Behavioral Dimensions of Internal Auditing: Behavioral ... · of Internal Auditing: A Practical Guide to Professional Relationships in Internal Auditing, a guide for internal auditors

Behavioral Dimensions of Internal Auditing:An Exploratory Survey of Internal Auditors

Behavioral Dimensions of Internal Auditing: An Exploratory Survey of Internal AuditorsThis report describes results of a survey conducted by the authors to identify the

behavioral dimensions of basic areas, issues, and techniques that affect internal

auditors in the field. From the data, observed trends assisted in suggesting

recommendations and conclusions as to how internal auditors should function

by recognizing the importance of these behavioral issues and the corresponding

opportunities presented.

These trends assisted the authors in their development of Behavioral Dimensions

of Internal Auditing: A Practical Guide to Professional Relationships in Internal

Auditing, a guide for internal auditors in the field on the human dimensions of

internal auditing.

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Order No. 5015.2.dlIIA members US $0 Nonmembers US $0

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Behavioral D

imensions of Internal A

uditing: An E

xploratory Survey of Internal A

uditorsMortimer A. Dittenhofer, PhD, CIA, CGFMSridhar Ramamoorti, PhD, CIA, CPA, CFEDouglas E. Ziegenfuss, PhD, CIA, CPA, CFER. Luke Evans, MA

BEHAVIORAL DIMENSIONS

OF INTERNAL AUDITING:

An Exploratory Survey of Internal Auditors

By

Mortimer A. Dittenhofer, PhD, CIA, CGFM

R. Luke Evans, MA

Sridhar Ramamoorti, PhD, CIA, CPA, CFE

Douglas E. Ziegenfuss, PhD, CIA, CPA, CFE

Disclosure

Copyright © 2011 by The Institute of Internal Auditors Research Foundation (IIARF), 247

Maitland Avenue, Altamonte Springs, Florida 32701-4201. All rights reserved. No part of this

publication may be reproduced, stored in a retrieval system, or transmitted in any form by any

means — electronic, mechanical, photocopying, recording, or otherwise — without prior written

permission of the publisher.

The IIARF publishes this document for informational and educational purposes. This document is

intended to provide information, but is not a substitute for legal or accounting advice. The IIARF

does not provide such advice and makes no warranty as to any legal or accounting results through

its publication of this document. When legal or accounting issues arise, professional assistance

should be sought and retained.

The Institute of Internal Auditors‘ (IIA‘s) International Professional Practices Framework (IPPF)

comprises the full range of existing and developing practice guidance for the profession. The

IPPF provides guidance to internal auditors globally and paves the way to world-class internal

auditing.

The mission of The IIARF is to expand knowledge and understanding of internal auditing by

providing relevant research and educational products to advance the profession globally.

The IIA and The IIARF work in partnership with researchers from around the globe who conduct

valuable studies on critical issues affecting today‘s business world. Much of the content presented

in their final reports is a result of IIARF-funded research and prepared as a service to The

Foundation and the internal audit profession. Expressed opinions, interpretations, or points of

view represent a consensus of the researchers and do not necessarily reflect or represent the

official position or policies of The IIA or The IIARF.

ISBN 978-0-89413-705-1 02/11

First Printing

In Memory of

Lawrence B. Sawyer, JD, CIA, PA

1911–2002

Pioneer and

“Father of Modern Internal Auditing”

v

CONTENTS

About the Authors ............................................................................................................. vii

Prologue ........................................................................................................................... xi

Acknowledgments............................................................................................................ xii

Executive Summary .......................................................................................................... xv

Introduction …… .................................................................................................................1 1

An Exploratory Study ...................................................................................................1

Survey Structure ........................................................................................................... 2

Research Methods ...............................................................................................................3

Data Collection and Validation .................................................................................... 3

Areas of Data Collection .............................................................................................. 3

Data Analysis ............................................................................................................... 3

Respondent Demographics .......................................................................................... 4

Survey Results — Inferential Statistics (ANOVA) ........................................................... 7

Study Variables ............................................................................................................ 8

Explanatory Variables .................................................................................................. 9

Survey Results — Descriptive Statistics .......................................................................... 11

Internal Auditor Background with Behavioral Subjects ............................................ 11

Internal Auditor Confidence with Behavioral Dimensions ........................................ 13

Role Self-perception and Role Conflict ..................................................................... 17

Communication Practices ...........................................................................................23

Interviewing Practices .................................................................................................28

Conflict Resolution .....................................................................................................30

Overcoming Hostility ..................................................................................................33

Management of Change ..............................................................................................35

Consultancy .................................................................................................................37

Perceived Responsibility to Management ...................................................................40

Summary and Implications .........................................................................................42

Conclusions and Recommendations ..................................................................................47

Epilogue ............................................................................................................................49

Appendix: Cover and Follow-up Letters ...........................................................................51

The IIA Research Foundation Sponsor Recognition .........................................................53

The IIA Research Foundation Board of Trustees ..............................................................54

The IIA Research Foundation Committee of Research and Education Advisors ..............55

vi

TABLES

1: Summary of ANOVA Tests ..........................................................................................8

2: Interest in Studying Behavioral Relationships and Beliefs in Usefulness

of Additional Guidance ................................................................................................11

3: Interest in Studying Behavioral Relationships and Beliefs in Usefulness

of Additional Guidance by Respondent Experience ....................................................12

4: Respondent Confidence in Basic Social Abilities and Relationships

of Influence and Persuasion .........................................................................................14

5: Respondent Confidence in Basic Social Abilities and Relationships

of Influence and Persuasion by Years of Experience ..................................................15

6: Respondent Confidence in Relationships That Include Ethical Concerns ..................16

7: Respondent Confidence in Relationships That Include Ethical Concerns

by Position ...................................................................................................................17

8: Role Self-perceptions of Respondents and Their Perceptions

of Auditee Perspectives ...............................................................................................18

9: Extent Respondents Believe Potential Role Conflict Exists During

the Internal Audit ........................................................................................................21

10: Extent Respondents Engage in Various Communication Practices ............................23

11: Respondents Who Did Not Encourage Auditee Participation in the Audit ................26

12: Respondents Not Seeking Consensus on Standards of Measurement ........................27

13: Respondent Perceptions of the Usefulness of Various Interviewing

Practices Employed in Internal Auditing ....................................................................29

14: Approaches Employed by Respondents to Resolve Conflict .....................................31

15: Respondent Perceptions of Effectiveness of Approaches Used

to Overcome Hostility .................................................................................................34

16: Respondent Approaches Used to Manage Change Problems .....................................36

17: Extent of Respondent Understanding of Consulting Activities ..................................38

18: Degree of Responsibility Respondents Hold Toward Management

(and Stakeholders) ......................................................................................................41

vii

ABOUT THE AUTHORS

Mortimer A. Dittenhofer, PhD, CIA, CGFM, is an Emeritus Professor of Accounting

at Florida International University, Miami, Florida. Before retiring, he was the director of

the School of Accounting at Florida International University and a research fellow of The

Institute of Internal Auditors (IIA). He earned a B.A. in economics from Macalester

College, St. Paul, Minnesota, MBA from Northwestern University, and PhD in business

administration from American University in Washington, D.C.

Dittenhofer also taught at American University, Georgetown University, George

Washington University, Catholic University, and DePaul University in Chicago. He

practiced internal auditing at the former Atomic Energy Commission, National

Aeronautics and Space Administration (NASA), the Department of Health, Education,

and Welfare, and the General Accounting Office (GAO). At the GAO, he chaired the

work group that developed the first edition of the world-renowned Government Audit

Standards (the Yellow Book). He was a two-term member of the committee that

developed The IIA‘s International Standards for the Professional Practice of Internal

Auditing.

He is well known for shepherding the publication of the IIA-sponsored textbook,

Sawyer’s Internal Auditing, 5th

Edition, published in 2003. He also edited a two-volume

annual government auditing and accounting update reference series and is co-editor of

The IIA‘s three case study collections on ethics. Dittenhofer received The IIA‘s

prestigious Bradford Cadmus Memorial Award in 1985, the Leon R. Radde

Distinguished Educator of the Year Award in 1989, and was the second recipient of The

IIA‘s Lifetime Achievement Award in 2002.

Sridhar (Sri”) Ramamoorti, PhD, CIA, CPA, CFE, is a principal of Infogix Advisory

Services, Infogix, Inc., a software-based information controls company and professional

services provider for governance, risk, and compliance (GRC), continuous controls

monitoring (CCM), and forensic accounting. He is a contributing editor to Sarbanes-

Oxley Section 404 for Small, Publicly-Held Companies (CCH/Wolters Kluwer, 2009) and

a co-author of The Audit Committee Handbook (5th

edition, John Wiley, 2010). He earned

a bachelor of commerce degree from Bombay University, India, and holds MAcc. and

PhD (quantitative psychology) degrees from The Ohio State University in Columbus,

Ohio. After completing his PhD, he was on the accountancy faculty at the University of

Illinois at Urbana-Champaign for a few years.

Until recently, Ramamoorti was a partner in the National Corporate Governance Group

of Grant Thornton LLP in Chicago. He led the firm‘s thought leadership initiatives in

corporate governance and accountability, advising on Sarbanes-Oxley, professional

standards and other technical matters, assisting with global client pursuits, delivering

board and audit committee briefings, promoting university faculty relations, and

Behavioral Dimensions of Internal Auditing: An Exploratory Survey

viii

mentoring younger professionals. A core member of the Grant Thornton authoring team

for the 2009 COSO Guidance on Monitoring Internal Control Systems (see

www.coso.org), he is also a co-author on the well-received textbook Internal Auditing:

Assurance and Consulting Services (2nd

edition, 2009), published by The IIA, that has

been translated into Spanish and Japanese.

Before joining Grant Thornton, Ramamoorti worked at Ernst & Young (EY) in the Fraud

Investigation and Dispute Services (FIDS) practice and was in-house EY faculty for fraud

awareness training of Ernst & Young partners and principals nationally. He spearheaded

the development of an EY proprietary litigation risk management simulation model that

attained ―patent pending‖ status with the U.S. Patent Office. Subsequently, he was also

the Sarbanes-Oxley advisor for the EY National Advisory Practices in North America.

Earlier in his career, he was a principal in the Professional Standards Group of Arthur

Andersen, where he consulted on generally accepted auditing standards, represented the

firm on the AICPA Financial Instruments Task Force that produced SAS 92: Auditing

Derivatives, Hedging Activities, and Investments in Securities, and served as a key liaison

in the multimillion-dollar Andersen-MIT research collaboration.

He has published extensively in research and professional journals such as Management

Science, European Management Journal, Research in Accounting Ethics, International

Journal of Accounting, Issues in Accounting Education, Advances in International

Accounting, Journal of Information Systems, Internal Auditor, Journal of Government

Financial Management, White Paper, and Financial Executive. He co-authored Using

Neural Networks for Risk Assessment in Internal Auditing (1998) and co-edited Research

Opportunities in Internal Auditing (2003), both published by The Institute of Internal

Auditors Research Foundation (IIARF). He is the recipient of many teaching excellence

awards and prestigious research grants.

Ramamoorti was originally trained as a chartered accountant from India, and holds

numerous U.S. professional certifications. Active in the profession, he is on the Board of

Directors of Ascend, Institute for Business and Professional Ethics (IBPE), Information

Integrity Coalition (IIC), and the Board of Governors of The IIA‘s Chicago Chapter. He

serves as vice-president (Practice) of two sections of the American Accounting

Association and is a member The IIA‘s Global Ethics Committee. Currently co-chairman

of The IIA‘s Global 2010 Common Body of Knowledge (CBOK) study, he is a past

chairman of the Academy for Government Accountability (2005-2008) and a member of

the Board of Trustees of The IIA Research Foundation (2002-2008). A frequent speaker

at academic and professional conferences, he has made presentations in the United States,

Brazil, Canada, France, India, Japan, the Netherlands, Qatar, South Africa, Spain,

Turkey, and the United Arab Emirates

Douglas E. Ziegenfuss, PhD, CIA, CPA, is professor and chair of the Accounting

Department at Old Dominion University in Norfolk, Virginia, where he teaches courses

in auditing and coordinates the Internal Auditing Enforced Program. He holds a B.A. in

http://www.coso.org/


ix

philosophy/history from Mount Saint Mary‘s College (magna cum laude), an M.S. in

accounting from American University, and a PhD in accounting from Virginia

Commonwealth University, along with numerous professional certifications.

His expertise includes operational, fraud, and information technology auditing, as well as

corporate governance and professional ethics. He has authored or co-authored three

books and 25 articles on audit-related subjects. He regularly presents programs on audit

management, fraud, and quality management issues in numerous locations across the

U.S. as well as internationally in Hong Kong, Mexico City, Paris, Toronto, and Australia.

He has eight years of auditing experience in the public utility and waste management

industries.

Ziegenfuss received The IIA‘s prestigious Leon R. Radde Distinguished Educator of the

Year Award in 1996. The Virginia Society of Certified Public Accountants recognized

him as their ―Outstanding Accounting Educator‖ in 1997, and the Association of

Government Accountants also recognized him in 2000 as one of the most influential

chapter members during its first 50 years for starting a student chapter. From 2005 to

2009, Virginia Business designated Ziegenfuss a ―Super CPA‖ educator.

