Drivers of stakeholders’ view of internal audit effectiveness

Abstract

Purpose The purpose of this study is to determine the differences in perception of the key stakeholders on the drivers of internal audit effectiveness, namely, senior management and the audit committee, in relation to identified measures. To be seen as an effective internal audit function, value needs to be added for both these stakeholders. It is thus important for internal auditing to obtain an understanding of what these stakeholders respectively perceive as the most prominent drivers of internal audit effectiveness. Design/methodology/approach Heads of internal audit functions (providing insight into the drivers), chairpersons of audit committees and senior management (providing insight into the measures) within the South African public sector responded to a survey. The data were subjected to an exploratory factor analysis and principal component analysis to reduce the set of items and to provide continuous scores for use in a multivariate multiple regression analyses. Findings Senior management and the audit committee differ in their level or order of prominence of the identified drivers that influence the identified measures of internal audit effectiveness. No statistical similarities in their level of views could be found. Originality/value To enhance the effectiveness of internal auditing, the internal audit functions should take cognisance of the difference in perceptions of its key stakeholders on the drivers of internal audit effectiveness, in relation to identified measures, to manage these relationships. No previous research could find that statistically compared views of senior management and the audit committee regarding the drivers of internal audit effectiveness.

Manifold Conceptions of the Internal Auditing of Risk Culture in the Financial Sector

“…Erasmus and Coetzee 2018;Roussy and Brivot 2016). In doing so, we enrich the literature on the IA of risk culture that focused on either the contextual viewpoints of implementers (Carretta et al 2017;Cornia et al 2016;Palermo et al 2016) or the regulatory viewpoints (Power 1999;Ring et al 2016) by highlighting its manifold notion.…”

“…The third approach explains IA by studying involvement and expectations of different stakeholders (Erasmus and Coetzee 2018;Roussy and Brivot 2016). Studying differing expectations of the major stakeholders and their influence on IA becomes essential considering the influence of a variety of stakeholders on IA practices (Arena and Jeppesen 2009;Covaleski et al 2003), as repeatedly shown through its historical development (Hayne and Free 2014;Parker and Johnson 2017;Spira and Page 2003).…”

“…This raises ethical concerns on how far IA should colonize and control employees through the IA of risk culture (Ezzy 2001;McCabe 2014). Second, involvement of different stakeholders (Erasmus and Coetzee 2018;Roussy and Brivot 2016), application to a variety of processes (Hayne and Free 2014;Spira and Page 2003), heterogeneity (Arena and Jeppesen 2015;Jiang et al 2018), and unclear ethical guidelines (Friedberg 1998) have sometimes challenged IA's abilities in achieving its ethical ideal of independence and objectivity (Everett and Tremblay 2014;Neu et al 2013). The compromised nature of existing IA practices raises concern on how IA could assure risk culture (Christopher et al 2009;Mihret 2014).…”

“…There is a danger that a direct transfer of knowledge, without critical considerations on the intangibility of risk culture, could lead to mere ritualistic thinking among implementers promoting a tick-box-based verification approach rendering IA of risk culture inefficient or ineffective (Erasmus and Coetzee 2018;McCabe 2014;Power 1999). Second, the control and governance approach, if extended to employees' behavior, raises ethical concerns where excessive controls might rob employees of their individuality and dissociate them from critical and moral decision-making (leading to the colonization of employees' emotional self) (Ezzy 2001;McCabe 2014).…”

“…Chambers and Odar 2015;Gramling et al 2004;Parker and Johnson 2017) and "how different stakeholders conceive IA expansions" (cf. Erasmus and Coetzee 2018;Roussy and Brivot 2016) created a fertile ground to understand the manifold viewpoints on the IA expansion to assure on risk culture. Consequently, our investigation focused on analyzing (1) how different actors-regulators, normalizers, consultants, and implementers-conceive the IA of risk culture and (2) what type of approaches they embrace to audit risk culture.…”