What is the value of internal auditing? – A literature review on qualitative and quantitative perspectives

Abstract

In recent years, research on internal audit has developed significantly. Numerous papers have discussed the importance of internal auditing (IA) as a central pillar of the corporate governance system. Through its activities, IA supports the Audit Committee and the CEO/C-Level. As an independent, objective assurance and advisory function, it is designed to add value through the audit of the internal control system, risk management and the governance processes. Interestingly, research on internal audit unfortunately rarely corresponds to these added value concept defined in the core responsibilities. Therefore, this literature review attempts to highlight the possible perspectives of the added value discussion and to help define future research avenues.

New Frontiers for Internal Audit Research*

“…However, there is scant academic research on these issues, probably in part because it is difficult to observe and measure stakeholder perceptions such as trust. Furthermore, it is inherently difficult to measure the value of the IAF because its perceived value likely differs among stakeholders depending on their needs, expectations, and experiences (Eulerich and Eulerich 2020). In the past, studies have investigated the IAF and its quality in relation to earnings management, disclosure of material weaknesses, management misconduct, or financial reporting quality (Prawitt et al 2009;Lin et al 2011;Prawitt et al 2012;Ege 2015;Abbott et al 2016;Bills et al 2021) and focused on the relationship with external auditors and their reliance on the IAF (see Felix et al 2001;Prawitt et al 2011;Abbott et al 2012;Bame-Aldred et al 2013).…”

“…See Behrend and Eulerich (2019) for a bibliometric analysis of all internal audit publications in the top six accounting journals and Roussy and Perron (2018) for a structured review of current internal auditing literature published between 2005 and 2017. We also refer readers to Gramling et al (2004), Bame-Aldred et al (2013), Lenz and Hahn (2015), and Eulerich and Eulerich (2020), who provide further reviews of different aspects of past internal audit research.…”

Attributes of the internal audit function and effectiveness of internal audit services: evidence from local government authorities in Tanzania

“…These findings suggest that more training for internal auditors is required. As suggested by Eulerich and Eulerich (2020) that when the internal audit office has a training policy for their internal audit staff, the auditors' professionalism will be enhanced. The existence of adequate and competent internal auditors in the public sector office will contribute to the effectiveness of internal audit effectiveness.…”

“…The effectiveness of internal audits is a key issue for those interested in internal audits such as internal auditors, boards, management and the audit committee ( Cular et al, 2020). However, there are different views among interested groups in the organization with regard to the effectiveness of internal auditing which has contributed to the debate among researchers (Eulerich and Eulerich, 2020). This calls for the need to examine the views of the heads of internal audit functions, internal auditors and chairpersons of audit committees within the Tanzanian Local Government Authorities (LGAs) on the effectiveness of internal auditing.…”

“…Previous studies informed by institutional theory point out that the validity of the notion that internal audit could add value to the organizations rests on the implied assumption that internal audit is effective (Al-Twaijry et al, 2003;Eulerich and Eulerich, 2020). However, literature in this area suggests that the function of internal audit may not always be effective because the degree of internal audit effectiveness tends to vary with country and organization level dynamics (Erasmus and Coetzee, 2018;Roussy et al, 2020;Turetken et al, 2019).…”