The Impact of Organizational Identity and Professional Norm Salience on Internal Auditors’ Assessments of Internal Control Weaknesses

• In Event: Continental Breakfast & Research and Education Forum
  In Paper Session: Table 14: Auditor Independence

Abstract

We examine whether internal auditors with a strong organizational identity, defined as a perceived close relationship between the individual and their employer, provide overly lenient assessments of identified internal control weaknesses as compared to internal auditors whose organizational identity is weak and as compared to a control group of external auditors. We also examine whether increasing the salience of professional norms, that is, increasing the prominence in the internal auditors’ judgment process of information about the expectations of the professional group to which they belong, reduces bias in the internal auditors’ assessment of internal control weaknesses when their organizational identity is strong and whether external auditors who are aware that the internal auditor is adhering to the norms of their professional organization are more willing to rely on the internal auditor’s work. Results indicate that internal auditors with strong organizational identity provide internal control assessments that are less severe than internal auditors whose organizational identity is low, but when professional norms are made salient, internal auditors with strong organizational identity provide the most severe ratings. In addition, we find that external auditors who are aware the internal auditor adheres to professional norms are more willing to rely on the internal auditor’s control assessments. Implications of our results for the debate about the benefits and costs of in-house versus out-sourced internal auditors are discussed.

Authors

• Ian T Burt, Niagara University

• Theresa A Libby, University of Waterloo