International Journal of Auditing doi:10.1111/ijau.

12048
Int. J. Audit. 19: 182–194 (2015)

A Study on Internal Auditor Perceptions of the Function Ability to Add Value

Giuseppe D’Onza,1 Georges M. Selim,2 Rob Melville2 and Marco Allegrini1
1
University of Pisa
2
Cass Business School, London

In the context of internal auditing, when there is no obvious correlation between auditors’ activities and financial
performance, it is critical to identify areas where value is added as well as the drivers that enable this, in the
evaluation of the effectiveness of the internal auditing function (IAF). This paper addresses whether and how
internal auditing activities (IAAs) can add value to their organisations. In order to gain some understanding of
value-adding processes, we analysed the responses of more than 1,800 internal auditors to questions specifically
designed to evaluate this contribution. This sample was based on the 2010 global survey of the internal auditing
profession that the Institute of Internal Auditors Research Foundation (IIARF) carried out; only those respondents
were included whose role showed they were in a position to make decisions and influence the work of their IAF.
This study found evidence that four variables are positively associated with adding value: IAF independence and
objectivity; compliance with the Institute of Internal Auditors’ (IIA) Code of Ethics; the IAF’s contribution to the
evaluation of the effectiveness of internal control; and the IAF’s contribution to the evaluation of the effectiveness
of risk management. With the exception of independence and objectivity, the analysis reveals that the remaining
value drivers of the IAF’s activities vary between developed and emerging countries and between financial and
non-financial companies, suggesting that the factors influencing the IAAs’ effectiveness might be partially context
dependent.
Key words: adding value, value drivers, objectivity, internal controls, risk management

INTRODUCTION drivers, such as the characteristics of the organisational

The objective of this study is to explore the potential
contribution of internal auditing activities (IAAs) to
value-adding processes and to identify the main factors
associated with these activities. The study is based on the
latest in the series of surveys of members of the Institute
of Internal Auditors (IIA), known as the Common Body of
Knowledge (CBOK). These began in 1972 and have been
repeated at regular intervals ever since. The purpose of
the CBOK surveys is to investigate the factors that
influence the working practices, rationales and capability
of internal auditing functions (IAFs) in all sectors across
the world. This database is recognised as the most
comprehensive survey on the state of the internal
auditing profession world-wide.
Some scholars (e.g., Chambers, Selim & Vinten, 1987)
have argued that ‘internal audit does not exist as a divine
right’. Rather, its raison d’être is its value-generating
capability: The perception and measurement of its ability
to add value are therefore fundamental elements in
evaluating internal auditing’s role in making a significant
contribution to organisational performance. While
adding value has always been perceived as a key factor
in evaluating the need for an IAF, many organisations
are experiencing a reduction in their revenues and
profitability in the post-financial crisis environment.
There are strong pressures on senior management to
ensure that their IAAs’ added-value contribution is clear
and measurable. Prior studies (Bou-Raad, 2000; Roth,
2000; Mihret & Woldeyohannis, 2008; Barac, Plant &
Motubatse, 2009; Chen & Lin, 2011) have attempted to
identify the main drivers that might enhance value
creation processes. These studies show mixed results
with no clear dominant model. Some common value
Correspondence to: Giuseppe D’Onza, Department of Economics and
Management, University of Pisa, Via Cosimo Ridolfi, 10, 56124 Pisa PI
Italy. Email: giuseppe.donza@unipi.it
environment in which the IAF1 is located, the way
it is managed and the skills and competencies of the
individuals performing the internal auditing
engagement, have been identified. These studies are
limited to single countries and are based on a small
sample; the results are therefore likely to have only
limited generalizability (Roth, 2000; Mihret &
Woldeyohannis, 2008; Barac et al., 2009).
In comparison, this study is based on responses from
more than 1,800 internal audit leaders, extrapolated from
a database that includes 13,582 responses of internal
auditors working in 107 countries who participated in the
CBOK survey in 2010. The respondents work in
organisations of different sizes, in different industries
with a differing range of activities and are members and
associates of the Institute of Internal Auditors (IIA).
Similar to the studies mentioned above, we explore
several factors associated with internal auditors’
capability to add value to their organisation by analysing
the responses of those survey participants who are
leaders of internal auditing services. Our analysis
addresses both micro- and macro-findings and we are
confident that our conclusions are generalizable.
Similar to various studies on IAA effectiveness and
value-adding capabilities (Lenz & Hahn, 2015), this paper
addresses the supply-side perspective, with internal
auditors self-assessing their capability to add value,
describing the characteristics of IAFs and the roles they
play in their organisations.2
According to the definition provided by the IIA in the
International Professional Practice Framework (IPPF),
IAAs add value when they contribute to governance, risk
management (RM) and the effectiveness and efficiency of
control processes (IIA, 2013). This definition forms the
basis of the research hypotheses posited to investigate the
relationship between IAAs perceived to add value and
the IAF’s characteristics drawn from the extant literature.
These include:

