Chapter 1

Introduction



1.1 Background of study
As an introduction, the background of the study consists of designing the plan for the
study which comprises three elements that will be discussed in detail, namely philosophical
assumption, the implementation, and specific research method .In detail, the researcher design is
based on three elements above which develop how the researcher came up with the problem of
this study ,researcher personnel experience of the research, and also which audience will the
study written about( Creswell, 2009). Hence, this study will come up with coworker trust (CT)
which are the believe of one party in organization towards the action that been made by another
parties in organization is vulnerable to the organization and themselves (Krot,2012).CT is very
essential to companies to ensure their can compete with their rival in this competitive world now.
Coworker will think either the function one department is really can create value added to their
organization or giving bad impact to organization. They will look the example of companies that
ruined cause the failure of certain department in that companies. The most crucial department
that always becomes great issue is audit function. This is because, starting from the depress era
failure of auditor in determining material misstatement of companies like Enron case, World
Com and Satyam , there are recommendations in emphasis the strength and the reliability of
internal auditor in organization. According to Cadbury report (2010), all the company should
appoint and establish an audit committee that expert in term of financial reporting matter. They
will review the performances of internal audit in preventing fraudulent act happening. The roles
of internal auditors are very crucial in determining the performance organization whether
effective or not. It is also very essential to determine what the level of coworker trust toward
other coworkers in companies especially internal auditor.



Quality in internal audit would prevent negative perception of the employee and management in
the workplace. Trust will determine whether the flow of information is effective, efficient and
flexible among internal parties in organization. They is very essential in determine the successful
of business. Nowadays, all organizations face competitive pressures to survive and these needs
them to work in a team oriented structures where worker should performances multidimensional
work. As a result, trust between co-worker and another co-worker are essential in order for an
organization to be successful (Zeffane and Connell, 2003).
CT also can be defined as a one party thought that the action of another party is
vulnerable to the organization and themselves (GuIbert and McDonough ,1986) . Trust can give
impact to total of satisfaction and degree of obedience of co-worker to accept all instruction by
internal auditors to gain effectiveness of operation. Trust is also the ways behaviors of co-worker
toward others function (Robinson and Morrison, 1995), job satisfaction (Cunningham and
MacGregor, 2000), and reduce non-need fulfillment (Cook and Wall, 1980). Normally, the co-
worker was preferred to understand and measure trust of internal auditor by the effectiveness of
internal auditing to doing their function in organizations.
In overall, this study tends to focus on indicators that suitable for measuring level of co-
worker trust of internal auditors function in the organization. Indicator that will be selected
would consider factors time suitability, cost and also organization situation when the study was
conducted. Finally, this study tends focus on the co-worker reliability toward auditor roles in
companies that located at Johor Bharu


1.2 Statement of problem
Thus, stating the problem, it is important for researchers to decide how to go about
finding their answers and the ways to obtain the result of research (Kumar, 2011). First and
foremost, even though the requirement of Sarbanes-Oxley Act 2002 require all companies should
have an internal audit function which giving many benefits to companies, this effectiveness
function was depended on the employee who conducted that role. Internal auditors become main


focus on quality in organization in term of company accountability, effectiveness of operation
and also material misstatement. According to George (2009), ineffective for internal auditor
conducted their role actually may contribute many problems which are fraud activities and a lot
material misstatement in the financial statement. Research conducted by Fatimah (2012),
ineffective audit function for doing quality jobs may create a problem which is lacking in
accountability for companies doing their operational activities. This also leads to corruption,
misuse of power, mismanagement criminal breach of trust and fraud.
There are many the researchers who has studied issues that regarding on coworker trust
for their coworker performance in many developing countries, that bringing the benefits towards
the effectiveness of internal control function ( Krot,2012; George, 2009 et al). Nevertheless,
there little empirical evidence on what exactly factor that influence the coworker trust toward
their coworker (Zeffane and Connell, 2003).For this reason, this study intended to investigate the
important factor affecting coworker trust especially for internal auditor in organization. On the
other aspect, there less participation from respondents in the previous researches about the factor
of coworker trust especially internal auditor who become the main respondent in this study (
Salawu.,2010). Some implementation that made by internal auditors for enhance accountability,
improve the operation for preventing fraud giving problems and negative feedbacks need to be
analyzed on comprehensive framework( Ismail and Sobhy,2009). Thus, this study intended to
understand coworkers trust form the certain basic principal that should be required by internal
auditors for enhance quality in their jobs. As internal auditors, they are exposed to the Code of
Ethics for Internal Auditors and basic principal for effective accountability that become factor to
measure their quality jobs(Salawu., 2010 and Karen.,2007),. By based on this principal, this
study intend to finding what exactly the quality for internal auditor function for perception by
their coworkers.
Hence, availability of research can be used in determining what are trust of coworker
toward quality job that be done by internal auditor. This determination was based on evaluation
made by their co-worker. In addition, complaining about lack of performance by internal auditor
can be identified either true or not true.