His service to the auditing profession includes national board membership on The IIA‘s

Board of Research and Education Advisors and as a trustee and secretary of The IIARF.

Before that he served as vice chair of The IIA‘s Academic Relations Committee.

Ziegenfuss has served on the board of The IIA‘s Tidewater Chapter and is a former

chapter president. He also chaired the 1997 IIA Mid-Atlantic Conference.

R. Luke Evans, MA, provides project coordination services for not-for-profit

organizations as an independent professional living in the Boston, Massachusetts area. He

holds a B.B.A. in accounting from the University of Toledo and an M.A. in educational

policy and leadership (focused on business administration curricula) at The Ohio State

University.

Upon earning his bachelor‘s degree, Evans served on the audit staff at Price Waterhouse

& Co. and later developed a public accounting practice serving small business clientele.

Eventually he expanded his experience into commercial credit analysis and lending at the

Huntington National Bank and BancOhio National Bank in their small business divisions.

Following several years in business, he entered graduate school at The Ohio State

University to study the teaching of ethics in business administration curricula, earning his

master‘s degree. He continued with doctoral study into the contemporary moral and

political philosophies that underlie curriculum practices in higher education, satisfying

his coursework and comprehensive exam requirements. He then entered higher education

administration at Ohio State, after which he returned to post-graduate study to pursue

human resource development at the University of Illinois, Urbana-Champaign. While at

Illinois, he collaborated with Sridhar Ramamoorti on a paper titled ―Strategies for


x

Effective Learning: Insights of Research and Scholarship in Business Education,‖ which

was presented at DePaul University.


xi

PROLOGUE

Contemporary internal auditing — as an integral part of a complex web of relationships

within an organization — involves significant social interaction with auditees.

Auditor/auditee interactions occur in organizational settings that consist of both face-to-

face and written communication. Internal auditing is very much a ―relationship and

communications business.‖

The nature, scope, and extent of auditor/auditee interactions lie at the core of internal

audit assurance activities. Most internal audit practitioners would agree that mastering

interpersonal and communication skills, often called ―soft skills,‖ is among the most

important skills that successful internal audit professionals need. Soft skills typically

include the ability to share information, make persuasive arguments, negotiate

agreements, and demonstrate passion for change, while simultaneously understanding

different roles and responsibilities, empathizing with others, acting with integrity, and

relating well with others from all levels of the organization. To employ all these skills

effectively in everyday situations, internal auditors need to have high degrees of

emotional and social intelligence.

Individual and social behavioral disciplines such as psychology, social psychology,

sociology, communications, behavioral economics, and cultural anthropology seek to

provide understanding and insight on the nature of such soft skill interactions among

people in various social and cultural settings.1 For a few decades now, the behavioral

dimensions of internal auditing have received little systematic exploration in the auditing

literature.2 Given that behavioral considerations carry so much importance in the day-to-

day practice of internal auditing, the authors conducted an online exploratory survey to

examine some of the current thinking of many internal auditors on this important topic.

Anyone harboring any doubts about the importance of this subject to internal auditing

should consult Summary of the Common Body of Knowledge 2006 (CBOK) by The

Institute of Internal Auditors Research Foundation (IIARF) and read the section on

internal auditor skills.3 This section identifies a list of typical behavioral skill sets

considered important to the audit staff, senior supervisors, and audit managers. The

1Sridhar Ramamoorti, ―Internal Auditing: History, Evolution, and Prospects,‖ in Andrew D. Bailey, A.A.

Gramling, and Sridhar Ramamoorti (eds.), Research Opportunities in Internal Auditing (ROIA) (Altamonte

Springs, FL: The Institute of Internal Auditors Research Foundation, 2003).

2See Victor Brink, 1965; Frederic E. Mints, 1972 and 1981; and Robert K. Mautz et al., 1984 for earlier

treatments of this general topic.

3Priscilla A. Burnaby, Mohammad J. Abdolmohammadi, and Susan S. Hass, A Global Summary of the

Common Body of Knowledge, 2006 (Altamonte Springs, FL: The Institute of Internal Auditors Research

Foundation, 2007), 34–35.


xii

authors of CBOK 2006 state, ―Practitioners consider almost all of the behavioral skills

listed to be important to [the performance of] their work at their current position….‖

In the spirit of The IIARF‘s 2003 Research Opportunities in Internal Auditing (ROIA),4

this survey on the ―behavioral dimensions of the internal auditor‖ also seeks to make

important contributions to the current understanding of interpersonal communications

and other general behavioral ―aspects‖ in the internal audit profession.

4Andrew D. Bailey, A. A. Gramling, and Sridhar Ramamoorti (eds.), Research Opportunities in Internal

Auditing (ROIA) (Altamonte Springs, FL: The Institute of Internal Auditors Research Foundation, 2003).

xiii

ACKNOWLEDGMENTS

We would like to thank the reviewers of the Board of Research and Education Advisors

(BREA) who undertook the review of this report, along with the staff of The Institute of

Internal Auditors Research Foundation (IIARF) for their patient understanding of the

vagaries associated with author life events over the course of the project.

We especially wish to acknowledge the valuable contributions of Sowmya Anand, PhD,

for her administration and compilation of the survey data into tables from which we

discuss the results, conclusions, and recommendations.

xv

EXECUTIVE SUMMARY

We conducted this survey of internal auditors to identify behavioral areas, issues, and

techniques that may apply toward improving the performance of their responsibilities. For

purposes of this study, we defined ―behavioral‖ in terms of psychology and sociology as

the study of human behavior toward understanding human thought and action. In doing

this, we identified areas first in the literature and next in the field where behavioral issues

affect auditor performance. We identified the following areas, issues, and techniques

affecting internal auditors:

Internal Auditor Background with Behavioral Subjects

Internal Auditor Confidence with Behavioral Dimensions

Role Self-perception and Role Conflict

Communication

Interviewing Practices

Conflict Resolution and Overcoming Hostility

Management of Change and Consultancy

Perceived Responsibility to Management

We then administered a web-based questionnaire to internal auditors over The Institute of

Internal Auditors‘ (IIA‘s) Global Audit Information Network (GAIN), which contained

names of more than 7,000 internal auditors. Two invitational requests were sent, which

yielded 913 usable responses.

We discuss all the topics together in the first section of results using analysis of variance

(ANOVA) and separately in the second section using measures of central tendency.

Afterward, we offer recommendations and conclusions as to how internal auditors should

proceed. In general, we found that some internal auditors have not fully recognized the

importance of these behavioral issues and the corresponding opportunities they represent.

Further, we recommend a strategic ongoing focus on the behavioral dimensions through

combinations of publications, conference sessions, and continuing education at regional

and local levels.

1

INTRODUCTION

While developing the proposal for the behavioral dimensions project, it seemed important

that we not only gather information published previously on behavior in the field of

internal auditing but also obtain related information directly from internal auditors

indicative as to what they are thinking, feeling, and actually experiencing in the internal

audit field.

The philosophy of a behavioral approach is not unusual in internal auditing. Although

employed by most internal auditors, it is not yet considered to be generally accepted by

the profession. Therefore, there is interest in indications of the attitudes of internal

auditors toward the basic procedural and philosophical foundations of the behavioral

approach. Moreover, there is also interest in how successful were the internal auditors who

used behavioral approaches in the application of this philosophy and how comfortable

they were with their application.

We believed that an exploratory survey of internal auditors to obtain insight on the above

information could accomplish three purposes. First, it might indicate the current status of

the application of behavioral approaches; second, indicate the degree of effectiveness of

some of these approaches toward providing useful and viable internal audit outcomes;

and third, possibly identify areas for further attention to improve effectiveness of some of

these approaches in their application.

We believe that current information on the status of acceptance and indications of the

success or failure of aspects of the behavioral approaches could help develop more

effective methods for their use. Moreover, one of the interests of the behavioral approach

has been and is to create a closer relationship between the internal auditor and auditee to

develop a more cooperative audit operation. We also thought the survey would better

illustrate this interest.

An Exploratory Study

This study explores the views held by internal auditors on the behavioral dimensions of

internal auditing as a starting point on this broad and complex subject. As such, it should

be considered more exploratory, or nonscientific, rather than a full scientific study.5 A

5It is meaningful to distinguish between usage of terms scientific, nonscientific, and unscientific inquiry. The

term scientific refers to inquiry that meets the canons of scholarly scientific research. Nonscientific inquiry is

not intended to rise to this level, often due to limitations placed on human, financial, or temporal resources.

Under these instances, those who conduct such inquiry are obligated to disclose these limitations to the

reader or community. Studies deemed unscientific, on the other hand, fail to meet the canons of scholarly

scientific research due to negligence or intentional bias or disregard but are nevertheless represented as

scientific to the reader or community.


2

full scientific survey would have required many additional procedures or methods

regarding testing of questions for content validity, random selection, non-response bias,

and so forth to bring the study up to the canons of scientific research.

The additional procedures and methods would have allowed us to generalize our results

to the broad population from which the respondents came and to interpret their responses

with stronger confidence. Moreover, they would have allowed for a ―completely open

review and [replication, capable] verification by other interested scholars.‖6 For instance,

had we been able to randomly select a sample from the population of internal auditors,

assure adequate demographic representation in our sample, e-mail the invitation to

respond only to those members selected for our sample, and receive a sufficient response

rate from across our sample, then we would have been able to generalize our results to

the broad population of internal auditors with confidence. Due to limited resources,

however, we were unable to fulfill all necessary procedures or methods for a full

scientific study and, thus, were able to generalize only to those individuals who

responded to this survey rather than the whole field. Similar exploratory studies,

however, have merit in that they often shed light on new areas of interest as well as serve

as valuable starting points for future scientific survey and case study research.

Survey Structure

We conducted an online survey of internal auditors to gather information on their training

in, attitudes toward, and usage of various behavioral techniques. First, we drafted a

questionnaire comprising various statements and questions with regard to the constructs

presented in the original proposal for this report (discussed in the following section,

Areas of Data Collection). Next, the statements and questions developed by the authors

were finalized based on reviewer comments at The IIARF and The IIA‘s Global Audit

Information Network (GAIN). Finally, the questionnaire was organized into several

sections that measured various facets of behavioral aspects of internal auditors in the

field. An e-mail inviting responses that contained a link to the questionnaire on The IIA‘s

website was then sent to prospective respondents.

6AAA Committee on Behavioral Science Content of the Accounting Curriculum (Sarasota, FL: American

Accounting Association, 1971).

3

RESEARCH METHODS

Data Collection and Validation

The questionnaire was programmed for web-based administration by the GAIN staff. The

e-mail inviting response to the survey was sent out on January 25, 2006, to approximately

7,000 internal auditors who were in the GAIN database; a link to the survey was

embedded in the e-mail. After two weeks of fielding the questionnaire, 378 responses

were obtained. Soon after, a reminder e-mail was sent to those who had not responded to

the survey, yielding an additional 535 responses. After four weeks of data collection, the

total sample size was 913, a response rate of approximately 13 percent. The data file was

set up and analyzed using SPSS (Statistical Package for the Social Sciences). Variables in

the data file were labeled and tables of frequencies were obtained for all variables; this

served as a check of whether the data were properly coded and whether missing values

were correctly assigned.

Areas of Data Collection

Data collection covered areas related to behavioral aspects typically encountered by

internal auditors during the course of their engagement. These areas focused on internal

auditor:

Confidence to engage in various behavioral aspects of practice.

Roles and the social demands that accompany these roles in various internal audit

situations.

Interviewing and communication approaches and techniques.

Practices and techniques used to resolve conflict and deal with client hostility.

Engagement in activities related to change management, in particular helping the

client deal with change, especially in consultancy aspects of internal auditing.

Perceptions of degrees of responsibility they believe they hold toward different

levels of management and stakeholders.

In addition, data collection included respondent background associated with education

and training in the social and behavioral disciplines and respondent demographics

(gender, age range, formal education, length of experience, and organizational position).

Data Analysis

Data analysis consisted of inferential and descriptive statistics. Inferential statistics

involved the use of analysis of variance (ANOVA), which looked at how internal auditor

demographics related to typical social and behavioral activities as experienced in

practice. Descriptive statistics focused on discerning patterns among frequencies of data

4

responses as reported on a five-point Likert scale and expressed as percentages for each

of the questions in the survey areas. The combination of inferential and descriptive

analyses helped us develop a more realistic picture in many areas of the behavioral

aspects of internal auditing as practiced today. Insights revealed on important points

could have important implications for future research that are intended to guide members

as the profession grows in the coming decades.

Respondent Demographics

The demographic data reported in the following charts provide a fuller description of our

respondents in terms of (a) gender, (b) age, (c) education level, (d) experience in the

internal audit activity, and (e) position in the organization.

Gender f %

Male 483 54

Female 414 46 N = 913

Total 897 100 No response is 16.

