Internal auditors’ reputation and managers’ reliance decision

Fengchun Tang, Ling Yang and Huiqi Gan

Managerial Auditing Journal, 2017, vol. 32, issue 8, 768-787

Abstract: Purpose - The purpose of this paper is to investigate how internal auditors’ performance reputation for auditing and assurance engagements affects corporate managers’ reliance on their consulting recommendations. Design/methodology/approach - This study conducted a 2 × 2 between-subjects experiment in which 103 MBA students were randomly assigned to one of the four conditions. This paper uses analysis of covariance to analyze the data. Findings - The results show that internal auditors’ reputation for performing assurance engagements positively influences managers’ reliance on their consulting recommendations. In addition, managers’ compensation structure affects their perceptions of the importance of the decision, and the perceived decision importance in turn partially moderates the effect of internal auditors’ performance reputation on managers’ reliance decision. Research limitations/implications - This paper advances the understanding of the consulting function of the internal audit function (IAF) and provides evidence on how internal auditors’ performance in one field (assurance) affects management’s perception of their performance in the other field (consulting). Practical implications - The findings of this paper should be particularly interesting to the parties that are responsible for training internal auditors by highlighting the importance of strengthening internal auditors’ capability of performing consulting service with respect to business operation. Originality/value - This study is one of the few studies that examine how internal auditors’ consulting recommendations affect managerial decisions in an operational setting. The findings of the interdependence between the assurance and consulting components of the IAF advance the growing research stream of internal audit and its impact on management decision-making.

Keywords: Consulting; Internal audit function; Compensation structure; Performance reputation (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:majpps:maj-04-2016-1366

DOI: 10.1108/MAJ-04-2016-1366

Access Statistics for this article

Managerial Auditing Journal is currently edited by Professor Jie Zhou

More articles in Managerial Auditing Journal from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().