© 2015 John Wiley & Sons Ltd ISSN 1090-6738

A Study on Internal Auditor Perceptions of the Function Ability to Add Value
• the IAF’s independence and objectivity;
• the relationship between the IAF and the audit
committee (AC);
• the IAF’s compliance with the IPPF;
• the types of activity performed and the tools used; and
• the roles internal auditors play in their organisations
regarding internal controls (ICs), risk management
(RM) and corporate governance (CG).
The results of this study support our four main
premises that there is a positive and significant
relationship between an IAF’s capability to add value to
the organisation and
• the IAF’s independence and objectivity;
• compliance with the IIA’s Standards and Code of Ethics;
• the IAF’s contribution to the evaluation of the
effectiveness of ICs; and
• the IAF’s contribution to the evaluation of the
effectiveness of RM.
The remainder of this paper is structured as follows:
The second section provides a critical discussion of the
background literature and develops the research
hypotheses; the third section presents the research
methodology adopted; the fourth and fifth sections
examine the results of the statistical analysis, while the
final section provides a concluding discussion of the
study results.
LITERATURE REVIEW AND DEVELOPMENT
OF RESEARCH HYPOTHESES
Using the IIA’s definition of the value creation process for
internal auditing practice (IIA, 2013), it is clear that IAAs
add value when they help improve the effectiveness of
RM, IC and CG processes.
Owing to the nebulous nature of the IAF’s perceived
role in value creation, scholars face the problem of how to
translate these concepts into measurable variables.
Several approaches have been used to facilitate this
process; these include assuming different perspectives,
such as the satisfaction of the IAF’s stakeholders
(Gramling & Vandervelde, 2006; Bolger, 2011), the
support that the auditees receive from the IAF (Arena &
Azzone, 2009) and the degree of compliance with
professional standards (Sawyer, 1988; Spraakman, 1997).
Another approach focuses on the perspective of those
who provide internal auditing services and use internal
auditors’ perceived contribution to the improvement of
their enterprise’s activities as a measure of value creation.
This approach has been used extensively in studies
relating to single countries (Mihret & Woldeyohannis,
2008; Barac et al., 2009) and in large multi-country surveys
(Burnaby et al., 2007; Chen & Lin, 2011). This is also the
approach applied in this study. While the responses to the
survey were self-reported, this is balanced by the very
strong sample analysed to evaluate the participants’
perception of their IAAs that added value to their
organisation.
Prior studies investigating the factors that have a
positive impact on the value creation process have
provided mixed evidence regarding the value drivers.
Roth (2000), for example, states that an excellent IAF will
feature five value-adding attributes: extensive staff
expertise, organisational alignment, challenging work
environment, a participative qualitative and real-time
assessment of risk, and the alignment of the audit
services with the organisation’s strategic direction. A
different view is suggested by Dittenhofer (2001), who
© 2015 John Wiley & Sons Ltd
183
identifies the following factors as contributors to the
value that internal auditors add: an adequate IAF
interaction with the organisation, internal restructuring,
creation of new services and methods, and using
technology. Other studies have identified different value
drivers, such as the IAF’s range of competencies, the use
of control self-assessment/control risk self-assessment
(Arena & Azzone, 2009) and top management support
(Cohen & Sayag, 2010). In our study, we identify potential
value drivers by testing the association between the value
creation process of IAAs and the IAF’s characteristics and
roles as drawn from the extant literature.
A possible explanation for the differences in value
drivers is that they were identified by empirical surveys
carried out in specific countries, such as the USA, South
Africa, Italy and Malaysia. The diverse results might thus
be due to country-specific variables and to the differences
associated with the research methods used. This will be
further discussed in the following sections.
In conclusion, we consider whether the differences
identified above support the major aim of this paper,
which is to explore the presence, or otherwise, of a
common, shared and tested view of the IAF’s
characteristics that enhance the value creation process of
IAAs. Prior academic research examining the internal
auditing profession from a global perspective addressed
the same objective. Another study based on the CBOK
survey (Allegrini et al., 2011) indicates that there is a clear
and expected convergence trend between developing/
developed countries, small/large organisations, and
non-listed/listed companies, which reflects the
governance and IC contexts, internal auditors’ roles and
the activities that the IAFs perform. Another study on
internal auditing practices in 26 countries finds evidence
of a high degree of de facto internal auditing practices
convergence towards US best practices (Sarens &
Abdolmohammadi, 2011). The possibility of convergence
of practices throughout countries and organisations
supports our decision to adopt a common framework of
factors that might identify the variables that favour the
value creation process of IAAs.
Sarens and Abdolmohammadi (2011) also highlight
that the convergence of internal auditing practices is not
context free. Thus, in order to analyse whether the value
drivers could be context dependent, we have developed
the analysis at two levels. The first considers all of the
survey participants’ usable responses. At this level, the
value-adding factors have been tested independently
from the geographical areas and the industries in which
the participants work. The second level analyses the value
drivers by disaggregating the responses by geographical
area and industry to examine the differences between the
investigated contexts.
Explanatory variables
Independence and objectivity
Prior studies on value drivers identify organisational
independence (Mihret & Yismaw, 2007) and the
objectivity of individuals performing within the IAF
(Mutchler, Chang & Prawitt, 2001) as fundamental for
value-added services. Despite the variety and range of
definitions of independence and objectivity, there is a
general consensus that these attributes are fundamental
qualities that an internal (as well as an external) auditor
must possess to ensure the trustworthiness of audit
services (Goodwin & Yeo, 2001; Gramling et al., 2004;
Int. J. Audit. 19: 182–194 (2015)
184
Paape, 2007). Consequently, any situation which might
impair these attributes could result in internal auditors’
credibility and professional image being damaged in
the eyes of their stakeholders (Anderson, 2009). It is
worth noting that recent studies have highlighted that the
IAF’s lack of organisational independence impairs
internal auditors’ capability to reassure their board and
AC when helping these bodies to discharge their CG
duties effectively (Christopher, Leung & Sarens, 2009;
Chambers & Odar, 2015). Krogstad, Ridley and
Rittenberg (1999) assert that internal auditors add value
when their reports are objective and insulated from any
underlying pressure or motivation to provide a particular
outcome or recommendation. Hence, the safeguarding of
organisational independence and individual objectivity is
imperative to allow internal auditors to perform their
assurance and consulting services effectively (De Zwaan,
Stewart & Subramaniam, 2011). All these considerations
lead us to the following research hypothesis:
H1: There is a positive association between the independence
and objectivity of internal auditors and the IAF’s ability to
add value.
Relationship with the AC
In recent years, a number of studies (Goodwin-Stewart &
Kent, 2006; Abbott et al., 2007; Cohen et al., 2011) have
underlined the reciprocal benefits that the IAF and the
AC gain when there is a functional and close relationship
between them. From the AC perspective, the IAF is a key
source of information to help it meet its duties and
responsibilities. This relationship acts as a safeguard of
the IAF’s organisational independence, which in turn
strengthens its ability to resist undue pressure from
senior management. These studies’ findings tend to
confirm the premise that the presence of an expert, an
active AC and Chief Audit Executive’s (CAE) direct and
frequent access to the AC increases the benefits of such a
relationship. Collectively, these studies support the
argument that frequent interactions between the CAE
and the AC reinforce the communication process and
enable internal auditors to discuss concerns and receive
advice on, and support for, ways to improve the RM, IC
and CG processes as well as to ultimately add value to the
organisation. In order to examine these issues, the second
research hypothesis posits:
H2: There is a positive association between frequent
interactions with the AC and the IAF’s ability to add
value.
Use of professional standards
Two studies (Sawyer, 1988; Spraakman, 1997) use the
degree of compliance with the IIA’s professional
standards as a measure of IAF effectiveness and highlight
the premise that the level of effectiveness increases when
the auditing practices fit the attribute and performance
standards as defined by the IIA. Ridley and D’Silva (1997)
find that, in the UK, complying with professional
standards is the most important contributor to the IAF’s
added value. Other studies on the factors enhancing
IAF effectiveness identify value drivers as variables
associated with the IIA professional standards. These