Age Range f %

Up to 25 Years 37 4

26 to 30 Years 100 11

31 to 35 Years 117 13

36 to 40 Years 131 15

41 to 45 Years 143 16

46 to 50 Years 143 16

51 to 55 Years 101 12

56 to 60 Years 83 10

61 Years + 23 3 N = 913

Total 878 100 No response is 35

Formal Education

Level

f %

Undergraduate/

Associate

26 3

Bachelor‘s 546 60

Master‘s/ Doctorate 301 33

Other 22 4 N = 913


Research Methods

5

Experience

in the

Internal

Audit

Activity

f

%

Up to 1

Year

62 7

1 – 2 Years 117 13

3 – 5 Years 188 21

6 – 10

Years

202 23

11 – 15

Years

110 13

15 Years + 201 23 N = 913

No response and ―not an

Total 880 100 internal auditor‖ are 33

Position in the

Organization

f

%

Audit Staff 368 41

Audit Manager 245 27

Audit Director 99 11

Chief Audit

Executive

128 14

Other 59 7 N = 913


7

SURVEY RESULTS — INFERENTIAL STATISTICS (ANOVA)

Though this project is exploratory in that it is studying an important subject in internal

auditing that has had little prior attention, we thought it appropriate to apply a test measure

in addition to the rather rudimentary measures of central tendency used in the following

section on survey results. It was decided to use Simple Regression and Analysis of

Variance (ANOVA) tests of significance as a technique to augment the interpretations that

have been made.

We have explored the relationships between certain key study variables and possible

explanatory variables. First, we reviewed the survey instrument and selected eight study

variables that correspond to important sections of this report: Level of (Internal Auditor)

Confidence, Roles, Communication, Interviewing, Neutralizing Change (Management of

Change), Consulting, People Issues (Conflict Resolution), and Overcoming Hostility.

Next, we selected possible explanatory variables: Gender, Age, Training in Behavioral

Methods, Audit Staff Size, Education, Years of Experience in Internal Auditing,

Professional Level = Manager, Audit Director, Chief Audit Executive (CAE), and Other.

We constructed these variables by computing the average response for the bank of

questions included in each study variable in the survey instrument. A similar procedure

was followed for the possible explanatory variables, except that the question concerning

level had to be broken down into separate dummy variables (e.g., audit manager, audit

director, CAE, etc.) for further analysis.

Simple regressions were computed using one of the eight study variables as the

dependent variable and all of the explanatory variables as the independent variables.

None of the resulting eight regressions were statistically significant. Next, we repeated

the process using Analysis of Variance (ANOVA) tests of significance and successfully

produced eight statistically significant results that are summarized in Table 1.


8

Table 1

Summary of ANOVA Tests

Explanatory

(Independent)

Variable

Study (Dependent) Variable

Level of

(Internal

Auditor)

Confidence

Roles

Communi-

cation

Interviewing

Neutralizing

Change

Consultancy

People

Issues

Over-

coming

Hostility

(Constant) .000*** .000*** .000*** .000*** .000*** .000*** .000*** .000***

Gender1 - .002*** .044** .957 .420 .051* - .009*** .561 .143

Age .093* - .349 .459 .137 .035** - .173 .131 .020**

Audit Staff

Size .183 .320 .002*** .000*** .165 - .072* .035** .019**

Education .708 .497 .141 .208 - .809 .506 .015** .930

Years

Experience in

IA

.032** - .927 .368 - .367 .837 .124 - .677 .913

Level = Audit

Manager1

.000*** .038** .094* .018** .562 - .824 .597 .216

Level = Audit

Director1

.002*** .210 .003*** .045** .028** - .564 .180** .312

Level = Audit

CAE1

.000*** - .537 .001*** .361 .269 - .152 .039** .009***

Level = Audit:

Other1

.268 .047** .169 - .851 .139 .182 .257 .704

Training in

Behavioral

Methods

.099* .771 .000*** .008*** .001*** .278 .065* .001***

Confidence levels: * = significant .10 level; ** = significant .05 level; *** = significant .01 level 1 Dummy coded.

Study Variables

The results are interesting. For instance, gender is negatively related to level of

confidence. This means that men were reported to have a higher level of confidence with

respect to their role as internal auditors. Likewise, older workers are inclined to have a

higher level of confidence as internal auditors than younger workers. Managers, directors,

and CAEs tend to have higher levels of confidence than other respondents. Finally, those

auditors who have training in behavioral methods seem to have a higher level of

confidence than those who do not have the training. Other interesting results follow:

Survey Results – Inferential Statistics

9

Women, more experienced audit managers, and other audit staff were more likely

to perceive a role conflict between how they viewed their roles and how their

auditees viewed the auditor‘s role.

Women, more experienced internal auditors, audit directors, and internal auditors

who had received behavioral training are apt to use more diverse communications

methods than other respondents.

Women, older internal auditors, audit directors, and those who had received

behavioral training more often used methods to neutralize the auditee‘s resistance

to change than other respondents.

Men and respondents from larger audit staffs were more comfortable in their role

as consultants than other respondents.

Women, those respondents from larger audit staffs, audit managers, and audit

directors used more diverse interviewing techniques than other respondents.

Respondents from larger audit functions, respondents with higher educational

levels, audit directors, CAEs, and those respondents with behavioral methods

training often use more diverse ―people oriented‖ methods to reduce conflict with

their auditees than other respondents.

Older respondents, respondents from larger internal audit functions, CAEs, and

those with behavioral methods training felt stronger about the effectiveness of

hostility-reducing methods than other respondents.

Explanatory Variables

We can also discuss these findings in terms of the possible explanatory variables. For

instance, men have a higher level of confidence in their role as internal auditors and tend

to believe more strongly in the consultancy role for internal auditors than women

respondents. However, women respondents experience greater role conflict, use more

diverse methods to neutralize auditee resistance to change, and use more diverse

interviewing techniques than men.

Some additional findings follow:

More experienced workers had higher levels of confidence. They also used more

diverse methods to neutralize auditee resistance to change and to overcome

auditee hostility.

Internal auditors on larger staffs used more diverse communication techniques,

believed more strongly that internal auditors have a consultancy role, used more

diverse interviewing techniques, used more ―people oriented‖ behavioral

methods, and more firmly believed in the effectiveness of hostility-reducing

techniques.

Surprisingly, educational level only related to one study variable — the use of

―people oriented‖ behavioral methods to resolve conflict problems.


10

Years of internal audit experience only related to one study variable — the level

of confidence.

On the other hand, the respondent‘s organizational level — whether as an audit

manager, audit director, or CAE — was significantly related to all the study

variables.

Those respondents who had completed training in behavioral methods had higher levels

of confidence in their role as internal auditors, used more diverse methods of

communication, used more diverse methods of neutralizing auditees‘ resistance to

change, used more diverse communication, interviewing, ―people oriented‖ behavioral

methods in conflict resolution, and felt more strongly about the effectiveness of methods

to overcome auditee hostility.

11

SURVEY RESULTS — DESCRIPTIVE STATISTICS

This section covers survey results from respondents covering the behavioral aspects

within the internal audit activity using normative measures of central tendency.

Internal Auditor Background with Behavioral Subjects

One can presume that internal auditors have taken basic academic coursework related to

behavioral relationships covered by requirements or electives for their bachelor‘s degree,

especially since this degree is typically a basic requirement to become an internal auditor

today. As for studying behavioral relationships within the context of the internal audit

function though, this is another matter — only 23 percent of the respondents indicated

having done so.

Our inquiry into internal auditor background relating to these behavioral relationships has

two facets: (1) their level of interest in studying behavioral relationships and (2) their

belief in the usefulness of seeking additional guidance on behavioral relationships. Most

respondents seemed interested in studying behavioral relationships and were willing to

gain additional guidance on this subject to some degree. Table 2 reflects these replies.

Table 2

Interest in Studying Behavioral Relationships and

Beliefs in Usefulness of Additional Guidance

Question

Level of Interest

Not

Interested

at All

Slightly

Interested

Moderately

Interested

Very

Interested

Extremely

Interested

No. % No. % No. % No. % No. % Total

How interested are you

personally in studying

behavioral relationships?

27

3

132

15

326

37

306

35

89

10

880

100%

How useful would it be if

additional guidance were

offered on behavioral

relationships in internal

auditing?

19

2

131

15

288

33

361

41

81

9

880

100%

N = 913. No reply and unusable responses are 33 for a net of 880.

As to respondent level of interest in the study of behavioral relationships, those

―Moderately Interested‖ and ―Very Interested‖ were almost equally divided. Likewise, as

to their belief in the usefulness of additional guidance on behavioral relationships in


12

internal auditing, the same can be said but with a somewhat higher response for those

respondents who are ―Very Interested.‖

These attitudes seem to indicate a split on the importance that most respondents place on

behavioral relationships in the course of their professional work. A secondary analysis

was conducted on these two response categories by the respondent‘s level of experience

in the internal audit activity, which is reflected in Table 3. This analysis indicated some

interesting patterns that might be worthy of further inquiry when it comes to establishing

continuing education courses for internal auditors.

Table 3

Interest in Studying Behavioral Relationships and Beliefs in Usefulness of

Additional Guidance by Respondent Experience

Question

Years in Internal Audit Field

< 1 Yr 1 – 2 Yrs 3 – 5 Yrs 6 – 10 Yrs 11 – 15 Yrs 15 + Yrs

No. % No. % No. % No. % No. % No. %

Interested in studying

behavioral

relationships:

Moderately

(No. = 326)

21

34

51

44

60

32

65

32

47

43

82

41

Very

(No. = 306)

20

32

33

28

73

39

79

39

31

28

70

35

Total Years (N = 880) (n = 62) (n =117) (n = 188) (n = 202) (n = 110) (n = 201)

Interested in receiving

further guidance:

Moderately

(No. = 288)

15

24

43

37

56

30

62

31

40

36

72

36

Very

(No. = 361)

31

50

42

36

77

41

91

45

40

36

80

40

Total Years (N = 880) (n = 62) (n =117) (n = 188) (n = 202) (n = 110) (n = 201)

As indicated in Table 3, a complementary pattern of correspondence between the

responses appears to exist between interest in the study of behavioral relationships and

beliefs in the usefulness of receiving additional guidance. Those internal auditors with 1 -

2 and 11 - 15 years of experience tend to have a more moderate interest in studying

behavioral relationships while indicating a level interest in receiving further guidance. On

the other hand, new internal auditors with less than one year of experience and mid-

career internal auditors seem to possess a level interest in studying behavioral

Survey Results – Descriptive Statistics

13

relationships while indicating a stronger interest in receiving further guidance. In

addition, for respondents with 15 or more years of experience, the directionality shifts

somewhat from ―Moderately Interested‖ to ―Very Interested‖ when it comes to beliefs in

the usefulness of receiving further guidance. These data patterns seem to suggest that

where an internal auditor resides in his or her career is an important influence on his or

her interest in behavioral dimensions.

The foregoing has implications for professional development. Continuing education

courses on behavioral relationships in the internal audit activity could be designed to

meet the specific needs of entry-level professionals and another set of needs for mid-

career professionals. In addition, specialized courses for internal auditors with 15 or more

years of experience could be offered in seminar format to promote spirited dialogue,

discussion, and debate as this group would likely comprise audit directors and CAEs who

have significant knowledge and experience in the field.

Internal Auditor Confidence with Behavioral Dimensions

Respondents were asked for their ratings of confidence in their abilities to handle various

situations involving relationship building with auditees, colleagues, and superiors.

Confidence refers to a person‘s beliefs in his or her own ability to achieve desired

outcomes, and typically this construct has been measured by assessing an individual‘s

perceived capability of performing various tasks that are relevant to achieving the desired

outcome of choice.7 According to Bandura, as most people realistically strive to achieve

in a few selected areas rather than in all areas, they tend to express beliefs that support

their confidence to perform in specific areas. Perceived self-confidence often correlates

with one‘s performance in the area of interest; thus, those high in perceived self-

confidence in a given area also tend to perform well in that area. In keeping with this

conception of confidence, this section measured respondent confidence in the areas

relating to behavioral issues in internal auditing.

The results present an optimistic view of respondent confidence in handling the

behavioral dimensions of most internal audit situations. While optimistic, it should be

realized that the results presented reflected viewpoints of the respondents and not that of

auditees. This optimism may not be shared between the two groups.

For this study, respondent confidence in the handling of behavioral dimensions can be

understood over three broad areas:

Basic social abilities (Tables 4 and 5).

Relationships of influence and persuasion (Tables 4 and 5).

Relationships that include ethical concerns (Tables 6 and 7).

7 Albert Bandura, Social Learning Theory (Englewood Cliffs, NJ: Prentice Hall, 1977).


14

Basic Social Abilities

Respondents indicated with relatively high confidence their basic social abilities to

maintain cordial relations, build trust, communicate effectively, and objectively consider

both sides (see Table 4). Fifty-six to 61 percent of respondents reported that they were

―Very Confident‖ (blue column) and, notably, another 20 to 27 percent of respondents

reported they were ―Extremely Confident‖ (rose column). Indeed, the combination of

these two columns provides some optimism regarding the basic social abilities of internal

auditors. But there still remains the 16 to 20 percent of respondents who indicated they

were only ―Moderately Confident‖ (green column) and the 9 to 16 percent who were only

―Slightly Confident.‖ So it seems likely that there is plenty of room to improve the basic

social abilities of many internal auditors.

