The effects of internal audit role and reporting relationships on investor perceptions of disclosure credibility

Travis P. Holt

Managerial Auditing Journal, 2012, vol. 27, issue 9, 878-898

Abstract: Purpose - The purpose of this paper is to assess whether internal audit role and reporting relationships affect investor perceptions of disclosure credibility. Design/methodology/approach - The experiment involved a 2 × 2 design with internal audit role and reporting relationship randomly assigned among 84 MBA students serving as proxies for nonprofessional investors. Findings - The results indicate that participants perceived disclosure credibility to be significantly higher when the Chief Audit Executive reported functionally to the audit committee and administratively to the CEO (versus both strategically and administratively to the CFO). The results reveal no significant differences in perceived disclosure credibility from the differing audit roles (i.e. primarily assurance versus primarily consulting). Originality/value - The findings contribute to the internal audit and corporate governance literatures by providing further evidence of the importance of internal audit in investor judgement and decision making.

Keywords: Investments; Investors; Decision making; Internal auditing; Perception; Investor decision making; Disclosure; Non‐professional investors (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eme:majpps:02686901211263085

DOI: 10.1108/02686901211263085

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