variables include: (i) the application of a risk assessment
methodology to support audit planning (Roth, 2000)
and/or (ii) the internal auditors’ professional proficiency
(Cohen & Sayag, 2010). These findings support the IIA’s
© 2015 John Wiley & Sons Ltd
G. D’Onza et al.
assertion that the main purpose of its professional
standards is to ‘provide a framework for performing and
promoting a broad range of value-added internal
auditing activities’ (IIA, 2013). Moreover, a recent study
(Lenz & Hahn, 2015) includes the degree of conformance
with the IIA professional standards in the factors which
help improve the effectiveness of IAAs, because this
allows the IAF to demonstrate that it follows the IIA’s
principles of good practice. Based on the findings
discussed above, we develop the following research
hypothesis:
H3: There is a positive association between the use of IIA
standards and the IAF’s ability to add value.
Number of IAAs
Researchers have generally argued that the IAF has a
variety of stakeholders to satisfy. The differences in the
stakeholders’ expectations require the IAF to perform
different activities in order to meet these different
expectations. In particular, attention has been focused on
senior management and the AC’s different expectations.
Prior studies have considered this dichotomy by
highlighting that while senior managers expect the IAF’s
support to improve the efficiency and effectiveness of
company operations, the AC members expect the IAF
to provide them with an overall assessment of the
organisation’s internal control system (Anderson, 2003;
Abbott et al., 2007). A recent empirical study (Selim et al.,
2014) on the internal auditing profession around the
world highlights that the CAEs interviewed across
countries indicate that they have satisfied an increasing
number of their stakeholders with different expectations
regarding what they want from IAAs. Therefore, it is
likely that when an IAF demonstrates flexibility and can
manage a diversified audit plan, its stakeholders’ level
of satisfaction will tend to increase. Roth (2000) also
confirms this argument by suggesting that an excellent
IAF offers an extensive array of services that satisfies
various stakeholders’ demands. These considerations
lead to the fourth research hypothesis:
H4: There is a positive association between the number of
activities carried out by the IAF and its ability to add value.
Number of internal auditing tools
During the last decade, internal auditors increased their
contribution to the areas of RM and CG, which lead to a
general view that internal auditors therefore need to
develop and enhance their tools and techniques in order
to continue helping managers and other stakeholders
deal effectively with these issues (Gupta, 2001; Lindow &
Race, 2002; Burnaby et al., 2007).
The 2010 CBOK study results (Bailey, 2010) highlight
that internal auditors use a range of tools to manage their
function and perform engagements. The five most
adopted are: risk-based audit planning, electronic
communication, analytical reviews, statistical sampling,
and electronic working papers. It is interesting to note
that, according to this survey, nearly 50 per cent of the
respondents indicated that they also use IT tools such as
computer assisted audit techniques (CAATs) or data
mining. These results may be considered positive,
because a wide range of techniques should support the
diversification of the IAF’s activities and increase its
ability to meet stakeholders’ expectations by providing a
wide range of assurance and consulting services.
Int. J. Audit. 19: 182–194 (2015)
A Study on Internal Auditor Perceptions of the Function Ability to Add Value
Furthermore, the adoption of IT tools could enhance the
efficiency and effectiveness of the IAF. All these
arguments provide the basis for the following research
hypothesis:
H5: There is a positive association between the number of
internal auditing tools used and the IAF’s ability to add
value.
The roles internal auditing plays in the organisation
The definition of internal auditing that the IIA (2013)
provides identifies three areas of the internal auditing
domain: IC, RM and CG. The traditional role of internal
auditors comprises the monitoring and the improvement
of the organisation’s ICs (Brink, 1941; Chambers et al.,
1987). This relevance of this role has not decreased over
time, which recent studies on the effectiveness of IAAs
demonstrate, as they highlight the difference made
when an IAF contributes to the avoidance of material
weaknesses in information systems that cause financial
misstatements (Hermanson, Ivancevic & Ivancevic, 2008),
fraud and other irregularities (Coffee, 2006).
Numerous studies have highlighted the important role
that internal auditing can play in the improvement of RM
activities by helping managers with the identification,
assessment and mitigation of their organisations’ risks
(Selim & McNamee, 1999; Spira & Page, 2003). The results
of empirical research (Allegrini & D’Onza, 2003; Sarens &
De Beelde, 2006) show that internal auditors’ contribution
to RM comprises a range of different aspects, such as
helping the organisation institutionalize enterprise risk
management activities, helping managers effectively
mitigate business risks, and providing assurance
regarding the RM systems’ adequacy. A recent study
(Coetzee & Lubbe, 2013), which indicates that the better
the IAF is with helping mitigate key risks threatening an
organisation, the more effectively it operates, points out
the relationship between the internal auditing role in RM
and internal auditing effectiveness.
Finally, the IAF can assume an active role in the
enhancement of an organisation’s CG systems
(Gramling et al., 2004). The findings of empirical studies
(Archambeault, DeZoort & Holt, 2008; Soh & Martinov-
Bennie, 2011) indicate that, in several organisations, the
IAFs provide assurance and consultation services
regarding governance issues. These issues encompass
various aspects of an organisation’s conformance with CG
systems, with governance codes, the analysis of conflict of
interests and the risk associated with directors and senior
managers’ remuneration schemes.
Taken collectively, these considerations indicate that
internal auditors’ perceptions that they add value to their
organisation increase when the IAF contributes to the
improvement of the effectiveness of ICs, the RM and the
CG processes. This contribution increases when internal
auditors use a systematic approach when carrying out the
evaluation of ICs, RM and CG systems. The Guidance Task
Force, which framed the definition of internal auditing,
provided evidence of this increase. This Guidance
indicates that this systematic approach is the ‘heart and
soul of internal auditing’s unique franchise’ and ‘the
primary basis for the profession’s success’ (IIA, 2013). This
discussion leads to the following research hypotheses:
H6: There is a positive association between a systematic
approach to evaluate the effectiveness of ICs and the IAF’s
ability to add value.
© 2015 John Wiley & Sons Ltd
185
H7: There is a positive association between a systematic
approach to evaluate the effectiveness of RM and the IAF’s
ability to add value.
H8: There is a positive association between a systematic
approach to evaluate the effectiveness of CG and the IAF’s
ability to add value.
Control variables
Meeting the requirements of the IIA’s Code of Ethics
This control variable refers to the Code of Ethics as defined
by the IIA. Internal auditors are required to comply with
the principles of integrity, objectivity, confidentiality and
competency as defined by this code in order to preserve
the credibility of the individuals who perform internal
auditing activities (Sawyer, 1988; IIA, 2013). Adherence
to these principles is fundamental to ensure the
trustworthiness of auditors’ evaluations. These
considerations lead us to consider a positive association
between the IAF meeting the requirements of the IIA’s
Code of Ethics and the IAF’s ability to add value to the
organisation.
Number of years the IAF has existed
A recent exploratory study (Sarens et al., 2011) on the
longevity of IAFs shows that a mature IAF performs
more advanced auditing activities, has a higher number
of individuals with an internal auditing certificate and
invests more in quality assurance and improvement
programmes than a less mature IAF. Moreover, if
establishing an IAF is not mandatory, the number of years
it has existed may be assumed to be an indicator of the
stakeholders’ satisfaction with the internal auditors’
services. Based on these assumptions, we posit a positive
association between the number of years the IAF has
existed and its ability to add value to the organisation.
Company size
Finally, we include company size as a control variable. A
study by Yoshikawa and Rasheed (2009) suggests that
large firms may be more willing to adopt best practices in
their control systems, because they are subjected to more
intense global competition. These arguments suggest that
there may be a positive association between company size
and the IAF’s ability to add value to RM, ICS and CG
(and, consequently, to add value to the organisation) as a
result of the adoption of best practice for IAAs.
METHODOLOGY
Model specification
We developed a logistic regression model to analyse the
association between the IAF’s capability to add value to
an organisation and its characteristics. The following
model is used to formalise the associations between the
dependent and independent variables for testing
purposes:
ADDVALUE = α + β1IND & OBJECT + β 2FINTERAC
+ β 3 USESTD + β 4 NUMBERACT
+ β 5 NUMBERTOOLS + β6 IAROLEIC
+ β7 IAROLERM + β8 IAROLECG
+ β9 MEETCE + β10 YEAREX + β11SIZE + ε
Int. J. Audit. 19: 182–194 (2015)
186 G. D’Onza et al.

