Informal interactions between audit committees and internal audit functions : exploratory evidence and directions for future research

Purpose – This paper aims to recognise the importance of informal processes within corporate governance and complement existing research in this area by investigating factors associated with the existence of informal interactions between audit committees and internal audit functions and in providing directions for future research. Design/methodology/approach – To examine the existence and drivers of informal interactions between audit committees and internal audit functions, this paper relies on a questionnaire survey of chief audit executives (CAEs) in the UK from listed and non-listed, as well as financial and non-financial, companies. While prior qualitative research suggests that informal interactions do take place, most of the evidence is based on particular organisational setting or on a very small range of interviews. The use of a questionnaire enabled the examination of the existence of internal interactions across a relatively larger number of entities. Findings – The paper finds evidence of audit committees and internal audit functions engaging in informal interactions in addition to formal pre-scheduled regular meetings. Informal interactions complement formal meetings with the audit committee and as such represent additional opportunities for the audit committees to monitor internal audit functions. Audit committees’ informal interactions are significantly and positively associated with audit committee independence, audit chair’s knowledge and experience, and internal audit quality. Originality/value – The results demonstrate the importance of the background of the audit committee chair for the effectiveness of the governance process. This is possibly the first paper to examine the relationship between audit committee quality and internal audit, on the existence and driver of informal interactions. Policy makers should recognize that in addition to formal mechanisms, informal processes, such as communication outside of formal pre-scheduled meetings, play a significant role in corporate governance.

Building indifferentiable compression functions from the PGV compression functions

Preneel, Govaerts and Vandewalle (PGV) analysed the security of single-block-length block cipher based compression functions assuming that the underlying block cipher has no weaknesses. They showed that 12 out of 64 possible compression functions are collision and (second) preimage resistant. Black, Rogaway and Shrimpton formally proved this result in the ideal cipher model. However, in the indifferentiability security framework introduced by Maurer, Renner and Holenstein, all these 12 schemes are easily differentiable from a fixed input-length random oracle (FIL-RO) even when their underlying block cipher is ideal. We address the problem of building indifferentiable compression functions from the PGV compression functions. We consider a general form of 64 PGV compression functions and replace the linear feed-forward operation in this generic PGV compression function with an ideal block cipher independent of the one used in the generic PGV construction. This modified construction is called a generic modified PGV (MPGV). We analyse indifferentiability of the generic MPGV construction in the ideal cipher model and show that 12 out of 64 MPGV compression functions in this framework are indifferentiable from a FIL-RO. To our knowledge, this is the first result showing that two independent block ciphers are sufficient to design indifferentiable single-block-length compression functions.

Structural damage detection method using frequency response functions

Structural damage detection using measured dynamic data for pattern recognition is a promising approach. These pattern recognition techniques utilize artificial neural networks and genetic algorithm to match pattern features. In this study, an artificial neural network–based damage detection method using frequency response functions is presented, which can effectively detect nonlinear damages for a given level of excitation. The main objective of this article is to present a feasible method for structural vibration–based health monitoring, which reduces the dimension of the initial frequency response function data and transforms it into new damage indices and employs artificial neural network method for detecting different levels of nonlinearity using recognized damage patterns from the proposed algorithm. Experimental data of the three-story bookshelf structure at Los Alamos National Laboratory are used to validate the proposed method. Results showed that the levels of nonlinear damages can be identified precisely by the developed artificial neural networks. Moreover, it is identified that artificial neural networks trained with summation frequency response functions give higher precise damage detection results compared to the accuracy of artificial neural networks trained with individual frequency response functions. The proposed method is therefore a promising tool for structural assessment in a real structure because it shows reliable results with experimental data for nonlinear damage detection which renders the frequency response function–based method convenient for structural health monitoring.

Cryptographic hash functions

Cryptographic hash functions are an important tool of cryptography and play a fundamental role in efficient and secure information processing. A hash function processes an arbitrary finite length input message to a fixed length output referred to as the hash value. As a security requirement, a hash value should not serve as an image for two distinct input messages and it should be difficult to find the input message from a given hash value. Secure hash functions serve data integrity, non-repudiation and authenticity of the source in conjunction with the digital signature schemes. Keyed hash functions, also called message authentication codes (MACs) serve data integrity and data origin authentication in the secret key setting. The building blocks of hash functions can be designed using block ciphers, modular arithmetic or from scratch. The design principles of the popular Merkle–Damgård construction are followed in almost all widely used standard hash functions such as MD5 and SHA-1.