Table 4

Respondent Confidence in Basic Social Abilities and

Relationships of Influence and Persuasion

Question

Level of Confidence

Not at All

Confident

Slightly

Confident

Moderately

Confident

Very

Confident

Extremely

Confident


Basic social abilities:

Maintain auditee cordiality.

0

0

9

1

141

16

528

60

202

23

880

100%

Build trust with the auditee.

3

0

12

2

177

20

511

58

177

20

880

100%

Communicate effectively.

2

0

14

2

153

17

539

61

172

20

880

100%

Objectively consider both

sides.

0

0

13

2

144

16

488

56

235

27

880

100%

Relationships of

influence and persuasion:

Obtain auditee cooperation.

2

0

26

3

216

25

517

59

119

13

880

100%

Discuss sensitive issues.

8

1

55

6

251

29

432

49

134

15

880

100%

Handle conflict.

7

1

47

5

295

34

443

50

88

10

880

100%

N = 913. No reply and unusable responses are 33 for a net of 880.


15

Relationships of Influence and Persuasion

Regarding relationships of influence and persuasion (see Table 4), respondent confidence

in obtaining auditee cooperation, discussing sensitive issues, and handling conflict

decreased some with noticeable increases in the ―Moderately Confident‖ column, along

with a dip in the ―Extremely Confident‖ column. Shifts in responses were most

noticeable in the area of handling conflict, though overall confidence still remained high.

Table 5

Respondent Confidence in Basic Social Abilities and

Relationships of Influence and Persuasion by Years of Experience

Level of Confidence:

―Very Confident‖

Years in Internal Audit Field

< 1 Yr. 1 – 2 Yrs. 3 – 5 Yrs. 6 – 10 Yrs. 11 – 15 Yrs. 15 + Yrs.

No. % No. % No. % No. % No. % No. %

Basic social abilities to:

Maintain auditee cordiality. 33 53 64 55 111 59 127 63 73 66 121 60

Build trust with the auditee. 30 48 56 48 102 54 129 64 70 64 123 61

Communicate effectively. 39 63 70 60 108 57 119 59 68 62 135 67

Objectively consider both

sides.

34 55 63 54 98 52 119 59 63 57 113 56

Total (N = 880) (n = 62) (n =117) (n = 188) (n = 202) (n = 110) (n = 201)

Relationships of

influence and persuasion:

Obtain auditee cooperation. 24 39 60 51 102 54 125 62 75 68 131 65

Discuss sensitive issues. 20 32 48 41 90 48 99 49 63 57 113 56

Handle conflict. 22 36 41 35 94 50 109 54 63 57 117 58

Total (N = 880) (n = 62) (n =117) (n = 188) (n = 202) (n = 110) (n = 201)

The abilities highlighted in blue (see Table 5) seem to indicate that internal auditors

become confident as they gain more experience in internal auditing. The two abilities

highlighted in rose suggest that confidence remains relatively level despite one‘s

experience, perhaps because these abilities might have been relatively established before

entering the profession.


16

Relationships That Include Ethical Concerns

In areas that often include ethical concerns (see Table 6), the responses seem to speak well

of the respondents‘ self-perceptions in such matters. For the areas of handling

inappropriate questions from auditees and colleagues, again respondents indicated high

confidence when inappropriate questions came from the auditee (46 percent ―Very

Confident‖ and 38 percent ―Extremely Confident‖) and when the questions came from

colleagues (47 percent ―Very Confident‖ and 39 percent ―Extremely Confident‖). But

slippage was evident when the inappropriate questions came from a supervisor (39 percent

―Very Confident‖ and 30 percent ―Extremely Confident‖), most likely due to the

sensitivity of the relationship‘s inherent power, though this overall measure still remains

somewhat high when the two measures are combined. Moreover, the confidence level for

―staff‖ is weakest as indicated in Table 7, which is what one would typically expect.

Table 6

Respondent Confidence in Relationships That Include Ethical Concerns

Question

Level of Confidence

Not at All

Confident

Slightly

Confident

Moderately

Confident

Very

Confident

Extremely

Confident


Ability to handle inappropriate questions:

From auditee. 5

1

21

2

116

13

408

46

330

38

880

100%

From colleague. 6

1

24

3

96

11

414

47

340

39

880

100%

From supervisor. 13

2

48

5

213

24

346

39

260

30

880

100%

N = 913. No replies and unusable responses are 33 for a net of 880.


17

Table 7

Respondent Confidence in Relationships

That Include Ethical Concerns by Position

Ability to handle

inappropriate questions:

―Very‖ and ―Extremely‖ Confident

Position Level in

Internal Audit Function

Staff Manager Director CAE

No. % No. % No. % No. %

From auditee:

Very confident. 173 47 110 45 37 37 63 49

Extremely confident. 107 29 113 46 48 48 55 43

From colleague:

Very confident. 180 49 113 46 42 42 60 47


From supervisor:

Very confident. 140 38 103 42 38 38 52 41


Total (N = 840) (n = 368) (n = 245) (n = 99) (n = 128)

N = 913. No replies are 14 and ―Other‖ is 59 for a total of 73 and a net of 840.

Overall, respondents appear to be quite confident in these three broad areas of behavioral

dimensions, which speak to a positive foundation for advancing understanding in other

areas of the behavioral dimensions in internal auditing.

Role Self-perception and Role Conflict

The term ―roles‖ can be described as norms associated with specific positions held by

individuals in groups or broader society. These norms depict how one can expect

someone in a specific position to behave or not behave.8 Thus, roles are important in that

they dictate behavior, and, as situations change, people can switch roles, and therefore

behaviors, many times in a day. Therefore, this section focused on the roles of the

internal auditor. Respondents answered questions on how they perceived themselves and

how they thought others might perceive them in their role as an internal auditor.

Responses to these questions could yield important insights into behavioral demands on

internal auditors (see Table 8).

Internal auditors see themselves in many roles. Some roles relate to work on the job and

to outside professional activities. On the other hand, the auditee also sees the internal

8Rodney Stark, Sociology, 7

th Ed. (Belmont, CA: Wadsworth, 1998).


18

auditor in a series of roles in the workplace or professional settings, typically not in a

beneficent role as internal auditors often visualize themselves. Internal auditors also

visualize themselves in various roles of expertise.

Probably one of the reasons for some disharmony in this area between the internal auditor

and the auditee is that the internal auditor and auditee assume different roles in an audit

situation. The different role behaviors assumed likely account for the differences in the

conceptual visualizations of the auditor‘s role held by him or her and that of the same

roles held by the auditee (at least in the internal auditor‘s belief). Internal auditor self-

perceptions of their roles and how they perceive auditee expectations of these roles stem

from auditor/auditee contacts and discussions through audit engagements that are framed

as pictures in the auditor‘s mind, resulting from auditee comments and attitudes over

time. These perceptions of internal audit roles are reflected in Table 8.

Table 8

Role Self-perceptions of Respondents and

Their Perceptions of Auditee Perspectives

Roles

Respondent Expectations

Roles in which you see yourself

as an internal auditor.

Roles in which the auditee might

see you as an internal auditor.

No. % No. %

Efficiency Expert 574 63 485 53

Technical Expert 416 46 8 1

IT Expert 152 17 10 1

Financial Expert 485 53 7 1

Fraud Detection Expert 426 47 7 1

Risk/Controls Expert 810 89 223 24

Change Management Expert 333 37 662 73

Representative of

Executive Management

446

49

485

53

Police Officer 101 11 359 39

Detective 351 38 396 44

Consultant 750 82 385 42

N = 913.

Respondent self-perceptions of roles along with the expectations presumably held by

auditees can be quite different, as indicated in Table 8. For instance, several respondent

self-perceptions indicated a moderate belief in a role while their corresponding

perceptions of auditee expectations were much lower. And a couple of self-perceptions

by respondents indicated just the opposite — respondents did not perceive themselves as


19

having a dominant role while perceiving the auditee might believe that they ought to.

Finally, there are respondent self-perceptions where they seemed in sync with their

perception of auditee expectations of their roles. The first two areas raise interesting

questions that are discussed further below.

High Self-perception of Role While Perceiving Low Auditee Expectation

With ―technical‖ and ―financial‖ expertise, 46 percent and 53 percent of

respondents respectively believe they have this expertise. Yet only 1 percent of

respondents in both areas believe that auditees possessed this expectation of them.

Do auditees consider internal auditors to lack expertise because they are typically

more focused on efficient methods or better controls, seemingly not too concerned

with broader technical and financial operations?

With ―fraud detection‖ expertise, differences in respondent self-perception of

roles are a surprise. While 47 percent of respondents have the self-perception that

they possess this expertise, only 1 percent considers that auditees think internal

auditors possess fraud detection expertise. This could bear some further inquiry.

Why do respondents suppose that auditees do not believe them to be experts in

fraud detection? Internal auditors should be and many probably are.

With ―risk-controls‖ expertise, differences in self-perception are also a surprise.

While 89 percent of respondents consider themselves to possess this expertise,

only 24 percent suppose that auditees have this expectation of internal auditors.

Why do the respondents feel that auditees tend to believe they are not aware of

risks? Is this true? The auditors believe they are risk oriented; why do they believe

that the auditees do not concur?

With ―consultant,‖ differences in self-perception are also great. Respondents‘

self-perceptions are strong at 82 percent but their perception of auditee

expectations of this role is only about half as strong at 42 percent. Do internal

auditors believe they have more to offer than the auditee is willing to accept?

Low Self-perception of Role While Perceiving High Auditee Expectation

Only 37 percent of respondents believe they have ―change management‖

expertise. However, 73 percent of respondents seem to think that auditees expect

internal auditors to possess this expertise. This tends to indicate that ―change

management‖ and all its complexity is becoming an increasingly emergent role

for internal auditors to fill, perhaps through auditee consultation.

The ―police officer‖ role is understandable. Since time immemorial, auditors have

been compared to the ―police.‖ While 11 percent of respondents see themselves in


20

this role, 39 percent believe that auditees hold this expectation. This is unfortunate

because auditors are concerned with resolving problems — not with arrest and

punishment. If true, more convincing work needs to be done with auditees to

clarify this aspect.

This entire area of internal auditor roles is important for promoting harmonious

relationships between the internal auditor and the auditee. Also, it can assist in

developing a cooperative environment. Thus, efforts should be made to ensure that

auditees are fully aware of the internal auditors‘ areas of responsibility and the expertise

available on the internal audit staff.

These perceptual indications by the internal auditor perhaps raise more questions than

answers. Probably one of the reasons for frequent disharmony between the internal

auditor and the auditee is the auditor‘s conceptual visualization of his or her role as

contrasting with that of the auditee‘s visualization of the auditor‘s role. Our interest lies

with those roles where the auditor‘s self-perception differs by a relatively large margin

from the perception he or she receives from the auditee. Most notably, many internal

auditors believe they have several forms of expertise — technical, IT, finance, fraud

detection, risk/control, and consultancy — yet they apparently believe that, in the

auditee‘s eyes, they lack this expertise. On the other hand, many internal auditors are

under the impression that the auditee believes internal auditors perform in the role of

―police officer‖ and ―change management expert‖ more than they think they do or ought

to do. These conceptual positions perhaps arise from auditor/auditee interactions over the

course of the audit involving auditee comments and attitudes expressed during

discussions that are then formed as a result in the auditor‘s mind. Because many

psychological, sociological, and perhaps cultural factors are operating here, further study

using case study research methods might be an excellent approach to understanding these

auditee role perceptions on a deeper or finer scale.

Conditions Potentially Involving Role Conflict

We asked internal auditors to respond to a series of questions regarding certain conditions

where potential role conflict might result in the internal audit process (see Table 9).


21

Table 9

Extent Respondents Believe Potential Role Conflict Exists During the Internal Audit

Frequency

Never

Rarely

Occasion-

ally

Often

Always

No reply

Conditions No. % No. % No. % No. % No. % No. % Total

1. Perform audit work

that should be done

differently.

32

4

215

23

495

54

137

15

23

3

11

1

913

100%

2. Work under

incompatible

policies and

guidelines.

171

19

413

45

224

25

74

8

18

2

13

1

913

100%

3. Go against rules or

policies to carry out

assignment.

433

48

374

41

75

8

16

2

2

0

13

1

913

100%

4. Work with two or

more groups who

think and operate

differently.

40

5

150

16

273

30

358

39

81

9

11

1

913

100%

5. Receive

incompatible

requests from others

or units during audit.

121

13

380

42

281

31

110

12

10

1

11

1

913

100%

6. Do audit work

acceptable by some

but not others.

61

7

300

33

357

39

161

18

21

2

13

1

913

100%

7. Perform work that

suits my values.

13

1

23

3

95

10

480

53

279

31

23

2

913

100%

N = 913.

Respondent replies from Table 9 are discussed in terms of the caveats that internal

auditors and the profession as a whole need to bear in mind as they conduct internal

audits:

In question #1, about 18 percent of internal auditors said they were required to

perform audit work that should be done differently ―Often‖ and ―Always,‖ with

54 percent reporting ―Occasionally.‖ This seems to imply that, in most instances,

auditors need to be alert to these pressures to determine that the internal audit

process conforms to principles of sound auditing practice.