Table 1: Description of the variables

Variable Definition Measurement
Dependent
ADDVALUE IAAs add value A binary variable with value = 1 if respondents select the responses ‘agree’ or
to organisation ‘strongly agree’ to the statement ‘Your IAAs add value’; = 0 otherwise
Independent
IND&OBJECT Independence A variable which assumes a value from 1 to 5. Respondents were asked to use a
and objectivity 1–5 scale (strongly disagree to strongly agree) to indicate their agreement with
the statement ‘Your internal audit activity is an independent objective
assurance and consulting activity’
FINTERAC Frequency of A variable which assume a value from 1 to 4 based on the percentage of the AC
interactions meetings CAEs were invited to attend. We use 1 = less than 25%; 2 = from
with the AC 25% to 50%; 3 = from 50% to 75%; 4 = more than 75%
USESTD Use of IIA’s A variable which assumes a value from 1 to 3. Respondents were asked to
standards indicate if they use all the IIA’s standards, some of the IIA’s standards, or if
they do not use the standards. We use 1= they do not use these standards;
2 = they use some standards and 3 = they use all the IIA’s standards.
NUMBERACT Number of A variable which assumes a value from 1 to 25. Respondents were asked to
activities select the activities they performed in 2010 from a list of 25 activities.
NUMBERTOOLS Number of tools A variable which assume a value from 1 to 16. Respondents were asked to select
the tools they used in 2010 from a list of 16 tools.
IAROLEIC IAF role A variable which assumes a value from 1 to 5. Respondents were asked to use a
regarding ICs 1–5 scale (strongly disagree to strongly agree) to indicate their agreement with
the statement ‘Your IAAs bring a systematic approach to evaluate the
effectiveness of internal controls’
IAROLERM IAF role A variable which assumes a value from 1 to 5. Respondents were asked to use a
regarding RM 1–5 scale (strongly disagree to strongly agree) to indicate their agreement with
the statement ‘Your IAAs bring a systematic approach to evaluate the
effectiveness of risk management’
IAROLECG IAF role A variable which assumes a value from 1 to 5. Respondents were asked to use a
regarding CG 1–5 scale (strongly disagree to strongly agree) to indicate their agreement with
the statement ‘Your IAAs provide a systematic approach for evaluating the
effectiveness of corporate governance’
MEETET Meet/Exceed the A variable which assumes a value from 1 to 5. Respondents were asked to use a
IIA’s Code of 1–5 scale (strongly disagree to strongly agree) to indicate their agreement with
Ethics the statement ‘Your IAAs meet/exceed the requirements of The IIA’s Code of
Ethics’
YEAREX Years of existence A variable which assumes a value from 1 to 4. We use 1 = for up to 4 years;
of internal 2 = for 5–10 years; 3 = for 11–50 years; 4 = more than 50 years
auditing unit
SIZE Size of the A variable which assumes a value from 1 to 4. We use 1 if the value of the total
organisation assets (in US dollars) is 1 bn or less; 2 = 1–15 bn; 3 = 16–25 bn; 4 = over 25 bn
ε Error term

where the dependent variable (ADDVALUE) corr-
esponds to the internal auditing activities’ ability to add
value to an organisation. The variables and their
measurements are described in Table 1.
As described in the previous section, we carry out the
analysis at two levels. The first considers the responses of
all the survey respondents to the topics from the regions
and the industries in which they work, which were
analysed independently. The second develops the
analysis for regions and industries with the aim of
identifying differences and/or similarities in their
value-adding factors.
To identify the regions, we use the Morgan Stanley
Capital International (MSCI) Equity Indices. These indices
are widely used as global benchmarks for cross-regional
comparisons (Sarens & Abdolmohammadi, 2011) and
provide a classification of countries into developed,
emerging and frontier countries. Specifically, the MSCI
Global Standard Indices identify 23 countries as
developed, 22 as emerging and 24 as frontier. Table 2
shows the number of responses by country in our study.
Owing to the shortage of data on frontier countries (73), we
decided to combine the emerging and frontier countries
into one group and to test the logistic regression model
separately in respect of each group of countries. This
decision is based on the results of a recent study of internal
auditing practices around the world (Selim et al., 2014),
which highlighted noticeable differences between IAFs’
characteristics, roles and activities in North America and
Western Europe and those in other regions. These
differences might result in different perceptions of the
factors affecting IAFs’ ability to add value in developed,
emerging and frontier countries.
With respect to the identification of industries, we
decided to combine the 23 industries addressed in the
CBOK study into two groups: financial services, which
include banks, insurance companies and other financial
services, and non-financial services, which comprise the
remaining industries. We have excluded the survey
responses of respondents who do not indicate the
industries in which they work. The results of prior
studies, indicating that, in the financial sector, the
regulatory context and the pressure that the supervisory
authorities exercise, favour the development of the IAF
(Goodwin-Stewart & Kent, 2006; Burnaby et al., 2007) to a
higher level of maturity and a greater focus on
compliance and risk management than in other sectors,
support separating the analysis into financial and
non-financial services (Sarens et al., 2011; Gras-Gil,
Marin-Hernandez & Lema, 2012). These differences may

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A Study on Internal Auditor Perceptions of the Function Ability to Add Value 187

Table 2: Number of usable responses per countries classified according to the MSCI International Equity Indices
Developed countries No. Emerging countries No. Frontier countries No.
USA 565 Brazil 15 Argentina 10
Canada 80 Chile 5 Bahrain 1
Australia 59 China 26 Bangladesh 3
Austria 52 Colombia 28 Bulgaria 10
Belgium 18 Czech Republic 12 Estonia 3
Denmark 8 Egypt No data available Jordan No data available
Finland 25 Greece 15 Kazakhstan 2
France 55 Hungary No data available Kenya No data available
Germany 85 India 24 Kuwait No data available
Hong Kong, China 10 Indonesia 3 Lebanon 9
Israel 2 Korea, South 5 Lithuania 5
Ireland 12 Malaysia 34 Mauritius 5
Italy 49 Mexico 24 Morocco No data available
Japan 57 Peru 20 Nigeria No data available
Netherlands 27 Philippines 10 Oman No data available
New Zealand 16 Poland 9 Pakistan 2
Norway 10 Qatar 3 Romania 5
Portugal 16 Russia 47 Serbia 7
Singapore 13 South Africa 56 Slovenia 4
Spain 40 Taiwan No data available Sri Lanka 5
Sweden 19 Thailand 9 Tunisia 1
Switzerland 64 Turkey 23 Ukraine 1
United Kingdom 74 United Arab Emirates 13 Vietnam No answers
Total 1,356 381 73

Table 3: Results of univariate analysis (1)