On hash functions using checksums

We analyse the security of iterated hash functions that compute an input dependent checksum which is processed as part of the hash computation. We show that a large class of such schemes, including those using non-linear or even one-way checksum functions, is not secure against the second preimage attack of Kelsey and Schneier, the herding attack of Kelsey and Kohno and the multicollision attack of Joux. Our attacks also apply to a large class of cascaded hash functions. Our second preimage attacks on the cascaded hash functions improve the results of Joux presented at Crypto’04. We also apply our attacks to the MD2 and GOST hash functions. Our second preimage attacks on the MD2 and GOST hash functions improve the previous best known short-cut second preimage attacks on these hash functions by factors of at least 226 and 254, respectively. Our herding and multicollision attacks on the hash functions based on generic checksum functions (e.g., one-way) are a special case of the attacks on the cascaded iterated hash functions previously analysed by Dunkelman and Preneel and are not better than their attacks. On hash functions with easily invertible checksums, our multicollision and herding attacks (if the hash value is short as in MD2) are more efficient than those of Dunkelman and Preneel.

On the Collision and Preimage Resistance of Certain Two-Call Hash Functions

In this paper we present concrete collision and preimage attacks on a large class of compression function constructions making two calls to the underlying ideal primitives. The complexity of the collision attack is above the theoretical lower bound for constructions of this type, but below the birthday complexity; the complexity of the preimage attack, however, is equal to the theoretical lower bound. We also present undesirable properties of some of Stam’s compression functions proposed at CRYPTO ’08. We show that when one of the n-bit to n-bit components of the proposed 2n-bit to n-bit compression function is replaced by a fixed-key cipher in the Davies-Meyer mode, the complexity of finding a preimage would be 2 n/3. We also show that the complexity of finding a collision in a variant of the 3n-bits to 2n-bits scheme with its output truncated to 3n/2 bits is 2 n/2. The complexity of our preimage attack on this hash function is about 2 n . Finally, we present a collision attack on a variant of the proposed m + s-bit to s-bit scheme, truncated to s − 1 bits, with a complexity of O(1). However, none of our results compromise Stam’s security claims.

On Randomizing Hash Functions to Strengthen the Security of Digital Signatures

Halevi and Krawczyk proposed a message randomization algorithm called RMX as a front-end tool to the hash-then-sign digital signature schemes such as DSS and RSA in order to free their reliance on the collision resistance property of the hash functions. They have shown that to forge a RMX-hash-then-sign signature scheme, one has to solve a cryptanalytical task which is related to finding second preimages for the hash function. In this article, we will show how to use Dean’s method of finding expandable messages for finding a second preimage in the Merkle-Damgård hash function to existentially forge a signature scheme based on a t-bit RMX-hash function which uses the Davies-Meyer compression functions (e.g., MD4, MD5, SHA family) in 2 t/2 chosen messages plus 2 t/2 + 1 off-line operations of the compression function and similar amount of memory. This forgery attack also works on the signature schemes that use Davies-Meyer schemes and a variant of RMX published by NIST in its Draft Special Publication (SP) 800-106. We discuss some important applications of our attack.

Cryptographic Hash Functions

In the modern era of information and communication technology, cryptographic hash functions play an important role in ensuring the authenticity, integrity, and nonrepudiation goals of information security as well as efficient information processing. This entry provides an overview of the role of hash functions in information security, popular hash function designs, some important analytical results, and recent advances in this field.

A Novel High Order Space-Time Spectral Method for the Time Fractional Fokker--Planck Equation

The fractional Fokker-Planck equation is an important physical model for simulating anomalous diffusions with external forces. Because of the non-local property of the fractional derivative an interesting problem is to explore high accuracy numerical methods for fractional differential equations. In this paper, a space-time spectral method is presented for the numerical solution of the time fractional Fokker-Planck initial-boundary value problem. The proposed method employs the Jacobi polynomials for the temporal discretization and Fourier-like basis functions for the spatial discretization. Due to the diagonalizable trait of the Fourier-like basis functions, this leads to a reduced representation of the inner product in the Galerkin analysis. We prove that the time fractional Fokker-Planck equation attains the same approximation order as the time fractional diffusion equation developed in [23] by using the present method. That indicates an exponential decay may be achieved if the exact solution is sufficiently smooth. Finally, some numerical results are given to demonstrate the high order accuracy and efficiency of the new numerical scheme. The results show that the errors of the numerical solutions obtained by the space-time spectral method decay exponentially.

A new twist on mode indicator functions

Mode indicator functions (MIFs) are used in modal testing and analysis as a means of identifying modes of vibration, often as a precursor to modal parameter estimation. Various methods have been developed since the MIF was introduced four decades ago. These methods are quite useful in assisting the analyst to identify genuine modes and, in the case of the complex mode indicator function, have even been developed into modal parameter estimation techniques. Although the various MIFs are able to indicate the existence of a mode, they do not provide the analyst with any descriptive information about the mode. This paper uses the simple summation type of MIF to develop five averaged and normalised MIFs that will provide the analyst with enough information to identify whether a mode is longitudinal, vertical, lateral or torsional. The first three functions, termed directional MIFs, have been noted in the literature in one form or another; however, this paper introduces a new twist on the MIF by introducing two MIFs, termed torsional MIFs, that can be used by the analyst to identify torsional modes and, moreover, can assist in determining whether the mode is of a pure torsion or sway type (i.e., having a rigid cross-section) or a distorted twisting type. The directional and torsional MIFs are tested on a finite element model based simulation of an experimental modal test using an impact hammer. Results indicate that the directional and torsional MIFs are indeed useful in assisting the analyst to identify whether a mode is longitudinal, vertical, lateral, sway, or torsion.