In question #2, about 10 percent of respondents believed they were ―Often‖ and

almost ―Always‖ working under incompatible auditing policies and guidelines,


22

with another 25 percent experiencing this situation ―Occasionally.‖ This problem

could be serious and a possible indication of conflicting audit issues. These

situations should be carefully explored using case study methods to reach a deeper

understanding of the problems.

In question #3, about only 2 percent of respondents felt compelled ―Often‖ and

―Always‖ to violate an internal or external audit rule or policy to carry out the

audit assignment, with another 8 percent experiencing this exposure

―Occasionally.‖ But, while relatively small, percentage wise, this situation could

be serious if members of management, especially senior members, are exerting

pressures to cover situations that could increase long-term risk to the organization.

This situation also warrants being studied more at a deeper level.

In question #4, about 48 percent of respondents indicated they work ―Often‖ and

―Always‖ with two or more groups who think and operate differently and another

30 percent who work in this situation ―Occasionally.‖ Thus, the potential for

incompatible requests and/or directions could not only cause confusion in the

audit process but also could, in some cases, modify or reduce the basic audit

objective. Moreover, it could result in more difficulty to gain auditee and

management acceptance of the final audit product.

In question #5, about 13 percent of respondents revealed that they have ―Often‖

and ―Always‖ received incompatible requests from others or units during the

course of the audit, with another 31 percent who experienced these requests

―Occasionally.‖ Thus, the internal auditor needs to be prepared to guard against

potential threats to the integrity of the audit process and results that exist in a fair

number of cases.

In question #6, about 20 percent of respondents indicated that they ―Often‖ and

―Always‖ perform audit work acceptable to some but not to others, with about 39

percent reporting this experience ―Occasionally.‖ This point reinforces the

political reality in formal organizations that internal auditors need to be prepared

to defend the quality of their work.

In question #7, about 84 percent of respondents reported that they ―Often‖ and

―Always‖ perform work suited to their values.

This last point seems quite important in that it is likely these values can serve to form the

moral and ethical foundation for internal auditors to garner sufficient strength to address

the caveats described in the previous six points. The result would no doubt be an

improved internal audit product. The above unusual situations could be productive areas

for a study group.


23

Communication Practices

In this section of research, we were interested in the communication practices between

the internal auditor and the auditee during the course of the audit. Thus, the

communication practices of interest here are essentially those related to the internal audit

process and not so much the formal reporting to the audit committee or the board (or less

acceptable reporting lines to the chief executive officer [CEO], or worse, the chief

financial officer [CFO]). The term ―communication‖ can include any type — verbal,

written, procedural, and so on.

Internal auditors were asked about the degree to which they employed various

communication practices regarding subjects typically encountered in audit situations with

auditees. These communications practices include asking about ethical matters, using

persuasion to bring an auditee into agreement, discussing potential auditee involvement

in the audit, seeking consensus with an auditee, reviewing (and discussing) audit results,

and requesting suggestions from the auditee. The questions provide only a broad

sampling of situations in which communication practices occur during the internal audit

process. But the responses to these questions have the potential to indicate where

communication practices might need more attention, which are summarized in Table 10.

This focused attention on communication could serve as yet another approach to improve

the quality of the internal audit process.

Table 10

Extent Respondents Engage in Various Communication Practices

Communication

Practice

Degree of Engagement

Never

Rarely

Occasion-

ally

Often

Always

No Reply

No. % No. % No. % No. % No. % No. % Totals

1. Ask if auditee has

someone to contact

when ethical dilemmas

or impropriety arise.

99

11

252

28

307

33

195

21

43

5

17

2

913

100%

2. Use persuasive

communication to have

auditee come around to

your point of view.

21

2

74

8

356

39

390

43

57

6

15

2

913

100%

3. Discuss basic audit

objectives and ask for

suggestions.

3

0

31

3

116

13

341

37

406

45

16

2

913

100%

4. Discuss areas where the

auditee can perform

aspects of the audit

process.

135

15

270

29

279

31

169

18

44

5

16

2

913

100%


24

Table 10 (cont’d)

Extent Respondents Engage in Various Communication Practices

5. Seek consensus on

standards of

measurement to be

used in an audit.

48

5

139

15

226

25

328

36

156

17

16

2

913

100%

6. Review findings and

discuss auditee

proposals to resolve

situations.

1

0

13

1

49

5

329

36

507

56

14

2

913

100%

7. Request suggestions

for areas the auditee

believes should be

reviewed.

2

0

30

3

131

14

343

38

395

43

15

2

913

100%

N = 913.

1. Asking About Ethical Matters

Internal auditors are often in an excellent position to observe evidence that unethical

practices have occurred, both internally within the organization and/or externally

relative to customers, vendors, financial institutions, government agencies, or society.

Moreover, it is not uncommon for auditees to experience moral dilemmas when

ethical matters arise. Therefore, we asked internal auditors about their experience

relative to asking the auditee about seeking assistance when faced with these ethical

matters (see Table 10).

Given the importance of ethics to the underlying quality of any organization,

especially after the events that led to the passage of the U.S. Sarbanes-Oxley Act of

2002, the survey responses on this question were expected to be more toward

―Always‖ and ―Often.‖ The respondents, however, indicated only 5 percent

―Always‖ and 21 percent ―Often,‖ compared with 33 percent ―Occasionally,‖ 28

percent ―Rarely,‖ and 11 percent ―Never.‖ Possibly the respondents did not ask this

question per se — but they may not have brought up questions on ethical matters at

all, except perhaps only after discovering ethical exceptions during the audit.

Understandably, ethical discussions are sensitive, yet when auditors raise such

questions on ethical matters, there is the possibility they could be raising the level of

ethical consciousness in the eyes of the auditee. By doing so, internal auditors, it

would seem, are in a position to indirectly influence and possibly persuade the auditee

to think and act more proactively about ethical matters in the course of their daily

activities.

For the next four communication practices (see Table 10, Practices 2 - 5), we asked

internal auditors about the frequency of the use of four basic objectives of

communication during the conduct of the internal audit process. Briefly, these four

basic objectives of communication are to:


25

Bring auditee (into agreement with) auditor‘s point of view.

Reach agreement in basic audit objectives with auditee.

Discuss areas where the auditee can perform some aspects of the audit.

Achieve consensus on the standards of measurement in the audit process.

These four objectives are in addition to the provision of specific information relative

to the internal audit process that is useful for the presentation of audit findings.

2. Using Persuasion to Bring the Auditee (into agreement with) the Auditor’s Point of

View

We asked internal auditors to indicate the amount of times they use persuasive

communication techniques to bring auditees into agreement with their position.

Respondents indicated 6 percent ―Always‖ and 43 percent ―Often‖ — about 50

percent of the respondents using this communication technique frequently — with

another 39 percent indicating ―Occasionally.‖ Could it be that internal auditors might

not always consider ―their point of view‖ to be necessarily the best? While 50 percent

use this communication practice, there are the remaining 50 percent, most of whom

only use this practice occasionally. Perhaps this latter 50 percent might consist of a

group that is more open-minded, respecting the view that auditees perhaps know their

operations better than the internal auditors, who should respect this fact by being

astute listeners. Those who did not try to persuade were almost evenly divided

between auditors with bachelor‘s degrees and those with advanced degrees.

Surprising? Also surprising is that those who did not try to persuade were almost

equally divided as to organizational level: staff, managers, and directors.

3. Discussing Basic Audit Objectives with the Auditee

We asked internal auditors to indicate the frequency with which they discussed the

basic objectives of the audit with the auditee (along with asking for suggestions).

Respondents reported 45 percent ―Always‖ and another 37 percent ―Often‖ — about

82 percent total as highly using this communication practice — with another 13

percent ―Occasionally.‖ In the interest of developing a cooperative attitude, the

internal auditor may ask for suggestions as to audit content and methods. This

approach is progressive — the auditor can be guided by these suggestions, when

appropriate.

4. Discussing Potential Auditee Involvement in the Audit

We asked internal auditors to indicate the extent to which they discussed areas where

the auditee could perform some aspects of the audit. Here the results from

respondents were dispersed more broadly, with only 5 percent stating they discuss

this ―Always‖ and 18 percent ―Often,‖ with 31 percent stating ―Occasionally‖ and 29

percent ―Rarely.‖ It is suspected that the nature and purpose of the audit and other

circumstances surrounding the audit can determine how often an internal auditor

might engage in this practice with the auditee. However, experience has shown that


26

the auditee can perform many audit tests and, under supervision and review, can

develop findings that are useful and usually beyond auditee dispute. However, the

identities of those who did not attempt to encourage auditee participation in the audit

are illustrated in Table 11.

Table 11

Respondents Who Did Not Encourage Auditee Participation in the Audit

Frequency

Education Level (Degree) Organization Level

Bachelor‘s Advanced Staff Manager Director

Never 16% 14% 16% 14% 9%

Rarely 31 29 29 34 30

Occasionally 30 32 31 30 35

N = 913.

This substantial lack of interest in auditee participation is unfortunate from a

professional and financial point of view. Participation can result in increased auditee

acceptance of the audit results and provide more depth to the audit examination.

5. Seeking Consensus with the Auditee

Finally, we asked internal auditors to indicate how often they seek to achieve

consensus with the auditee on the standards of measurement to be used in the audit.

Here, respondents indicated 17 percent ―Always‖ and 36 percent ―Often‖ use this

practice, with 25 percent indicating that they ―Occasionally‖ used it, 15 percent

―Rarely,‖ and 5 percent ―Never.‖ Again, the responses are rather dispersed. This

distribution is surprising, especially with the 20 percent who indicated that they

―Rarely‖ and ―Never‖ use this practice. The agreement between auditor and auditee

as to the ―standards of measurement‖ to be used in the evaluation of auditee

performance should be a fundamental requirement for obvious reasons. There should

be discussions about standards for evaluation to gain acceptance of the audit‘s results

in the auditee‘s mind. Experience seems to indicate that preliminary discussion of

standards usually will gain auditee acceptance — and under some circumstances, the

auditor‘s standards may be unrealistic or inappropriate. This element of the audit is

important. A further analysis of those not seeking consensus on the standards of

measurement is presented in Table 12.


27

Table 12

Respondents Not Seeking Consensus on Standards of Measurement

Frequency

Education Level (Degree) Organizational Level

Bachelor‘s Advanced Staff Manager Director

Occasionally 26% 24% 25% 26% 31%

Rarely 16 14 16 17 15

Never 5 4 6 5 3

N = 913.

This distribution seems really surprising. One might expect that not seeking

consensus would be higher for those auditors with less formal education and who

work at lower levels of the organization. Instead, responses are relatively even across

education and position levels, and the position of director is higher than the manager

and staff levels.

6. Reviewing (and Discussing) Audit Results

The final two communication practices (Table 10, Practices 6 - 7) have broader

implications for the conduct of the audit than the previous four. These communication

practices occur at the audit‘s conclusion, thus all previous communication from its

preliminary stages throughout the conduct of the audit come together here. If done

well, there should be no surprises between the internal auditor and auditee, hopefully

setting the stage for a positive audit conclusion and effective implementation of

recommendations for improvement.

Almost 56 percent of respondents indicated that they ―Always‖ engage in this

communication practice, with another 36 percent indicating ―Often‖ for a total of 92

percent. We should not be too surprised from these results because this

communication practice is standard procedure in most internal audits. Given the high

frequency of this practice, however, experience has shown that it is prudent that the

internal auditor‘s ongoing communication with the auditee as the audit progresses be

such that when the time comes to review the total findings and discuss auditee

proposals, there are no surprises. This practice can go a long way toward building

confidence and trust with the auditee.

7. Requesting Suggestions from the Auditee

Finally, internal auditors were asked about the practice of requesting suggestions

from auditees. About 43 percent of the respondents indicated they ―Always‖ use this

method, with another 38 percent indicating ―Occasionally,‖ for a total of 81 percent at

the high frequency end. Again, experience has shown that asking the auditee to

identify other areas that should be reviewed can bring the auditee into the audit

process as an active participant with the hope that the auditor and auditee will come

together with a single objective — ―continuous improvement.‖


28

Interviewing Practices

Interviewing is one of the most important activities in the preliminary stage of the audit

process. It follows the initial research aspect of the audit — sometimes referred to as

―reading into the audit‖ and the ―walk through‖ or physical inspection — and leads to the

construction of the audit program. Thus, if properly performed, interviewing can be

immensely productive.

In the process of interviewing, many specialists in the conversational arts have suggested

that interviewers use what are called ―people-type questions‖ as a way of ―breaking the

ice‖ and developing useful background information. In the context of the audit process,

examples of people-type questions that follow can be used to start the flow of information

from the interviewee:

What tasks do you perform?

What tasks does your immediate supervisor perform?

What tasks do the people under your supervision perform?

When you want a job done in a hurry, to whom do you turn?

Who do you contact if you believe your job could be done more efficiently?

Who do you contact if you believe that there are ethical problems?

Who do you contact if there might be improper activities taking place?

The list is not exhaustive but readers will observe that the questions become more

complex as the series proceeds.