Variable IAAs add value
Yes No Statistic Significance
(92%) (8%)
IND&OBJECT: Scale 1–5 (Disagree to Agree) 4.57 (2,543) 3.34 (207) t = −23.89 <0.01
Mean (Number of cases)
NUMBERACT Min = 0; Max = 25 11.05 (2,549) 8.99 (207) t = −6.09 <0.01
Mean (Number of cases)
NUMBERTOOLS Min = 0; Max = 16 7.10 (2,549) 5.67 (207) t = −5.41 <0.01
Mean (Number of cases)
IAROLEIC Scale 1–5 (Disagree to Agree) 4.40 (2,534) 3.38 (204) t = −19.66 <0.01
Mean (Number of cases)
IAROLERM Scale 1–5 (Disagree to Agree) 4.09 (2,527) 3.03 (205) t = −17.67 <0.01
Mean (Number of cases)
IAROLECG Scale 1–5 (Disagree to Agree) 3.84 (2,534) 2.93 (203) t = −14.35 <0.01
Mean (Number of cases)
MEETET Scale 1–5 (Disagree to Agree) 4.05 (2,539) 3.02 (205) t = −16.97 <0.01
Mean (Number of cases)

have an impact on the factors that the survey respondents RESULTS

consider critical for the IAF’s ability to add value.
Source of data
In 2010, the Institute of Internal Auditors Research
Foundation (IIARF) carried out a global survey of the
IIA’s total membership. We are aware of the potential for
response bias and the availability of statistical tools for
use in this context (e.g., to control for differences between
the first group of respondents and the last group).
Unfortunately, the sample could not be tested using these
tools, as this information was not available to us. Our
study’s other limitations are discussed in the conclusion.
We use the responses to the CBOK survey’s questions
relating to the variables reported in the logistic regression
model in this study. The number of responses varies from
1,939 for the variable FINTERAC to 2,756 for the variables
NUMBERACT and NUMBERTOOL.
This section provides summary statistics relating to the
variables used in the model outlined above. In particular,
Tables 3 and 4 show the association between the
dependent variable ‘The internal auditing activities add
value’ and the independent variables. As pointed out in
the second row, 92 per cent of the survey respondents
indicated that they believe their internal auditing
activities add value to their organisation.
The second and third columns of Tables 3 and 4
provide a breakdown of the explanatory and control
variables in terms of the IAF’s capability to add value. The
last two columns include statistical tests and their
two-tailed significance for the differences between each
ADDVALUE variable. All the significant differences are
highlighted.3
Table 2 shows that the first explanatory variable – the
independence and objectivity (IND&OBJECT) – is

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188 G. D’Onza et al.

Table 4: Results of univariate analysis (2)

Variable IAAs add value
Yes No Statistic Significance
(92%) (8%)
FINTERAC <0.01
Less than 25% 82 (86.3%) 13 (13.7%)
From 25% to 50% 102 (91.1%) 10 (8.9%)
χ2 = 13.45
From 50% to 75% 94 (90.4%) 10 (9.6%)
More than 75% 1,540 (94.6%) 88 (5.4%)
USESTD
No use 458 (88.2%) 61 (11.8%)
Use some of the standards 942 (92.2%) 80 (7.8%) χ2 = 21.48 <0.01
Use all of the standards 1,142 (94.6%) 65 (5.4%)
YEAREX
Up to 4 years 540 (93.4%) 38 (6.6%)
From 5 to 10 801 (89.7%) 92 (10.3%) 2
χ = 16.844
From 11 to 50 1,083 (94.3%) 65 (5.7%)
More than 50 120 (90.9%) 12 (9.1%) <0.01
SIZE
1 bn or less 1,160 (91.4%) 109 (8.6%)
1–15 bn 882 (92.8%) 68 (7.2%) 2
χ = 5.58
16–25 bn 120 (93.8%) 8 (6.2%)
Over 25 bn 246 (95.3%) 12 (4.7%) 0.13

significant. This is because the difference between the
IND&OBJECT of 4.57 (under ‘Yes’ to ‘Add Value’) and
3.34 (under ‘No’ to ‘Add Value’) is statistically significant
(p < 0.01). The capability to add value is therefore
positively associated with the IAF’s organisational
independence and the internal auditors conducting their
engagements with impartiality and neutrality.
When considering the interaction with the audit
committee (FINTERAC), this was found to be significant
(p < 0.01), indicating that the IAF’s capability to add value
is significantly related to the frequency of its interactions
with the AC. Regular access to the AC is probably
perceived as an opportunity to discuss concerns
regarding the RM and the IC system and to receive
support for remedying the reported weaknesses.
The next variable, the use of the IIA standards
(USESTD), is also significant (p < 0.01). It is interesting to
note that 458 of the 2,5424 respondents (i.e., 18 per cent)
declare that they add value to their organisation even
though they do not use the IIA’s standards. In other
words, in these cases the use of the IIA standards is not
perceived as a factor that helps the IAF add value to the
organisation. The IIA should carefully consider and
further explore this result in order to identify the
motivation for this finding and opportunities to improve
the professional standards.
The remaining explanatory variables are all significant
(p < 0.01). It is interesting to note that, in respect of the
number of activities (NUMBERACT) and the number of
tools (NUMBERTOOLS), the means of ‘Yes’ to ‘Add
value’ is higher than that of ‘No’ to ‘Add value’. These
results indicate that when the IAF performs a higher
number of activities, or when it uses a larger number of
tools, this generates a positive perception of the IAF’s
ability to add value to the organisation.
With respect to the variables associated with the roles
that the IAF plays in the evaluation of the effectiveness of
the internal control (IAROLEIC), risk management
(IAROLERM) and corporate governance (IAROLECG),
the results show that the means of ‘Yes’ to ‘Add value’ is
higher than that of ‘No’ to ‘Add value’ in all cases. This
supports the view that the IAF’s greater involvement in
the evaluation and improvement of internal controls, risk
management and corporate governance increases the
perception of it creating value for the organisation.
In terms of the control variables relating to meeting/
exceeding compliance with the IIA’s Code of Ethics
(MEETET), the number of years that IAFs’ have existed
(YEAREX), and the size of the organisation (SIZE),
Tables 3 and 4 show that the first two of these are
significant (p < 0.01). However, the size of the
organisation (SIZE) is not significant (p = 0.13).
Table 5 presents the correlations between the variables
in the regression model. The correlation matrix shows
that there are several significant correlations between the
explanatory variables and that the highest is between
the internal auditing role regarding the evaluation of the
internal control’s (IAROLEIC) effectiveness and the
internal auditing role regarding the assessment of the risk
management (IAROLERM), which has a coefficient of
0.583. These figures support the view that multi-
collinearity does not seem to be a concern, a view that the
tolerance indexes’ values and the variance inflation
factors reported in Table 6 confirms.
REGRESSION ANALYSIS
Findings regarding all internal auditors
Table 6 shows the regression analysis results, including
all the explanatory and control variables. We report the
coefficient (β) of each independent variable as well as its
related Wald statistic and significance. The last two
columns show the values of the tolerance and the
variance inflation factor as a check for potential
multicollinearity problems. The results reported in
Table 6 indicate that multicollinearity does not appear to
be a serious concern, as the coefficients for tolerance are
all above the critical conventional level of 0.20 and the
VIF coefficients are under the critical conventional level
of 5 (Wooldridge, 2000). The last three rows provide the
value of the number of valid cases, the χ2 statistic and
its pseudo R2. The results show that the estimated
model is highly significant (p < 0.01) with a pseudo R2 of
34.5 per cent.

