Another role for monitoring is suggested by Abdel-khalik (1993) who reported that owners of private companies voluntarily demand the positive assurance provided by a financial statement audit as a compensatory control mechanism for loss of organizational control inherent in hierarchical organizations. That is, the external audit is an important monitoring mechanism. To quote: " a primary function of external audits is to evaluate the quality and adequacy of internal control systems" (Abdel-khalik 11993, p. 38]). It follows that the greater the risk of loss of organizational control, the greater will be the demand for monitoring from external auditing. So just as a variable audit frequency is an operational response to different levels of agency costs, it is a response to different levels of risk of breakdown in internal control.