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The Importance of the C hief A udit E xecutive's Communication: Experimental Evidence on Internal Auditors' Judgments in a ‘Two Masters Setting’

The Importance of the C hief A udit E xecutive's Communication: Experimental Evidence on Internal... 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Auditing Wiley

The Importance of the C hief A udit E xecutive's Communication: Experimental Evidence on Internal Auditors' Judgments in a ‘Two Masters Setting’

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Publisher
Wiley
Copyright
Copyright © 2015 John Wiley & Sons Ltd
ISSN
1090-6738
eISSN
1099-1123
DOI
10.1111/ijau.12046
Publisher site
See Article on Publisher Site

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.

Journal

International Journal of AuditingWiley

Published: Nov 1, 2015

References