Information-theoretic analysis of brain white matter fiber orientation distribution functions

We propose a new information-theoretic metric, the symmetric Kullback-Leibler divergence (sKL-divergence), to measure the difference between two water diffusivity profiles in high angular resolution diffusion imaging (HARDI). Water diffusivity profiles are modeled as probability density functions on the unit sphere, and the sKL-divergence is computed from a spherical harmonic series, which greatly reduces computational complexity. Adjustment of the orientation of diffusivity functions is essential when the image is being warped, so we propose a fast algorithm to determine the principal direction of diffusivity functions using principal component analysis (PCA). We compare sKL-divergence with other inner-product based cost functions using synthetic samples and real HARDI data, and show that the sKL-divergence is highly sensitive in detecting small differences between two diffusivity profiles and therefore shows promise for applications in the nonlinear registration and multisubject statistical analysis of HARDI data.

Analyzing multi-fiber reconstruction in high angular resolution diffusion imaging using the tensor distribution function

High-angular resolution diffusion imaging (HARDI) can reconstruct fiber pathways in the brain with extraordinary detail, identifying anatomical features and connections not seen with conventional MRI. HARDI overcomes several limitations of standard diffusion tensor imaging, which fails to model diffusion correctly in regions where fibers cross or mix. As HARDI can accurately resolve sharp signal peaks in angular space where fibers cross, we studied how many gradients are required in practice to compute accurate orientation density functions, to better understand the tradeoff between longer scanning times and more angular precision. We computed orientation density functions analytically from tensor distribution functions (TDFs) which model the HARDI signal at each point as a unit-mass probability density on the 6D manifold of symmetric positive definite tensors. In simulated two-fiber systems with varying Rician noise, we assessed how many diffusionsensitized gradients were sufficient to (1) accurately resolve the diffusion profile, and (2) measure the exponential isotropy (EI), a TDF-derived measure of fiber integrity that exploits the full multidirectional HARDI signal. At lower SNR, the reconstruction accuracy, measured using the Kullback-Leibler divergence, rapidly increased with additional gradients, and EI estimation accuracy plateaued at around 70 gradients.

Topological properties and fractal analysis of a recurrence network constructed from fractional Brownian motions

Many studies have shown that we can gain additional information on time series by investigating their accompanying complex networks. In this work, we investigate the fundamental topological and fractal properties of recurrence networks constructed from fractional Brownian motions (FBMs). First, our results indicate that the constructed recurrence networks have exponential degree distributions; the average degree exponent 〈λ〉 increases first and then decreases with the increase of Hurst index H of the associated FBMs; the relationship between H and 〈λ〉 can be represented by a cubic polynomial function. We next focus on the motif rank distribution of recurrence networks, so that we can better understand networks at the local structure level. We find the interesting superfamily phenomenon, i.e., the recurrence networks with the same motif rank pattern being grouped into two superfamilies. Last, we numerically analyze the fractal and multifractal properties of recurrence networks. We find that the average fractal dimension 〈dB〉 of recurrence networks decreases with the Hurst index H of the associated FBMs, and their dependence approximately satisfies the linear formula 〈dB〉≈2-H, which means that the fractal dimension of the associated recurrence network is close to that of the graph of the FBM. Moreover, our numerical results of multifractal analysis show that the multifractality exists in these recurrence networks, and the multifractality of these networks becomes stronger at first and then weaker when the Hurst index of the associated time series becomes larger from 0.4 to 0.95. In particular, the recurrence network with the Hurst index H=0.5 possesses the strongest multifractality. In addition, the dependence relationships of the average information dimension 〈D(1)〉 and the average correlation dimension 〈D(2)〉 on the Hurst index H can also be fitted well with linear functions. Our results strongly suggest that the recurrence network inherits the basic characteristic and the fractal nature of the associated FBM series.

A stochastic exponential Euler scheme for simulation of stiff biochemical reaction systems

In order to simulate stiff biochemical reaction systems, an explicit exponential Euler scheme is derived for multidimensional, non-commutative stochastic differential equations with a semilinear drift term. The scheme is of strong order one half and A-stable in mean square. The combination with this and the projection method shows good performance in numerical experiments dealing with an alternative formulation of the chemical Langevin equation for a human ether a-go-go related gene ion channel mode