The Importance of the Chief Audit Executive's Communication: Experimental Evidence on Internal Auditors' Judgements in a 'Two Masters Setting'

Florian Hoos, Natalia Kochetova-Kozloski, Anne d'Arcy

Publikation: Wissenschaftliche FachzeitschriftOriginalbeitrag in FachzeitschriftBegutachtung

Abstract

The position of an internal audit function (IAF) as a ‘servant of two masters’ (i.e., management and the audit committee) may lead to a conflict of priorities. In this setting, the tone at the top set by the Chief Audit Executive (CAE) plays a critical role in balancing the potentially competing priorities of the ‘two masters’. We test two hypotheses in a mixed experimental design with the communicated preferences of the CAE to subordinates (cost reduction vs. effectiveness of internal controls) as a between-subjects factor, and levels of ambiguity (low, medium, high) manipulated within-subjects. Findings suggest that the emphasis in the CAE's message can influence internal auditors' judgments, and such influence is more pronounced when task ambiguity is high, resulting in the elimination of a significantly greater number of internal controls and the design of less effective processes. We discuss implications of our results for modern IAFs and the role of the CAE.
OriginalspracheEnglisch
Seiten (von - bis)166 - 181
FachzeitschriftInternational Journal of Auditing
Jahrgang19
Ausgabenummer3
DOIs
PublikationsstatusVeröffentlicht - 2015

Österreichische Systematik der Wissenschaftszweige (ÖFOS)

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