New Frontiers for Internal Audit Research^*

Abstract

Internal audit provides useful and valuable services to organizations, and academic research has established its importance in improving corporate governance. However, the body of internal audit research is still relatively small. Indeed, there are many emerging, lesser-known topics and practitioners would like guidance. The primary focus of this paper is to make specific recommendations for future research based on surveys, interviews, and discussions with practitioners. We identify three broad areas for additional academic research: innovation in information technology, staffing and personnel development, and agile auditing. In each area, we describe current practices and discuss the relevant accounting literature, noting gaps where additional inquiry is needed. We also provide a list of testable research ideas to help inform academics about practice-relevant research questions that would not only add to the academic literature, but would benefit practitioners who seek guidance. We hope this paper will inspire more academic research that investigates important internal audit questions.

The Influence of Management's Internal Audit Experience on Earnings Management*

“…This is important given that internal audit experience is something most firms can provide to their own employees or obtain through the hiring process. Finally, our results contribute to prior work highlighting the importance and value of internal auditing in the organization in the still‐emerging area of internal audit research (DeFond and Zhang 2014; Christ et al 2021). 4…”

“…Importantly, these findings are incremental to, or opposite of, other types of manager experience such as firm-specific experience, external audit experience, and accounting experience. These are important findings that continue to build on prior work highlighting the importance and value of internal auditing in the organization (DeFond and Zhang 2014;Christ et al 2021) Notes: We use the BoardEx job titles of managers with internal audit experience to assign relative power rankings of these positions within the firm. We assign each title-description pair to one of the 18 classes listed above.…”

“…The findings of this paper provide additional evidence of the importance of studying internal auditing by showing that manager internal audit experience is associated with reductions in REM. Also, while much of the research on using the IAF as an MTG concludes that such use results in negative outcomes (Messier et al 2011;Burton et al 2015;Christ et al 2015;Carcello et al 2018;Christ et al 2021), this study highlights at least one potential benefit of rotating employees to/from IAFs-lower levels of REM, which can have detrimental effects on organizations. Importantly, subsample analyses indicate that our results are robust to controlling for the use of the IAF as an MTG, suggesting our paper makes a unique contribution to this literature.…”

Information Asymmetries and Intra-Company Monitoring: an Empirical Analysis of Nonlinear Relationships Between Company Characteristics and the Size of the Internal Audit Function

“…In this context, the Institute of Internal Auditors, the worldwide standard-setting body, as well as other regulating institutions, such as the United States Securities and Exchange Commission and the New York Stock Exchange, require listed companies to implement an internal audit function (IAF). While the benefits of an effective IAF are manifold and well documented in the literature, research that provides reliable empirical insights on IAF is still incomplete (DeFond and Zhang 2014; Christ et al 2021).…”

“…One core principle defines that an effective IAF "is appropriately positioned and adequately resourced" (Institute of Internal Auditors 2018). Although the IPPF and its associated core principles are a mandatory standard for IAFs, multiple practitioner and research papers highlight the problem of an adequate resource allocation to internal auditing (e.g., Shelton 2018;Calvin 2021;Christ et al 2021). In any case, the decision on the resource allocation to internal auditing requires valid knowledge on the relationship between company characteristics and the size of the IAF.…”