In this section of research, we were interested in the interviewing practices conducted

between the internal auditor and the auditee before conducting the audit. For survey

purposes, we identified four practices as to the content of interviews and thought it

important to learn how internal auditors viewed their usefulness (see Table 13).


29

Table 13

Respondent Perceptions of the Usefulness of Various

Interviewing Practices Employed in Internal Auditing

Interviewing

Practices

Usefulness

Not

Useful

at All

Slightly

Useful

Moderately

Useful

Very

Useful

Extremely

Useful

Do Not

Use This

Approach

No

Reply

No. % No. % No. % No. % No. % No. % No. % Total

1. To focus

attention on

important issues.

–

–

7

1

67

7

384

42

430

47

6

1

19

2

913

100%

2. To defuse

emotional

reactions.

4

1

41

4

153

17

388

42

271

30

37

4

19

2

913

100%

3. To persuade

interviewee of

soundness of

questions asked.

13

2

79

9

229

25

312

33

154

17

105

12

21

2

913

100%

4. To facilitate

negotiation.

6

1

47

5

175

19

370

41

216

24

78

8

21

2

913

100%

N = 913.

Survey responses for these interviewing practices are discussed below.

1. To Focus Attention on Important Issues

Of the respondents, 47 percent indicated ―Extremely Useful‖ followed by 42 percent

―Very Useful‖ for this area — with a total of 89 percent for these two categories.

Interviewing for this purpose seems to be well accepted by the respondents and

perhaps by internal auditors in general. Experience would seem to indicate that the

benefits of focusing on important issues would serve to reduce overall risk to the

quality of the audit process.

2. To Defuse Emotional Reactions

Of the respondents, 30 percent selected ―Extremely Useful‖ and 42 percent ―Very

Useful‖ on this point, for a total of 72 percent. However, another 17 percent indicated

―Moderately Useful.‖ A relatively small percentage of respondents do not use it. A

large majority of respondents consider this important, though not as high as the

previous practice. Experience seems to indicate that the benefits of this practice

would help promote a cordial atmosphere with the auditee conducive to conducting a

constructive audit outcome.


30

3. To Persuade Interviewees of the Soundness of the Questions Asked

Of the respondents, 17 percent chose ―Extremely Useful,‖ 33 percent ―Very Useful,‖

and 25 percent ―Moderately Useful.‖ Respondents seem less inclined to consider this

practice as useful as the first two practices, though still useful. During the preparatory

stages of the internal audit process, the auditee might have questions about why the

internal auditor believes certain audit questions should be asked. So it seems

important for the internal auditor to be able to persuade the auditee of the soundness

of these questions to gain the auditee‘s cooperation during the audit process.

4. To Facilitate Negotiation

Of the respondents, 24 percent indicated interviewing as ―Extremely Useful,‖ 41

percent as ―Very Useful,‖ and 19 percent as ―Moderately Useful‖ to facilitate

negotiations, similar to the distribution in #3 above. Interpretation of responses here

seems to center on the usefulness of facilitating negotiation on points of difference

that arise with the auditee during the interview process. Success here also points

toward gaining the cooperation of the auditee so that the audit proceeds positively and

constructively.

Overall, the above responses to the four intentions of interviewing tend to direct attention

to the importance of developing and maintaining these interviewing skills. By doing so,

the auditor is more enabled, especially in the preliminary stages of the audit process, to

promote quality and reduce risk in conducting the internal audit.

Conflict Resolution

It is conventional wisdom that conflict is present in most organizations, showing itself in

varying degrees and sometimes between organizational units relative to (1) the methods

of performance of activities, (2) ―turf‖ problems — areas of responsibility, (3)

competition for scarce resources, and (4) differences in personal and professional values,

attitudes, and beliefs.

Conflict is also often a natural byproduct of the internal audit process. Thus, managing

conflict is a primary responsibility of the internal auditor. The profession has long

examined the problem and, over time, a series of anecdotal approaches has evolved. We

included these approaches in the survey, hoping to see how the respondents viewed their

use and effectiveness. Table 14 summarizes the responses.


31

Table 14

Approaches Employed by Respondents to Resolve Conflict

Approaches

Effectiveness

Not at All

Effective

Slightly

Effective

Moderately

Effective

Very

Effective

Extremely

Effective

Do Not

Use

No

Reply


1. Concentrate on

people issues.

78

9

159

17

265

29

153

17

44

5

186

20

28

3

913

100%

2. Separate

individuals from

context of conflict.

2

0

10

1

87

10

374

41

412

45

9

1

19

2

913

100%

3. Consider the other

side of conflict.

-

-

17

2

118

13

439

48

313

34

9

1

17

2

913

100%

4. Involve the auditee

in resolution.

2

0

7

1

67

7

354

39

454

50

9

1

20

2

913

100%

5. Discuss emotions

openly, including

stakes and

reputations.

41

5

140

15

250

27

189

21

81

9

188

20

24

3

913

100%

6. Communicate,

listen, and try to

comprehend.

-

-

4

0

34

4

283

31

568

62

5

1

19

2

913

100%

7. Avoid accusatory

or inflammatory

comments.

2

0

1

0

39

4

220

24

613

67

21

2

17

2

913

100%

N = 913.

1. Concentrate on People Issues

Regarding approaches that concentrate on people issues, respondents indicated that

20 percent of the time — a fairly large percentage — they did not use this approach.

Of those who did, about 77 percent considered it effective but in varying degrees in a

somewhat normal curve — 9 percent considered it ―Not at All Effective,‖ 17 percent

only ―Slightly Effective,‖ 29 percent ―Moderately Effective,‖ 17 percent ―Very

Effective,‖ and 5 percent ―Extremely Effective.‖ Perhaps much might depend on how

respondents interpreted this approach given the highly analytical nature of the internal

audit profession.

2. Separate Individuals from the Context of Conflict This approach — identifying issues rather than people — seems to resonate strongly

with respondents. About 86 percent of respondents considered this approach to be

either ―Extremely Effective‖ or ―Very Effective.‖ This approach seems to have the


32

effect of directing discussions discretely to points held more objectively and away

from those that might pose as threats to one‘s personal and professional reputation.

3. Consider the Other Side of the Conflict Similarly, about 82 percent of respondents believed that consideration of the other

side of conflict were either ―Very Effective‖ or ―Extremely Effective.‖ This approach

has the advantage of giving the auditee the opportunity to be heard (or listened to)

and respected, thus perhaps injecting a sense of fairness into the audit process.

4. Involve the Auditee in Resolution For involving the auditee in resolution of conflict, about 89 percent considered this

approach to be either ―Extremely Effective‖ or ―Very Effective.‖ This approach has

the effect of creating a partnering or collegial context to achieve a positive audit

outcome, thus possibly reducing risk of conflict in the internal audit process.

5. Discuss Emotions Openly, Including Stakes and Reputations Similar to approach #1, 20 percent of respondents indicated that they did not use this

approach. Again, this is a fairly large percentage. Of those who did, about 71 percent

considered it effective in varying degrees — approximately 5 percent considered it

―Not at All Effective,‖ 15 percent considered it only ―Slightly Effective,‖ 27 percent

―Moderately Effective,‖ 20 percent ―Very Effective,‖ and 9 percent ―Extremely

Effective,‖ a somewhat normal curve. Again, perhaps much might depend on how

respondents interpreted this approach given the highly analytical nature of the internal

audit profession.

6. Communicate, Listen, and Try to Comprehend As for this approach, about 93 percent of the respondents considered it to be either

―Very Effective‖ or ―Extremely Effective.‖ Given the virtual universal quality of this

approach, it would seem that it could be used in conjunction with all other

approaches. And given its broad acceptance by respondents, one might also wonder if

it could improve their success with other approaches.

7. Avoid Accusatory or Inflammatory Comments Similarly, almost the converse to the approach in #6, to avoid accusatory or

inflammatory comments, about 91 percent of respondents considered this approach to

be either ―Very Effective‖ or ―Extremely Effective.‖

Resolving conflict is probably one of the most important aspects of the internal audit

process. The internal auditor is most effective when he or she can resolve conflict or,

better yet, avoid it altogether. The auditee is more likely to accept the audit results as a

constructive part of the management process, something to be sought after as an

operational asset for good management.


33

Overcoming Hostility

Unfortunately, internal auditors sometimes experience a deep-seated antagonism or

hostility, either expressed or unexpressed, toward the internal audit process itself. In a

general sense, no one likes to be investigated or audited. The very concept of an audit

implies that the auditor must find some questionable items to justify his or her activity.

Also, most auditees are aware of some activities that could be improved and are

apprehensive that the auditors will find them before they, the auditees, have had a chance

to improve them themselves.

When internal auditors do come up with findings or areas of activities that could be

improved, the auditee might object. In some cases, the auditee‘s objection is supported —

the auditor‘s position may be inappropriate. For instance, the imposition of a new control

might reduce risk or result in a more efficient operation but the impact on costs may be

unacceptable. In many cases, though, disagreement may be simply related to some

principle, content, method, time, amount, procedure, or other reason. Often, such

disagreements need to be resolved by beginning with approaches discussed in the

previous section on conflict resolution.

Internal auditors, however, are bound to run into some deep-seated antagonism or hostility

in some audits. While an internal auditor presents his or her points of view reasonably and

logically, the auditee may sometimes remain adamant, unhearing, unconvinced, and

completely negative, or simply refuse to engage in any discussion. These confrontations

happen now and again — people are people. It is a closed-minded syndrome and there is

no master key. Hostility to the audit process per se is a difficult attitude to overcome.

Thus, it becomes important for the internal auditor to maintain an open mind since the

resolution of deep-seated antagonism or hostility requires additional effort and skill. The

alternative to early resolution, of course, is to publish the audit report as the auditor sees it

and allow the auditee object by conference or correspondence. Resolution, however,

before the issuance of the audit report is always most desirable.

We were interested in asking internal auditors about their approaches to reduce deep-

seated antagonism or hostility during the course of the audit. Their responses are

summarized in Table 15.


34

Table 15

Respondent Perceptions of Effectiveness of Approaches Used to Overcome Hostility

Approach

Effectiveness

Not at All

Effective

Slightly

Effective

Moderately

Effective

Very

Effective

Extremely

Effective

Do Not

Use

No

Reply


1. Select the right time

for discussion.

8

1

53

6

228

25

350

38

214

23

32

4

28

3

913

100%

2. Never take a locked-

in-concrete position.

6

1

28

3

170

19

432

47

197

22

38

4

41

5

913

100%

3. Do not rely

on logic.

201

22

155

17

194

21

100

11

20

2

208

23

35

4

913

100%

4. Avoid painting

yourself into a corner.

8

1

40

4

185

20

379

42

176

19

87

10

38

4

913

100%

5. Avoid persuading

by force.

31

3

24

3

142

16

328

36

243

27

110

12

35

4

913

100%

6. Try to find early points

of agreement.

3

0

29

3

167

18

410

45

240

26

31

3

33

4

913

100%

7. Invite auditees to spell

out positions.

3

0

21

2

141

15

403

44

291

32

24

3

30

3

913

100%

8. Put yourself in

the auditee‘s position.

2

0

20

2

134

15

431

47

287

31

10

1

29

3

913

100%

9. Be willing

to compromise.

6

1

52

6

204

22

393

43

206

23

23

3

29

3

913

100%

10. Try to resolve conflict

over facts.

8

1

14

2

135

15

366

40

336

37

21

2

33

4

913

100%


involving positions on

findings.

9

1

34

4

196

22

387

42

222

24

32

4

33

4

913

100%


involving values.

42

5

104

11

237

26

235

27

124

14

139

15

32

4

913

100%

N = 913.

Survey respondents apparently have had some success in the resolution of adverse

attitudes using the above approaches. The shaded responses in 10 of the 12 approaches

appear to be what one would normally expect from those who are generally successful

with overcoming hostility. In all of these approaches, there was an approximate normal

curve from ―Moderately‖ to ―Extremely Effective,‖ with the mode being ―Very

Effective.‖ The curve tails were minor. The approach in #12 — try to resolve conflict

involving values — yielded an almost flat distribution, with a modest mode somewhere

between ―Occasionally‖ at 27 percent and ―Often‖ at 26 percent. This distribution did not


35

seem to say much and the question might have suffered from unfortunate wording. The

approach that did not resemble a normal curve was #3 — do not rely on logic. The

distribution was highly unusual and might also have been due to unfortunate wording. The

meaning intended, ―do not over rely on logic,‖ perhaps might have yielded different

results.

Thus, with the exception of the two approaches above, the overall responses for the

remaining approaches to resolve deep-seated antagonism or hostility with modes under

the category ―Very Effective‖ were quite encouraging.

Management of Change

If there is a consistent thread of audit-induced concern running through the mind of the

auditee, it is ―change.‖ In most every audit, the report is replete with many

recommendations for change. In the minds of most auditees, change is not popular. In

many cases, it is ―uncomfortable in the least and feared in the most.‖ There are a number

of reasons for this rejection of change resulting from the audit process. Some are:

Ego. It indicates that the auditee was not performing properly.

Cost. The change, even for control improvement, may cost more than the

potential savings.