© 2015 John Wiley & Sons Ltd Int. J. Audit. 19: 182–194 (2015)
© 2015 John Wiley & Sons Ltd
Table 5: Pearson correlation matrix of independent variables
IND&OBJECT FINTERAC USEST NUMBERACT NUMBERTOOL IAROLEIC IAROLERM IAROLECG MEETET YEAREX SIZE
IND&OBJECT 1.00
FINTERAC 0.072* 1.00
USEST 0.175** 0.078* 1.00
NUMBERACT 0.165** 0.130** 0.325** 1.00
NUMBERTOOL 0.192** 0.061* 0.344** 0.550** 1.00
A Study on Internal Auditor Perceptions of the Function Ability to Add Value

IAROLEIC 0.493** 0.111** 0.201** 0.217** 0.224** 1.00

IAROLERM 0.434** 0.111** 0.183** 0.270** 0.235** 0.583** 1.00
IAROLECG 0.338** 0.123** 0.221** 0.300** 0.253** 0.540** 0.580** 1.00
MEETET 0.459** 0.078* 0.358** 0.220** 0.229** 0.459** 0.431** 0.377** 1.00
YEAREX 0.128** 0.019 0.101** 0.230** 0.186** 0.086** 0.055* 0.036 0.133** 1.00
SIZE 0.070** 0.010 0.074** 0.228** 0.182** 0.065* -0.003 0.052 0.091** 0.314** 1.00
*Pearson correlation is significant at the 0.05 level (two-tailed)
**Pearson correlation is significant at the 0.01 level (two-tailed)

Int. J. Audit. 19: 182–194 (2015)

189
190 G. D’Onza et al.

Table 6: Results of regression analysis

β Wald Sig. Tolerance VIF
IND&OBJECT 0.836 41.247 0.000 0.656 1.525
FINTERAC 0.216 3.726 0.054 0.977 1.023
USEST −0.209 1.503 0.220 0.821 1.217
NUMBERACT 0.042 2.034 0.154 0.530 1.888
NUMBERTOOL 0.020 0.279 0.597 0.605 1.652
IAROLEIC 0.399 5.372 0.020 0.509 1.966
IAROLERM 0.320 4.181 0.041 0.532 1.879
IAROLECG 0.146 0.818 0.366 0.565 1.770
MEETET 0.330 5.044 0.025 0.630 1.586
YEAREX −0.168 1.322 0.250 0.869 1.150
SIZE −0.035 0.184 0.668 0.860 1.162
Constant −5.751 56.297 0.000
No. of valid cases 1,808
χ2 249.71 (p < 0.01)
R2 Nagelkerke 34.50%

When considering the explanatory variables, the Table 7: Results of sensitivity analysis
variable independence and objectivity (IND&OBJECT) is
highly significant (p < 0.01) and positively associated β Wald Sig.
with the IAF’s ability to add value. These findings IND&OBJECT 0.834 41.232 0.000
support H1, indicating that if internal auditors’ FINTERAC 0.455 1.507 0.220
engagements are completed independently and USEST −0.198 1.354 0.245
objectively, this has a positive impact on the value that NUMBERACT 0.044 2.195 0.138
they generate for their organisation. This result confirms NUMBERTOOLS 0.019 0.238 0.626
our initial premise that if the organisational IAROLEIC 0.409 5.620 0.018
IAROLERM 0.325 4.302 0.038
independence of the internal auditing activity is IAROLECG 0.145 0.799 0.371
maintained and internal auditors operate impartially, MEETET 0.335 5.184 0.023
their credibility is reinforced, which in turn contributes to YEAREX −0.166 1.295 0.255
the audit services’ trustworthiness in the eyes of the SIZE −0.032 0.159 0.690
internal auditing stakeholders. Constant −5.489 53.306 0.000
The findings also support H6, which refers to the IAF’s No. of valid cases 1,808
χ2 247.71 (p < 0.01)
role regarding internal control (IAROLEIC). The results R2 Nagelkerke 34.30%
indicate that the adoption of a systematic approach to
evaluating and improving the effectiveness of the
organisation’s ICs is significantly (p < 0.05) and positively
associated with the value the internal auditors create for remaining control variables are significant. Thus, the
their organisation. This result confirms the important role results do not show significant effects regarding internal
that internal auditors play in identifying the weaknesses auditing activities adding value in respect of ‘the number
of the ICs and in providing recommendations to increase of years the internal auditing activities have existed’
their efficiency and effectiveness. (YEAREX) and ‘the size of the organisation’ (SIZE).
A similar result is found for the variable, the IA role in
risk management (IAROLERM) (p < 0.05). The findings Robustness test of the logistic regression model
support H7, revealing that the adoption of a systematic
In order to test the robustness of the results, we ran the
approach to evaluate and improve the effectiveness of the
regression model again, replacing the original variable,
RM system is significantly and positively associated
‘the relationship with the AC’, with the continuous
with internal auditors’ ability to add value to their
variable ‘number of AC meetings the CAE is invited to
organisation.
attend/total number of AC meetings’. Table 7 reports the
Regarding the relationship with the AC (FINTERAC),
results of the regression analysis, which show that the new
the results of the regression show a significant
variable used to measure the relationship with the AC
relationship at a level of 10 per cent (p = 0.054). Thus, the
(FINTERAC) is not significantly related to ADDVALUE
results show some support for H2.
(p = 0.22), casting some doubt on our previous results in
Looking at use of the IIA’s standards (USEST), the
respect of H2. The results of the other variables are broadly
regression analysis indicates an insignificant relationship
consistent with those reported in Table 6.
between the use of the IIA standards and the IAAs
These findings indicate that, consistent with our
adding value (p = 0.220). H3 is therefore not supported.
expectations in H1, H6 and H7, the IAF’s ability to add
The results of the multivariate analysis also do not
value is significantly and positively associated with its
support the remaining hypotheses H4 (the number of
independence and objectivity and the internal auditors’
internal auditing activities (NUMBERACT)), H5 (the
contribution through their evaluation and improvement
number of internal auditing tools (NUMBERTOOLS))
of the effectiveness of the ICs and RM.
and H8 (the internal auditing role in corporate
governance (IAROLECG)). Analysis by regions and by industries
Regarding the control variables, Table 6 shows strong
results for ‘meet/exceed the requirement of the IIA’s In order to analyse whether the value-adding factors
Code of Ethics’ (MEETET) (p < 0.01), but neither of the differ between regions and industries, we have tested the

© 2015 John Wiley & Sons Ltd Int. J. Audit. 19: 182–194 (2015)
A Study on Internal Auditor Perceptions of the Function Ability to Add Value 191