1.3 Research questions
There are some of questions that became as a basis of research. Which are:

1. What is the degree of coworker trust toward internal auditor in audit firm that
located south of Johor Bharu?

2. Is that quality of internal auditor performance which are enhancing accountability ,
enhancing effectiveness operation, and enhancing effective operations in the company
especially in audit firm located south of Johor Bharu affecting their coworker trust?

3.What employee perspective toward experience worker regarding on their level of
trust?

4. What should be implemented to solve the problems of regarding own lack
reliabilitys employee toward internal audits?

1.4 Objectives of the Study
Several objectives that be stated that collateral with the purpose of research. The
objectives of this study are:
1. To identify coworker trust in the company especially in audit firm that located in
area south of Johor Bharu
2. To determine is that that quality of internal auditor performance which are
enhancing accountability, enhancing effectiveness operation, and enhancing effective
operations in the company especially in audit firm located south of Johor Bharu affecting
their coworker trust.
3.To identify employee perspective toward experience worker regarding on their level of
trust.


4.To recommend what that supposes internal auditors do to enhance coworker trust in
organization.


1.5 Significance of the Study
Nowadays trends in the modern workplace, such as decentralization and work teams, it requires
more interaction, cooperation, and information transfer between coworkers. As a result, the new
working conditions require more horizontal trust between coworkers. Hence, the primary
purpose of internal audit function in an organization is to provide quality in their work for
enhanced effective and accountable for an organization. Effectiveness doing their job may
contribute respect from other coworkers in the workplace (GuIbert and McDonough .,1986).
Thus, from the effectiveness of internal audit function to gain respect from their coworker, this
study found that the result and the findings would offer a lot importance of organization, if the
internal auditor realized that their performance also has been look by other parties not only their
own perception. The researcher is able to investigate how far coworker trust impacts internal
auditor when doing their auditing work.
Next, the research would like to focus the purpose of the research on coworker trust as
well as internal auditor performance because they are important in order to measure the
companys condition as they are part of the organization. The situation in the organization
whether it's successful or not successful can be depend by level of worker trustworthiness in the
organization , which are influenced by certain factor such as organizational structure, control
mechanism, job design, communication, performances and employee behaviors (Zeffane and
Connell, 2003)
Furthermore, this study is crucial for practicality . It is especially a practice by internal
auditors on the implementation something in order to provide quality jobs for enhancing
accountability and effectiveness in organization for gaining trust from a coworker(Becmerhagen
.,2004). It would able identify the issue which brought dissatisfaction of coworker toward quality
of job doing by internal auditors. This is because, according to Cunningham and MacGregor(
2000), the strongly trust bonding between the alliances would give positive impact between


internal auditor and coworkers in the organization. This positive impact will motivate each team
in organization for achieving the company objective. Moreover, trust can give impact to total of
satisfaction and obedience of co-worker to accept all instruction that has been made by internal
auditors. Normally, the coworker was preferred to understand and measure trust of internal
auditor by the effectiveness of internal auditors for doing their function in organizations.Besides,
this research is also important for auditor to know other alternatives to finding any fraudulent act
that can harm the organization's reputation (Becmerhagen .,2004).

Besides that, the contribution of this research is to share some information regarding the
issues highlighted which can be used by professional bodies to issue a specific standard on the
performance of internal in the workplace especially for auditor guideline (Stoel et al., 2012).
Therefore, this study proceeds to explore the depth on certain aspect that influence the coworker
trust which are the quality of internal audit performance and the experience in the workplace.
The following section will discuss the scope of this study.














