'Serving Two Masters' and the Chief Audit Executive's Communication: Experimental Evidence About Internal Auditors’ Judgments

Florian Hoos (1) , Natalia Kochetova-Kozloski , Anne d'Arcy

1 GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC

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.

Mots clés: corporate governance; internal audit function; effectiveness; internal controls

Domaines: Gestion et management

Florian Hoos, Natalia Kochetova-Kozloski, Anne d'Arcy. 'Serving Two Masters' and the Chief Audit Executive's Communication: Experimental Evidence About Internal Auditors’ Judgments. 2013. ⟨hal-02011436⟩