Table 8: Results of analysis per regions

Developed countries Emerging and frontier countries
β Wald Sig. β Wald Sig.
IND&OBJECT 0.791 21.270 0.000 1.021 11.072 0.001
FINTERAC 0.283 4.703 0.030 0.196 0.439 0.507
USESTD −0.095 0.214 0.643 −0.421 1.145 0.285
NUMBERACT 0.053 1.633 0.201 0.083 1.958 0.162
NUMBERTOOLS −0.034 0.399 0.527 0.114 2.223 0.136
IAROLEIC 0.754 10.984 0.001 −0.406 1.171 0.279
IAROLERM 0.031 0.020 0.887 0.923 8.558 0.003
IAROLECG 0.008 0.001 0.971 0.063 0.037 0.847
MEETET 0.534 7.821 0.005 0.224 0.503 0.478
YEAREX −0.133 0.496 0.481 −0.055 0.024 0.876
SIZE −0.075 0.515 0.473 −0.013 0.004 0.949
Constant −6.398 42.006 0.000 −5.247 8.617 0.003
IAAs add value Yes = 91%; No = 9% Yes = 94%; No = 6%
No. of valid cases 1.174 414
χ2 173.42 (p < 0.01) 62.47 (p < 0.01)
R2 Nagelkerke 36.60% 40.10%

Table 9: Results of analysis per industries

Financial services Non-financial services
β Wald Sig. β Wald Sig.
IND&OBJECT 0.462 4.118 0.042 1.109 32.885 0.000
FINTERAC 0.339 3.230 0.072 0.169 1.064 0.302
USEST −0.323 1.251 0.263 −0.130 0.246 0.620
NUMBERACT 0.126 5.555 0.018 −0.028 0.430 0.512
NUMBERTOOL 0.033 0.241 0.623 0.017 0.094 0.759
IAROLEIC 0.461 2.125 0.145 0.297 1.409 0.235
IAROLERM 0.465 2.735 0.038 0.382 2.737 0.041
IAROLECG 0.199 0.515 0.473 0.082 0.105 0.746
MEETET 0.130 0.263 0.608 0.531 5.440 0.020
YEAREX −0.221 0.710 0.399 −0.197 0.791 0.374
SIZE 0.032 0.051 0.821 −0.049 0.166 0.684
Constant −5.783 21.692 0.000 −6.153 27.010 0.000
IAAs add value Yes = 94%; No = 6% Yes = 90%; No = 10%
No. of valid cases 644 939
χ2 84.5 (p < 0.01) 141.86 (p < 0.01)
R2 Nagelkerke 32.60% 39.40%

logistic regression model by separately considering the
responses provided by internal auditors working in
developed and emerging countries and those operating
in financial and non-financial industries.
Tables 8 and 9 report the results of the logistic
regression analyses. It is interesting to note that the
variable independence and objectivity (IND&OBJECT) is
significantly and positively associated with the IAF’s
ability to add value in all the regression analyses.
Comparing the developed and emerging countries,
we find interesting differences regarding the factors
adding value. In developed countries, the IAF’s added
value is specifically significantly and positively associated
with frequent interaction with the audit committee
(FINTERAC) (p < 0.05), while this variable is not
significant in emerging and frontier countries. Hence, H2
is supported for IAFs in developed countries, but not in
emerging and frontier countries. This difference indicates
that the characteristics of the institutional context might
influence the drivers of the IAF’s ability to add value.
For example, in developed countries, it is generally
recognised that the AC is one of the main governance
stakeholders of the IAF, demanding assurance regarding
and consulting services on ICs and RM. Therefore,
frequent interaction with the AC members increases
internal auditors’ perception of their value-adding
function.
Moreover, when considering the internal auditing roles
in the organisation in emerging and frontier countries,
the IAF’s ability to add value is significantly and
positively associated with the internal auditing role in
risk management (IAROLERM) (p < 0.05), while this
variable is not significant in developed countries. Thus,
the results support H7 in emerging and frontier
countries, but not in developed countries. A possible
explanation for this result is that the internal auditors in
emerging countries may often be the key players who
establish, monitor and improve the RM system, while, in
developed countries, the importance of internal auditors
for RM may decrease with the development of the ‘three
lines of defence’ model and the setting up of an RM
function.
When comparing financial and non-financial services
industries, the variable number of activities
(NUMBERACT) is found significant in respect of financial
services and not significant in non-financial services.
Hence, the results support H4 in the financial services
sector, but not in the non-financial sector. The most likely
reason for this difference is that, in the banking industry,
especially after the 2008 financial crisis, there has been an
increase in pressure on the banks to strengthen their ICs,
RM and CG. In this scenario, it is likely that internal
auditors have more opportunities to satisfy the board,
senior management and other stakeholders’ expectations

