Internal audit stigma impairs internal audit outcomes

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Abstract

Prior research finds that the internal audit function (IAF) plays a critical role in organizations, yet there is still a stigma toward the profession. We examine how this stigma affects internal audit outcomes, using three different data sources: survey results from parts of Europe (113 observations) and the United States (124 observations) for the year 2017 and an experiment (65 observations) in 2018. We find that when internal auditors in parts of Europe and the U.S. believe there is a negative stigma about internal auditing, they report negative work outcomes, including less ability to add value, less influence in the organization, more resistance to implementing their recommendations, and more pressure to change audit findings. Our experimental results confirm the survey findings and provide further evidence that negative stigma causes participants to perceive less value in internal audit reports and that internal audit recommendations are less influential in decision-making. Taken together, the results suggest that negative perceptions of internal audit have a significant impact on the profession.

Keywords: Internal Audit, Occupational Stigma, Dirty Work

Authors’ individual contribution: Conceptualization — M.E., J.K., K.K.S., and D.A.W.; Methodology — M.E., J.K., K.K.S., and D.A.W.; Formal Analysis — D.A.W.; Writing — Original Draft — M.E., J.K., K.K.S., and D.A.W.; Writing — Review & Editing — M.E., J.K., K.K.S., and D.A.W.; Supervision — M.E., J.K., K.K.S., and D.A.W.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

Acknowledgements: The authors thank Joel Behrend, Benson Blake, Timothy Fogarty, Klarissa Kemp, Ronja Krane, Nathan Mecham, Jared Moon, Matt Starliper, Kimberly Tribou, and workshop participants at the Brigham Young University Accounting Research Symposium and the Texas Tech Alumni Accounting Research Conference for helpful comments and suggestions.

JEL Classification: M41, M42

Received: 13.09.2021
Accepted: 17.12.2021
Published online: 21.12.2021

How to cite this paper: Eulerich, M., Kremin, J., Saunders, K. K., & Wood, D. A. (2021). Internal audit stigma impairs internal audit outcomes [Special issue]. Corporate Ownership & Control, 19(1), 257–271. https://doi.org/10.22495/cocv19i1siart4