troublemakers. Finally, the impact of the internal audit function is both direct and indirect, as its mere existence has ripple effects extending throughout the organisation.

Research Insight

In this respect, appointing internal auditors might be an cost-effective way to improve governance while sending a signal that things are set to change.

Dr. Gaoguang Zhou Associate Professor Department of Accountancy and Law

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Research Espresso / Apr 2022

Research EXCELLENCE

Prof. Xu Huang

Dr. Jays Kim

Dr. Sibo Liu

Chair Professor Department of Management

Assistant Professor Department of Management

Assistant Professor Department of Management

Comparisons draw us close: The influence of leader-member exchange dyadic comparison on coworker exchange

Unpacking the "O" in VRIO : The role of workflow interdependence in the loss and replacement of strategic human capital

Personnel Psychology

Strategic Management Journal

https://doi.org/10.1111/peps.12465

http://doi.org/10.1002/smj.3358

Minimum Wage and Corporate Investment: Evidence from Manufacturing Firms in China Journal of Financial and Quantitative Analysis

https://doi.org/10.1017/S0022109021000053

Research Excellence

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Dr. Wookje Sung

Dr. Chris (Xiaodong) Zhao

Assistant Professor Department of Management

Assistant Professor Department of Accountancy and Law

Turnover During a Corporate Merger: How Workplace Network Change Influences Staying

Do Managers Issue More Voluntary Disclosure When GAAP Limits Their Reporting Discretion in Financial Statements?

Journal of Applied Psychology

https://doi.org/10.1037/apl0000864

Journal of Accounting Research

https://doi.org/10.1111/1475-679X.12401

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Research Espresso / Apr 2022

Upcoming EVENTS Research Seminars Date

Speaker

Topic

Economics

1 June 2022 16:00-17:30

8 June 2022 9:00-10:30

10 June 2022

Prof. Tai-Wei HU University of Bristol

Prof. Øivind SCHØYEN

Stanford University and UiT The Arc�c University of Norway

A Theory of Moral Authority

Prof. Ma�eo CROSIGNANI

Exorbitant Privilege? Quan�ta�ve Easing and the Bond Market Subsidy of Prospec�ve Fallen Angels

9:00-10:30

Federal Reserve Bank of New York

29 June 2022

Prof. Cesar MARTINELLI

9:00-10:30

Voter Polariza�on and Extremism

George Mason University

Razor-Thin Elec�ons

Centre for Business Analytics and the Digital Economy

2 June 2022

Prof. Aleksander BERENTSEN

23 June 2022

Dr. Katrin ASSENMACHER

CBDC and Business Cycle Dynamics in a New Monetarist New Keynesian Mode

30 June 2022

Prof. Hans GERSBACH

Monetary Policy with a Central Bank Digital Currency: The Short and the Long Term

14 July 2022

Dr. Katrin ASSENMACHER

Monetary Policy and the Digital Euro

16:00-17:30 16:00-17:30

16:00-17:30

16:00-17:30

University of Basel

European Central Bank

ETH Zurich

European Central Bank

Decentralized Finance: The Future of Money and Finance

HKBU

Reward Management and Innovation Symposium

2022

2 June 2022

Zoom Webinar

Time

Session

Speaker

2:00 - 2:10 pm

Welcome and Opening

Prof. Snape – HKBU School of Business

2:10 - 2:50 pm

Keynote

Prof. Randy Chiu – HKBU School of Business

2:50 – 3:50 pm Research Insights

Discussant 3:50 - 4:00 pm

Dr. Man Nok Wong – Sun Yat-sen University Dr. Rongjun Yu – HKBU School of Business Prof. Huang Xu – HKBU School of Business Break

4:00 - 5:00 pm

Dialogue: Reinven�ng Reward Management in the New Normal

Mr. Gabriel Kung – Bow�e Mr. John Lee – Standard Chartered Bank Ms. Felicity Ting – China Interna�onal Capital Corpora�on (CICC) Ms. Sarah Cheuk – Fano Lab

5:00 - 5:20 pm

Centre for Human Resources Strategy and Development (CHRSD) showcase

Prof. Huang Xu – HKBU School of Business

5:20 - 5:30 pm

Closing

Dr. Song Chang – HKBU School of Business

Registration

bit.ly/3EW2OXV

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