© 2015 John Wiley & Sons Ltd Int. J. Audit. 19: 182–194 (2015)
192
when they adopt a multi-product approach and perform a
wide range of audit activities.
CONCLUSION
The research findings support our research hypotheses 1,
6 and 7, thus confirming that internal auditors’
independence and objectivity and their contribution
regarding the evaluation and improvement of ICs and
RM systems have a positive impact on the value that the
IAF generates for the organisation. Moreover, the results
provide some support for H2, indicating that there is a
positive association between frequent interaction with
the AC and the IAF’s ability to add value, because this
helps reinforce the IAF’s independence and offers the
CAE support to remedying the reported weaknesses. The
results thus strongly support the widespread perception
that internal auditors cannot perform their audit activities
effectively without independence and objectivity, as these
are fundamental attributes which provide internal
auditors with credibility and status. Impairing such
attributes would irremediably compromise internal
auditors’ reputation and the trust that their stakeholders
place in this function.
This study highlights that the perception of an IAF’s
ability to add value increases when internal auditors
evaluate and improve the effectiveness of ICs and RM
through the adoption of a systematic and disciplined
approach, thus ensuring that the IAAs are carried out
proficiently and professionally. These findings confirm the
premise that the internal auditor perception of adding
value depends on internal auditors’ active role in
strengthening the effectiveness of the IC and RM systems.
Further analysis confirms the paramount importance of
the IAF complying with the IIA’s Code of Ethics when
performing auditing activities. This allows internal
auditors to demonstrate to their stakeholders that their
auditing work and their outputs are performed at a
professional level.
The comparison between developed and emerging
countries and between financial and non-financial
industries indicates that, with the exception of
independence and objectivity, the other three value
drivers of IAAs vary between the contexts analysed,
indicating that the factors influencing the internal
auditing’s effectiveness might be partially context
dependent.
To date, the majority of studies investigating the IAF’s
value drivers have been carried out in a single country.
Based on the data collected through the 2010 CBOK
global survey, this study identifies generally applicable
potential IAF value drivers without a specific
geographical region’s characteristics constraining it. The
value drivers identified in this study could also be used to
develop future research on internal auditors’ capability to
add value in a more specific context. Moreover, future
research could explore the value drivers from the internal
auditing stakeholders’ perspective, including that of the
board and the AC members, senior management, the
auditees and the external auditors. Since independence
and objectivity are perceived as key conditions for
value-adding assurance and consulting services, it
would be interesting to analyse the meaning and the
importance that internal auditing stakeholders assign to
these attributes as well as their perceptions regarding
the factors that might impact, either positively or
negatively, these characteristics. We also believe that
© 2015 John Wiley & Sons Ltd
G. D’Onza et al.
future studies in this area can expand our knowledge of
the profession by complementing existing research,
which, with a few exceptions (Cohen et al., 2011), is
largely based on the supply-side perspective (Goodwin &
Yeo, 2001; Christopher et al., 2009). More studies on the
demand-side perspective could also shed light on the
roles the IAF should play regarding the ICs and RM
in different industries, countries and organisational
context in order to successfully meet the stakeholders’
expectations.
We believe that this study’s findings have interesting
implications for the development of internal auditing
conceptually and professionally at both the institutional
and the personal levels. At the conceptual level, this
study’s results should allow researchers and academics
to incorporate these findings into the development of
theory on internal auditing.
At the institutional level, the global and national
institutes need to continuously remind their stakeholders
that value added internal audit can only be delivered if
the IAF operates independently and objectively,
continuously strives to expand the audit remit and by
exploring the use of different auditing tools for work that
should be carried out within the framework of greater
compliance with the IIA standards. Furthermore, it
would be beneficial for the global and national institutes
to invest in funding research at the global, regional and
national levels to help identify: (i) new and improved
tools to carry out audit activities, (ii) successful practices
carried out by leading edge organisations which can be
shared with the rest of the internal auditing world, and
(iii) impediments to progress in certain regions and/or
countries and ways of overcoming them. Moreover, as the
internal auditing added value factors are partially context
dependent, local institutes should consider the possibility
of adopting a contingency approach when carrying out
training and with regard to other institute’s activities in
order to understand the specific circumstances that might
influence the effectiveness of the IAF. These local
institutes should also provide internal auditors with the
necessary skills and competencies to adapt the IAF’s
structure, strategy and organisational behaviour to their
specific environment. For example, this study suggests
that institutes operating in mature and frontier countries
should invest in activities to help internal auditors
develop their role in RM and, by implication, help them
add value to their organisations.
At the personal level, CAEs and senior audit managers
need to ensure that threats to their independence
and objectivity (IIA, 2001), such as a weak functional
reporting line, internal auditors’ self-review, social
pressure, economic interest, personal relationships as
well as familiarity with executive managers, cultural and
cognitive biases, are all managed actively. The use of the
IAF as a management training ground (Messier et al.,
2011) and internal auditors’ intensive involvement as top
management advisors are other factors that could also
impair objectivity and need to be managed vigorously
and pro-actively (Christopher et al., 2009). In addition,
CAEs and senior managers should strive to expand the
internal audit domain and repertoire by continuously
exploring the use of new and innovative audit tools in
their audit work. Finally, internal auditors’ continuous
professional development needs to be paramount on
CAEs’ agenda in their drive to achieve IAA excellence.
As with all studies based on survey analysis, a number
of limitations can be identified. Firstly, among the
Int. J. Audit. 19: 182–194 (2015)
A Study on Internal Auditor Perceptions of the Function Ability to Add Value
approaches highlighted in the second section, those
chosen to measure the adding value concept are based on
the perception of the 2010 CBOK survey participants. As
in similar studies, the respondents’ perceptions may
deviate from the realities of practice, or be influenced by
‘overly optimistic self-assessments by internal auditors’
(Lenz & Sarens, 2012, p. 537). Secondly, the CBOK survey
participants were all internal auditors; the measures
therefore reflect only the perspective of those providing
internal auditing services. Thirdly, as this study uses the
responses of the 2010 CBOK study, which the IIARF
administered, the manner in which the CBOK survey’s
questions were formulated strongly influences the way
the dependent and the independent variables are
measured. Finally, this study may not have examined all
possible factors that influence IAAs.
In turn, these limitations provide the basis for our
suggestions regarding future research areas. Researchers
can avoid reliance on one set of respondents by carrying
out research based on large random samples of different
users of IAAs. This would provide a broader measure of
the reality of internal audit practices. This can also be
replicated across different world regions and countries.
Finally, a number of variables (explanatory and control)
can be built into new regression models to identify their
potential impact on the value that internal auditing adds.
Examples could be: (i) the profile of the IAF individuals
(their educational background, behavioural and technical
skills, etc.); (ii) the characteristics of the staffing and the
managing processes of the IAF (e.g., the methods used to
evaluate the CAE and staff, the career development
programmes of IAF individuals); and (iii) the factors in
the company’s environment in which the IAF operates,
such as the tone at the top, the implementation of the CG
code and of the corporate ethics policies.
ACKNOWLEDGEMENT
The authors are grateful to the Institute of Internal
Auditors Research Foundation for access to the CBOK
2010 database.
NOTES
1. In this study, the terms ‘internal auditing activities’
(IAAs) and ‘internal auditing function’ (IAF) refer
respectively to the activities that the internal auditing
function undertakes and the function itself.
2. Future research is planned to investigate the IAF’s
value creation process from the service customer
perspective. This will allow us to provide a more
complete analysis of value-adding processes.
3. Table 3 reports the t-test results of the differences
between the means under ‘Yes’ to ‘Add Value’ and
‘No’ to ‘Add Value’ in terms of the variables
IND&OBJECT, NUMBERACT, NUMBERTOOLS,
IAROLEIC, IAROLERM and IAROLECG, while
Table 4 shows the differences in the χ2 test results
between the percentages under ‘Yes’ to ‘Add Value’
and ‘No’ to ‘Add Value’ in terms of the remaining
explanatory and control variables. The results are
presented in two tables to add clarity and
completeness.
4. The number is the sum of the responses to ‘Yes’ in
respect of ‘IAAs add value’ with regard to the variable
USESTD reported in Table 4.
© 2015 John Wiley & Sons Ltd
193
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AUTHOR PROFILES
Giuseppe D’Onza, PhD, is an associate professor of
Risk Management at the University of Pisa, Italy, where
he is chairman of the MSc in Auditing and Internal
Control. His research focuses on the areas of internal
auditing, risk management and corporate governance. He
was a member of the CBOK research team in 2006 and
2010.
Georges M. Selim, PhD, FIIA, is Emeritus Professor of
Internal Auditing, former head of the Faculty of
Management, and former director of the Centre for
Research in Corporate Governance at Cass Business
School, City University – London. He was elected the
1992 Educator of the Year by The IIA and, in 2000, was
awarded the John B. Thurston Award for Literary
Excellence along with co-author David McNamee for
their paper titled ‘The Next Step in Risk Management’.
Robert Melville, PhD, FIIA, is Professor of Internal
Auditing at Cass Business School, City University –
London, where he teaches and researches in internal
auditing and corporate governance. In 2005–2006, he was
the group leader for Europe and Africa for CBOK 2006,
and a follow-up project in 2010–2011.
Marco Allegrini, PhD, CpA, is a full professor at the
University of Pisa, Italy, where he is board chairman of
the MBA and director of the MSc in Chief Financial
Officer (CFO). His research focuses on the areas of
internal auditing, financial accounting and corporate
governance. He was a member of the CBOK research
team in 2006 and 2010.
Int. J. Audit. 19: 182–194 (2015)