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Internal audit involvement in enterprise risk management

Internal audit involvement in enterprise risk management Purpose – The purpose of this paper is to examine the impact of internal auditors' involvement in enterprise risk management (ERM) on perceptions of their willingness to report a breakdown in risk procedures and whether a strong relationship with the audit committee affects such willingness to report. The study also investigates the use of ERM and the role of internal audit in ERM in Australian private and public sector entities. Design/methodology/approach – The study uses an experimental design, manipulating the internal auditor's involvement in ERM and the strength of the relationship between internal audit and the audit committee. Participants are 117 certified internal auditors. The study also gathers descriptive data on the use of ERM. Findings – The study indicates that a high involvement in ERM impacts the perceptions of internal auditors' willingness to report a breakdown in risk procedures to the audit committee. However, a strong relationship with the audit committee does not appear to affect their perceived willingness to report. The study also finds that the majority of organisations have recently adopted ERM. Internal auditors are involved in ERM assurance activities but some also engage in activities that could compromise objectivity. Research limitations/implications – There are internal and external validity threats associated with the experimental design. Practical implications – The findings reinforce the need for organisations to adhere to the recommendations of the Institute of Internal Auditors and to ensure that internal auditors do not play an inappropriate role in ERM. Originality/value – The paper contributes to our understanding of the impact of involvement in ERM on internal audit objectivity and of the current role of internal audit in ERM in Australia. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Auditing Journal Emerald Publishing

Internal audit involvement in enterprise risk management

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References (47)

Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
0268-6902
DOI
10.1108/02686901111151323
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to examine the impact of internal auditors' involvement in enterprise risk management (ERM) on perceptions of their willingness to report a breakdown in risk procedures and whether a strong relationship with the audit committee affects such willingness to report. The study also investigates the use of ERM and the role of internal audit in ERM in Australian private and public sector entities. Design/methodology/approach – The study uses an experimental design, manipulating the internal auditor's involvement in ERM and the strength of the relationship between internal audit and the audit committee. Participants are 117 certified internal auditors. The study also gathers descriptive data on the use of ERM. Findings – The study indicates that a high involvement in ERM impacts the perceptions of internal auditors' willingness to report a breakdown in risk procedures to the audit committee. However, a strong relationship with the audit committee does not appear to affect their perceived willingness to report. The study also finds that the majority of organisations have recently adopted ERM. Internal auditors are involved in ERM assurance activities but some also engage in activities that could compromise objectivity. Research limitations/implications – There are internal and external validity threats associated with the experimental design. Practical implications – The findings reinforce the need for organisations to adhere to the recommendations of the Institute of Internal Auditors and to ensure that internal auditors do not play an inappropriate role in ERM. Originality/value – The paper contributes to our understanding of the impact of involvement in ERM on internal audit objectivity and of the current role of internal audit in ERM in Australia.

Journal

Managerial Auditing JournalEmerald Publishing

Published: Jul 26, 2011

Keywords: Australia; Public sector; Private sector; Internal auditing; Enterprise risk management; Audit committees

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