1.6 Scope of study
This study is limited to the coworker that which work in the area south of Johor Bahru from a
checklist of auditor's firm obtained from MIA(Malaysian Institute of Accountants) which in this
study tend focus at Larkin, Bandaraya Johor Bharu, Pelangi, Kempas, Uda and Skudai. Sample
size of data obtains from MIA as a body registered accountants and auditors in Malaysia (Mohd
Sanusi et all.,2005). This scope of the study was only focused on employee that also auditor that
relies on internal auditor job in audit company. However, it did not investigate the perception of
non- audit co-worker.
Besides, indicators that determine trust of coworker in this study just only focus on quality
internal auditors . According Becmerhagen (2004), internal audit not only should comply with all
standard, but other things also become necessary when wants to determine the quality of the
audit function which are enhancing the accountability, prevent fraudulent act happen department
and improve the effectiveness of operation.Besides, the year of experience in the workplace for
internal audit has also become the indicator to enhance the trust of a coworker.

1.7 Limitation of study
There are varieties of coworker trust relationship who are affecting the perception toward
internal audit function in organization. According to Krot (2012), trust can be divided into
certain types of relationships. It can be horizontal (between coworkers), vertical (between
managers and employees or between employees and managers), or institutional (between
employees and organizations). However, the researcher would only focus this research on
horizontal trust that involve the relationship between coworker which are more exposed to the
overall perception regarding on the effective and efficient one of department in organization.
Nowadays trends in the modern workplace, such as decentralization and work teams, it requires
more interaction, cooperation, and information transfer between coworkers. As a result, the new
working conditions require more horizontal trust between coworkers (Ristig ,. 2009). hence, a
coworker is the main people to evaluate one department performance and frequently become a
focus on the quality functionality one function(Stoel et al., 2012). In addition, due the time


constraint in this researcher, the researcher decided to take on a small size which focus only on
the south Johor Bharu from list was provided by MIA, update in 2012.


1.8 Organisation of chapter
This report can be divided into 5 parts. The main part has involved the introduction ( chapter 1) ,
literature review ( chapter 2) ,research methodology ( chapter 3) analysis study ( chapter 4) and
recommendations and conclusion( chapter 5) .
Introduction( chapter 1)
It cover an overview of the issues that were covered in this research and also as a basis to
chapter 2,3 ,4 and 5. It gives the framework on issue occurring that are going to be
highlighted and elaborated on the statement of the problem, research objectives and
question, the scope, significance and limitation of the study in detail.
Literature review ( chapter 2)
This chapter was focusing in depth understanding in term of definition, purpose, concept,
factor influence coworker trust and the ways to measure it. This chapter involves work
which review book, academic journals, previous research, and secondary material in
newspapers. The main purpose this literature review is to identify methods and
techniques that can be used in analyzing data collected.This chapter is necessary to know
the current situation that influence coworker trust.

Research methodology ( chapter 3)
The research design and data collection will be specified plus the sampling design is used
to identify the number of respondents. Data are collected by using single instrument only
which is questionnaires as primary source and also journal,books and other as a
secondary data.All the data collected were are analyzed by using the Statistical Package
for Social Science (SPSS) software to obtain the result of the study.

Analysis study ( chapter 4)


The research involved only 40 respondents who are audit firm located South of Johor
Bharu. Data analysis was determined by using Crobachs Alpha Reliability Test and
Frequancy to obtain the objective of the study. Later on the result will interpret in the
table to make clear.

Recommendation and conclusion (chapter 5)
Finding of the study will be disclosed in the end of a chapter for a room of improvement
to enhance coworker trust toward internal auditor role in audit firm take part. This
chapter will be used to determine whether the objective of the study was found or not.
Lastly, the limitations in this study were identified and some suggestion and
recommendations were provided for future study
















1.9 Conclusion of chapter
The introduction of this report has briefly discussed CT in the problem statement, objectives of
the study, research questions, the scope, significance, and limitations of the study, and also the
structures of the whole study. The researcher has come up which several questions to support the
objective of the study. Besides that, the importance and significance of this study to contribute to
the body of knowledge related to CT and also the quality of audit function have been discussed
briefly in this chapter. Hence, the remaining chapters of this report are organized as follows: next
chapter provides an overview of previous studies regarding on CT and factor influences it and
next discusses the research methodology, followed by research findings. The paper ends with the
conclusion and suggestions of future research.