Performance. The auditee and associated units and their staffs will have to revise

their operations and learn new ones.

Relationship. There will have to be new relationships with both horizontal and

vertical organizations with which the auditee functions.

Intellectual. The auditee and staff will have to modify their thinking to accept the

philosophy of the new process.

Unknown. Generally, this is a fear of unknown results affecting areas other than

those above.

Because of these influences, often the concept of change is not very popular and the

internal auditor must try to alleviate some of the auditee‘s fears and apprehensions. This

procedure has resulted in the development of approaches to resolve auditee resistance to

change. The survey reviewed a number of these approaches, summarized in Table 16.


36

Table 16

Respondent Approaches Used to Manage Change Problems

Approach

Frequency

Never Rarely Occasionally Often Always No reply

No. % No. % No. % No. % No. % No. % Total

1. Try to neutralize the fear of

unknown results of change.

19

2

67

7

291

32

431

47

78

9

27

3

913

100%

2. Describe the positive results

from the change.

1

0

4

0

75

8

497

55

308

34

28

3

913

100%

3. Try to resolve the ego aspects

of accepting change.

73

8

172

19

325

36

259

28

52

6

32

3

913

100%

4. Attempt to neutralize

bureaucratic aspects that will

result from change.

38

4

107

12

349

38

322

35

65

7

32

4

913

100%

5. Identify cost benefit or service

improvement of change.

6

1

11

1

112

12

438

48

319

35

27

3

913

100%

N = 913.

1. Try to Neutralize Fear

About 79 percent of respondents indicated they used this approach ―Occasionally‖ or

―Often,‖ with a mode of 47 percent indicating ―Often.‖ Only about 9 percent reported

they ―Always‖ employed this approach. On the other end, another 9 percent used this

approach ―Rarely‖ or ―Never.‖ These data seem to indicate a high degree of success

with this approach.

2. Describing Positive Results of Change

About 89 percent of the respondents employed this approach ―Often‖ or ―Always,‖

with a mode of 55 percent under ―Often.‖ Again, these data seemed to indicate a high

degree of success with this approach.

3. Trying to Resolve the Ego Aspects of Accepting Change

This distribution of respondent choices approximated a normal curve with a mode of

36 percent under ―Occasionally.‖ This is an effective psychological approach and

should be used more often. Because of its psychological nature, however, the internal

auditor might tend to refrain from using it. The ego is strong, yet an imaginative

approach such as suggesting that change is the auditee‘s independent action to a

degree and that it is an ―improvement‖ rather than a ―change‖ perhaps could help to

defuse hesitancy to accept change.

4. Neutralizing Bureaucratic Aspects

About 74 percent of the respondents indicated that they employ this approach, with

―Occasionally‖ or ―Often‖ almost equally divided between the two. This approach


37

requires the internal auditor to research the bureaucratic impact that changes can have

and develop ways to neutralize or reduce their impact. Accordingly, the internal

auditor needs to develop a broad knowledge of the vertical and horizontal impacts of

the change and be ready to identify methods that will accommodate and promote

these changes.

5. Identifying the Cost Benefits of Change

About 83 percent of the respondents indicated that they use this approach ―Often‖ or

―Always,‖ with a mode of 48 percent under ―Often‖ and another 12 percent under

―Occasionally.‖ This method is the second most frequently used, compared with the

more general approach ―describing positive results of change,‖ probably because of

its positive management aspects.

Consultancy

The conduct of internal auditing typically consists of two professional areas: assurance

services (attestation auditing) and consulting services. Assurance services pertain to

conducting organizationally independent assessments of financial and operational

procedures and results as to compliance with organizational policy on governance, risk

management, and control. Consulting services relate to the internal auditor providing

advice as to adding value and improving functions relative to governance, risk

management, and control, but without directive authority. In some cases, assurance

engagements contain consulting-like activity where the internal auditor finds problems

and, as a result of analytical work, identifies methods to resolve them.

The questions in this section of the survey were intended to determine whether the

internal auditor fully understands the consulting aspect established by The IIA and

identifying the methods being used. Statistical responses from these questions are

summarized in Table 17 and discussed with particular reference to the shaded areas in the

table.


38

Table 17

Extent of Respondent Understanding of Consulting Activities

Question

Response

Definitely

Not

Probably

Not

Not

Sure

Probably

Definitely

No

Reply


1. Does the internal auditor

have a consultancy

responsibility?

11

1

28

3

49

5

243

38

456

50

26

3

913

100%

2. Should the auditee comply

with recommendations

related to the auditor‘s

consultancy?

8

1

24

3

185

20

596

65

70

8

30

3

913

100%

3. Are consultancy

recommendations

comparable to a

management directive?

212

23

277

30

126

14

197

22

71

8

30

3

913

100%

4. Can the auditee negotiate a

degree of conformance to

consultancy

recommendations?

12

1

53

6

113

12

449

49

255

28

31

4

913

100%

5. Should the internal auditor

work jointly with the auditee

in a consultancy function?

18

2

50

5

73

8

282

31

460

51

30

3

913

100%


query the auditee as to areas

where operations might be

improved?

2

0

3

0

27

3

227

25

622

68

32

4

913

100%


identify areas where

operations might be

improved?

4

0

8

1

35

4

249

27

383

64

34

4

913

100%

N = 913.

1. Does the Internal Auditor Have a Consultancy Responsibility?

Respondents seemed to indicate strongly their support of this point. About 88 percent

of respondents indicated either ―Probably‖ or ―Definitely,‖ with a mode of 50 percent

under ―Definitely‖ believing they have a consultancy responsibility. These replies

seem to indicate a strong affirmative viewpoint toward the consulting function by

internal auditors. It is not, however, a responsibility in an attestation audit, unless

corrective action by the auditee would be appropriate.


39

2. Should the Auditee Comply with Recommendations Related to the Auditor’s

Consultancy?

Respondents seem less strongly inclined to support this point on auditee compliance

with the auditor‘s consultancy recommendations. About 85 percent indicated either

―Probably‖ or ―Not Sure,‖ with a mode of 65 percent under ―Probably.‖ The 65

percent response seems to support the view that the auditee should comply. However,

compliance should be only with management approval or when management so

directs, not simply when the internal auditor recommends, as responses under

―Definitely‖ would imply. The internal auditor has no directive authority over the

auditee in consultancy engagements. Compliance should occur when management

and the auditee, in their judgment, deem it appropriate under the particular

circumstances, but not solely based upon internal auditor recommendations.

3. Are Consultancy Recommendations Comparable to a Management Directive?

On this question, respondents were spread over the possible choices. Unlike the

previous question that presumes some auditee discretion, this question presumes

otherwise. About 53 percent of respondents indicated either ―Probably Not‖ or

―Definitely Not,‖ with a low mode of 30 percent for ―Probably Not.‖ Yet, 22 percent

still indicated ―Probably‖ and another 14 percent are ―Not Sure.‖ As stated above,

internal auditors have no directive authority in consultancy engagements. Some

prompt clarification appears to be needed in this area. Even though 67 percent of

respondents are not sure, or believe ―Probably Not‖ or ―Definitely Not,‖ 33 percent

appear to be unclear on this point.

4. Can the Auditee Negotiate a Degree of Conformance to Consultancy

Recommendations?

Respondents seem quite inclined to support this point. About 77 percent indicated

either ―Definitely‖ or ―Probably,‖ with a mode of 49 percent under ―Probably.‖ This

decision as to degree of conformance, however, is not an internal audit decision. The

degree of conformance is a management and auditee decision. While it is assumed

that the auditor makes an objective judgment as to the recommended change that is in

the best interest of the organization‘s well-being, there could be elements of

negotiation as to auditor recommendations, perhaps more in the manner of

implementation.

5. Should the Internal Auditor Work Jointly with the Auditee in a Consultancy

Function?

Respondents seem strongly inclined to support this point. About 82 percent indicated

either ―Definitely‖ or ―Probably,‖ with a mode of 50 percent under ―Definitely‖ that

auditors should work jointly with auditees in the consultancy function. Internal

auditors are not omniscient — the auditee may have ideas on how the operation can

be improved, often injecting a dose of reality into the recommendation. If so, auditee

assistance should be sought and acknowledged. Here the respondents were leaning in

the right direction. This is the optimum method.


40

6. Should the Internal Auditor Query the Auditee as to Areas Where Operations

Might Be Improved?

Respondents were strongly inclined to support this point. About 93 percent indicated

either ―Definitely‖ or ―Probably,‖ with a mode of 68 percent under ―Definitely‖ to

query the auditee as to where operations could be improved. Here, again, auditor

agreement to do so seems appropriate. The internal auditor, however, needs to give the

auditee appropriate credit should the auditor report areas where operations might be

improved that had been initially suggested by the auditee.

7. Should the Internal Auditor Identify Areas Where Operations Might Be Improved?

Respondents, again, were strongly inclined to support this point. About 91 percent

indicated either ―Definitely‖ or ―Probably,‖ with a mode of 64 percent under

―Definitely‖ to identify areas where operations could be improved. Here the

respondents concurred in this obvious answer. This is one of the primary objectives of

the audit process.

As can be readily observed, some instructional work appears to be needed in areas related

to degree of compliance with internal auditor recommendations during a consulting

engagement (as compared to an attestation engagement) as revealed in questions 2

through 4.

Perceived Responsibility to Management

The placement of the internal audit activity in an organization usually defines the lines of

authority, responsibility, and reporting. Early on, internal auditing was considered an

operational function and placed in the financial area or under a comptroller. The ―new

look‖ places the internal audit activity directly under the audit committee of the board of

directors; however, it usually is also located in an administrative area for general

administration purposes. The activity also may provide audit reports on an information

basis to operational executives such as the CEO and the CFO.

We asked the respondents to identify the degree of responsibility that they believed they

had to the various levels of management in their organizations and stakeholders. The

responses are summarized in Table 18.


41

Table 18

Degree of Responsibility Respondents Hold Toward Management

(and Stakeholders)

Executive/

Organization/

Society

Not

Responsible

at All

Slightly

Responsible

Moderately

Responsible

Very

Responsible

Extremely

Responsible

No

Reply


Board of

Directors

32

3

26

3

79

9

310

34

433

47

33

4

913

100%

Audit

Committee

22

2

12

1

30

3

143

16

673

74

33

4

913

100%

CEO 34

4

31

3

129

14

357

39

330

36

32

4

913

100%

CFO 61

7

49

6

147

16

350

38

277

30

29

3

913

100%

Controller 91

10

86

10

212

23

336

37

149

16

39

4

913

100%

Operations

Manager

91

10

100

11

265

29

308

34

116

13

33

3

913

100%

Auditees 30

3

50

5

170

19

390

43

247

27

26

3

913

100%

Society 40

4

74

8

200

22

312

34

253

28

34

4

913

100%

N = 913. Shaded areas represent areas of similar frequencies.

As might be expected, the respondents selected the audit committee as the function to

which they believe their degree of responsibility is ―Extremely Responsible‖ at 74

percent, followed by the board of directors at 47 percent. But when combined with

responses under ―Very Responsible,‖ the percentages become more striking, as illustrated

in the chart below.

Responsible to Extremely

Responsible

Very Responsible Combined

Board of Directors 47% 34% 81%

Audit Committee 74% 16% 90%

This selection is reasonable and in accordance with current internal audit philosophy. It

should also be noted that the highest degree of responsibility is to the audit committee,

and through it, to the board of directors.


42

As for the two executives, CEO and CFO, respondents indicated their degree of

responsibility with modes almost evenly split, though nevertheless still high when

combined.

Responsible To Extremely

Responsible

Very Responsible Combined

CEO 36% 39% 75%

CFO 30% 38% 68%

The responses in the chart above represent what one would expect for more traditional

responses to lines of responsibility. While still strong, the indications are not as strong as

the combined responses to the audit committee and board of directors.

As for beliefs regarding the degree of responsibility to auditees, 89 percent of

respondents indicated ―Moderately Responsible‖ to ―Extremely Responsible,‖ with a

mode of 43 percent under ―Very Responsible.‖ The basic audit objective is normally the

improvement of the auditee‘s operation, and the internal auditor is responsible for

assisting with the overall objective — the enhancement of the organization‘s operations.

It was encouraging to see respondent interest in the internal auditor‘s degree of

responsibility to ―society‖ as 84 percent indicated ―Moderately Responsible‖ to

―Extremely Responsible,‖ with a mode of 38 percent under ―Very Responsible,‖ perhaps

held not as a legal but a moral responsibility. This truly seems to be a positive leap

forward in internal audit philosophy.

Summary and Implications

The behavioral concepts or dimensions of internal auditing transform what has been

traditionally considered an aggressive adversarial relationship into a cooperative effort to

improve the efficiency and effectiveness of the organization‘s operations. The auditee

often views the internal auditor as an expert in ―fixing things,‖ eliminating unnecessary

activities and resolving problems. Thus, the background, education, and broad experience

of internal auditors can provide genuine opportunities for managers to gain valuable

assistance in the performance of their management responsibilities.

Where are these behavioral advantages located and where might the problems be?

