Internal auditors’ perceptions of their role in environmental, social and governance assurance and consulting

Abstract

Purpose – The purpose of this paper is to investigate the nature and extent of internal audit functions’ (IAFs) involvement in environmental, social and governance assurance (ESG) and consulting in Australia. To identify emerging priorities, and the profession’s capacity to respond to these, the paper also explores internal audit practitioners’ perceptions of the current and future importance of these issues and the adequacy of their skills and expertise in meeting the challenges associated with their involvement in these areas. Design/methodology/approach – Data were collected from 100 Chief Audit Executives and internal audit service provider partners through a survey. Findings – Governance issues are a key area of focus for respondents’ assurance and consulting efforts, followed by social and environmental issues, respectively. While governance issues are perceived to be of greatest current importance to IAFs, environmental issues are most commonly expected to increase in importance over the next five years, and are reported to be in greatest need of further development of IAFs’ skills and expertise. Research limitations/implications – As the corporate landscape and expectations around transparency and accountability increase, the internal audit profession needs to address the current perceived skills gap in their ability to provide assurance and consulting on ESG issues to ensure their continued relevance and ability to meet stakeholders’ needs and expectations in providing effective integrated assurance and in contributing to internal improvements. Originality/value – This paper provides initial empirical evidence of the nature and extent of internal audit’s involvement in ESG assurance and consulting.

Internal audit function characteristics and external auditors' co‐sourcing in different institutional contexts

“…The results confirm our expectations regarding the relationship between IAF characteristics and fees paid to support internal audit activities. We find a positive association between IAF consulting activities and co-sourcing fees, which is in line with the shift from assurance to consulting IAF activities (Allegrini et al, 2011;Soh & Martinov-Bennie, 2015) being likely to accelerate the use of cosourcing. Firms reporting consulting-oriented IAFs should, then, tend to increase internal audit employees' expertise if they want to avoid recurring to co-sourcing.…”

“…The shift that internal audit functions (IAFs) have experienced from assurance to consulting activities in many firms (Allegrini, D'Onza, Melville, Sarens, & Selim, 2011;Soh & Martinov-Bennie, 2015) has increased the importance of internal audit in firms' organizations (Speklé, van Elten, & Kruis, 2007), as more consulting-oriented IAFs are better able to enhance corporate governance through their relationships with the audit committee, the management, and the external auditors (Gramling, Maletta, Schneider, & Church, 2004;Hazem & Roberts, 2018). To respond to the increasing importance of IAFs in firms' corporate governance, firms can choose to develop the required internal audit skills and abilities inside an organization, or to adopt the strategy of co-sourcing internal audit activities (Selim, Woodward, & Allegrini, 2009).…”

Editorial: Internal Auditing: Creating Stepping Stones for the Future

“…IA can also support the external auditor who may rely on work already performed by the IA or request direct assistance when doing an audit (e.g., Maletta, 1993;Felix, Gramling & Maletta, 2001). On top of all of these functions, IA can also be viewed as a consultant, challenging management and acting as a catalyst for improvement, using their knowledge of risk and control to enhance business practices (e.g., Arena & Azzone, 2009;Ma'ayan & Carmeli, 2015;Soh & Martinov-Bennie, 2015).…”

New Perspectives in Internal Audit Research: A Structured Literature Review

“…After investigating the role of internal auditors with respect to disclosures of greenhouse gas emissions and energy usage, Trotman and Trotman () concluded that the IAF should play a role in this type of reporting because internal auditors view their function as having become part of the external reporting process. Despite the fact that sustainability issues are expected to increase in the coming years (Soh and Martinov‐Bennie, ; Ridley et al, ), few papers advocate that internal audit should provide assurance concerning sustainability. Its issues remain unclearly defined and are considered less important than other governance issues (Soh and Martinov‐Bennie, ; Ridley et al, ).…”

“…Despite the fact that sustainability issues are expected to increase in the coming years (Soh and Martinov‐Bennie, ; Ridley et al, ), few papers advocate that internal audit should provide assurance concerning sustainability. Its issues remain unclearly defined and are considered less important than other governance issues (Soh and Martinov‐Bennie, ; Ridley et al, ). Internal auditors are perceived to have far less expertise on environmental issues than on other topics (Soh and Martinov‐Bennie, ).…”