Following in summary form are some of the internal audit areas explored and studied

from a behavioral perspective in this study:

While most respondents possessed previous coursework in behavioral

relationships, only about one quarter received such instruction within the context

of internal auditing. Moreover, respondents also indicated a strong interest in

learning more about behavioral relationships in internal auditing. Thus


43

opportunities to present more continuing education offerings in this area seem to

exist for The IIA and its chapters.

Respondents appeared quite confident in their social ability and relationships of

influence and persuasion and those relationships relating to ethical concerns. The

implication here is that most respondents perceived themselves as being

competent in these areas.

The various roles that internal auditors play and the stress that can result were

explored. First, focus was directed toward the auditor‘s (a) high self-perception of

particular roles while perceiving low auditee expectations of these roles and (b)

their low self-perception of other roles while perceiving high auditee expectations

of these roles. Second, focus was aimed at the degree of role conflict experienced

by internal auditors during the course of the audit.

Perceived auditee expectations seem to derive from nonverbal or implicit

communication received from the auditee during the course of the audit.

Respondent data in the first section appears to indicate where internal auditors

could do more to win over the auditee, namely in the areas of technical, financial,

fraud detection, risk/control, and consultant expertise. Could this be an area of

poor public relations? In the second section, data seem to indicate where auditee

need is increasing and where fear can be reduced; namely, change management

expertise and being viewed as a ―police officer.‖

The second focus on role conflict was analyzed in terms of caveats that internal

auditors need to keep in mind to avoid threats to the integrity of the internal audit

process. One positive point was that a strong majority of respondents often or

always perform their work in a manner that suits their values.

Role perception differences and role conflict impact the auditor/auditee

relationship. Again, some important opportunities appear to exist for continuing

education offerings by The IIA and its chapters in this area.

The communication practices between internal auditor and auditee were analyzed

related to basic objectives: ethical matters, typical communication practices

during the course of the audit, and then at audit conclusion. Responses over the

areas tended to be what one would expect, except perhaps to the question

regarding ethical matters whose responses appeared somewhat diffused.

Interviewing practices by the internal auditor were analyzed with regard to

effective methods. Overall, respondents tended to direct attention to the

importance of developing and maintaining these skills to maintain the quality of

the audit process.


44

Conflict resolution is probably one of the most important aspects of the internal

audit process. Differences commonly arise between the internal auditor and

auditee regarding methods of performance, areas of responsibility, competition

for scarce resources, or professional values, attitudes, and beliefs, to name some

common areas. So, using approaches that can effectively diffuse conflict in such

situations is important to preserve the overall effectiveness of the audit.

Respondents indicated that avoiding accusatory or inflammatory comments and

listening, communicating, and trying to comprehend the auditee‘s point of view

were the most effective approaches. On the other hand, concentrating on people

issues and discussing emotions openly, including stakes and reputations, received

mixed responses.

As a result of the inquiring nature of the audit process itself, at times the auditee

will hold and sometimes express hostility toward the internal auditor. The survey

inquired into 12 common approaches, with respondent results indicating an

approximate normal curve from ―Moderately Effective‖ through ―Extremely

Effective,‖ with the mode as ―Very Effective‖ on 10 of the 12 approaches. Thus,

with the exception of two approaches with mixed results, the responses to the

remaining 10 approaches were quite encouraging.

The management of change in thinking and operations that is imposed on the

auditee has always been an important and sometimes difficult process. Change is

not popular and, in many cases, it is ―uncomfortable in the least and feared the

most.‖ To overcome resistance to change, indentifying positive results from the

change and cost benefits or service improvements of change were approaches

considered most effective by respondents. Three other approaches produced

mixed results.

The conduct of the internal auditors usually consists of two professional services:

assurance (attestation auditing) services and consultancy. The questions in this

section were intended to determine internal auditor understanding of consultancy

as established by The IIA and aspects of approaches commonly used. Of the

seven questions asked, respondents answered either ―Probably‖ or ―Definitely‖ to

five of them. But to the question regarding whether the auditee should comply

with consultancy recommendations, 65 percent of respondents answered

―Probably,‖ with another 20 percent ―Not Sure.‖ And to the question regarding

whether consultancy recommendations were comparable to a management

directive, results were diffuse, clearly indicating confusion among respondents on

the issue of directive authority.

The placement of internal auditing in an organization usually defines the line of

authority, responsibility, and reporting of the function. Respondents indicated to

the extent of 74 percent that internal auditors are ―Extremely Responsible‖ to the


45

audit committee but hold that their responsibility is evenly split between ―Very

Responsible‖ and ―Extremely Responsible‖ to both the CEO and CFO. What was

especially encouraging though was the high responsibility held by the respondents

toward the auditee and society, held perhaps not as a legal but a moral

responsibility.

It would appear that most of the important behavioral areas of internal auditing have been

identified and covered thus far. There may be some other behavioral aspects of the

internal auditing process that could be explored and strengthened.

Implications

Some divergence between the conditions reported by respondents and the principles

espoused by The IIA became evident. The following situations might be reviewed for

possible remedial activity, in order of perceived importance:

There appeared to be confusion among internal auditors as to whether their

recommendations, either oral or written in the audit report, had the authority of a

management directive. If the internal auditor is confused on this point,

unnecessary tensions could arise between the internal auditor and auditee that

could adversely affect the outcome of the internal audit process.

A sizeable group of internal auditors seem to believe they were responsible to

both the CEO and the CFO and, in many cases, apparently in addition to the audit

committee. This apparent problem has the potential of serving too many masters,

thus creating potential problems that could threaten transparency and

accountability.

About 25 percent of respondents indicated that it was not important to assure that

the auditee was in agreement as to the measures and standards to be used in the

audit. Without such agreement, auditee nonacceptance of audit results increases

dramatically, thus potentially increasing auditee hostility toward the audit process

in general and threatening its outcome.

There was only mild approval of having the auditee participate in some aspects of

the audit fieldwork. Some modest auditee participation might not only increase

the efficiency of the audit but also help create a nonadversarial teamwork

approach toward a constructive outcome of the audit process that serves the long-

term best interests of the auditee, the internal auditor, and the organization.

In the area of ―management of change,‖ there appears to be some reluctance on

the part of respondents to resolve the ―ego aspects‖ related to change and the

―bureaucratic changes that would result.‖ Given the deeper psychological nature

of this point, internal auditors might lack confidence in this area.


46

Respondents apparently perceive that auditees do not consider them to possess

sufficient expertise in technical, financial, fraud detection, and risk/control. This

point needs further exploration and analysis, because it is essential that auditees

have confidence in the internal auditor‘s ability in these key areas if the outcome

of the audit process is to be effective.

Relative to resolving conflicts, the responses indicated that the internal auditors

did not see a great deal of effectiveness in concentrating on people issues and

discussing emotions openly, including stakes and reputations. Again, the deeper

psychological nature of this point might leave internal auditors lacking confidence

to pursue this.

It appears that respondents in many cases did not try to assist auditees in the

resolution of ethical problems.

Almost 90 percent of the respondents indicated that little attention in staff

meetings was directed to behavioral relationships. Also, almost 90 percent of the

internal audit organizations did not encourage staff to become knowledgeable in

behavioral relationships. This could lead internal auditors to believe that the

organization might not value these relationships highly (which might be true in

some organizations).

Other than the above, the responses were generally positive and appeared to indicate a

progressive attitude toward the behavioral dimensions or aspects of internal auditing.

47

CONCLUSIONS AND RECOMMENDATIONS

The behavioral dimensions shape and influence how well a profession‘s membership

applies its technical methods, regardless of the profession. Moreover, when any

profession falls short of its obligations, its failings seem to lie within the scope of the

behavioral dimensions. For instance, many issues of corporate governance emerging in

the aftermath of the Wall Street financial crisis of 2008 appear to have their roots in

behavioral considerations. As an integral part of the infrastructure of corporate

governance in organizations, internal auditors who emphasize behavioral perspectives

can play a vital role. Thus, it would seem prudent for the leadership of any profession to

focus ongoing attention to the behavioral dimensions that underlie its respective technical

practice.

The behavioral dimensions of internal auditing, of course, go beyond the perceptions of

internal auditors as individuals even though the internal auditor likely functions as the

central actor in the internal audit process. There is also the role of the internal audit team

along with the associated pressures from its management. Then, too, there is the role of

the auditees along with the associated pressures from their management. Moreover, there

are the consultative roles of the internal auditor who serve internal clients at their request.

Roles are more than individual; they are also social and cultural, and therefore quite

complex. This point argues for a comprehensive professional development program that

includes all aspects of the behavioral dimensions — an undertaking too broad for a single

study or report. Therefore, it is our recommendation that The IIA and its chapters directly

address the behavioral dimensions of internal auditing within strategically focused and

coordinated programs not only through traditional publication, but also in proactive

conference sessions and continuing education offerings on local and regional levels.

Publications on the behavioral dimensions in general will remain an excellent place to

begin one‘s professional development. The IIA, of course, has published books and

articles on aspects of behavioral dimensions, demonstrating its ongoing leadership. But a

formal publication series on various aspects of the behavioral dimensions of internal

auditing might provide a more coherent and organized focus. In addition, conference

sessions on behavioral dimensions can provide opportunity for members to discuss

behavioral issues or aspects in face-to-face settings. And structured continuing education

offerings that allow behavioral issues or aspects to be discussed with sufficient give and

take can facilitate deeper insights into effective strategies to improve practice.

Publications, conference sessions, and continuing education offerings can focus on both

(a) stand-alone behavioral topics for more in-depth understanding and (b) integrated topics

— technical practice along with its related behavioral aspects — for more emphasis on

successful application.

Perhaps some still believe that internal auditing can be performed without behavioral

considerations. Yes, it can and presumably has been so practiced. Yet, as the data from


48

survey responses indicate, most in the profession seem to accept the conventional

wisdom that the practice of internal auditing can be more effective for the auditor,

auditee, and organization when the behavioral dimensions are employed as a foundation

for the application of internal audit techniques. Nevertheless, there are still those who

have not fully recognized the importance of these behavioral issues and the

corresponding opportunities they represent. This relatively new perspective of placing

greater importance on the behavioral dimensions brings the internal auditor and auditee

closer together in the process of providing greater value for the organization and, in a

greater sense, for society itself.

49

EPILOGUE

The prologue of this report states that the survey relative to the ―behavioral dimensions of

the internal auditor… seeks to make important contributions to the current understanding

of interpersonal communications and other behavioral ‗aspects‘ in the internal audit

profession.‖

In our opinion, the survey accomplished this objective by identifying the behavioral

dimensions of basic areas, issues, and techniques that affect internal auditors in the field.

From the data, observed trends assisted in suggesting recommendations and conclusions

as to how internal auditors should function by recognizing the importance of these

behavioral issues and the corresponding opportunities presented. These trends also

assisted the authors in their development of a guide published separately for internal

auditors in the field on the behavioral dimensions of internal auditing.

In addition to the basic behavioral dimensions experienced herein by internal auditors,

more attention could be directed ―to prevent, deter, and detect‖ malfeasance (fraudulent

behavior) at executive levels where losses generated can significantly outweigh those at

lower levels (e.g., as indicated by current reports such as the Committee of Sponsoring

Organizations of the Treadway Commission‘s [COSO‘s] 2010 Fraudulent Financial

Reporting 1998–2007 and ACFE‘s 2010 Report to the Nation). Since it seems likely that

malfeasance has its roots in misfeasance (improper or unlawful performance of

something lawful) and nonfeasance (failure to perform official or lawful obligations),

perhaps internal auditors will need to direct more attention to these inappropriate

behaviors at the executive level.

The authors therefore reiterate the recommendations in the Executive Summary for a

―strategic ongoing focus on the behavioral dimensions through combinations of

publications, conference sessions, and continuing education‖ at all levels.

51

APPENDIX

GENERAL INFORMATION TO ALL SURVEY RECIPIENTS

This survey is being administered to collect information on the behavioral

aspects of internal auditing. This survey is part of an IIA Research Foundation

funded study being conducted by a team composed of three professionals who

have practitioner as well as academic backgrounds.

The questions in this survey ask information about your experiences in

dealing with ―people‖ issues (in our survey we refer to these issues

collectively as ―behavioral relationships‖) during audits, including approaches

that you commonly use in these situations. Therefore, we would like you to

answer the survey with reference to your audit experiences.

Completing the survey will take approximately 30 minutes of your time.

Please answer all questions. The question form has been designed so that you

can indicate your responses by either checking the box next to a response

option, by typing in your response, or by using pull down menus to indicate

your response. After you are finished marking your responses, please be sure

to save the document and e-mail it to <[email protected]>

Participation in this survey is voluntary. We assure you that the information

you provide will be completely confidential and will only be reported as group

data. Please indicate if you would like to receive a link to the online executive

summary of the completed study; we will also try to secure you the author

discount of 40 percent if you wish to purchase the hardcopy published version

of the full study.

If you have any questions regarding this survey, please contact Dr. Sowmya

Anand at (614) 292-3640, email: [email protected].

Thank you for your participation in this project.

Mortimer Dittenhofer, PhD, CIA

Sridhar Ramamoorti, PhD, CIA, CFSA

Sowmya Anand, PhD

Figure 1

Initial Cover Letter (January 25, 2006)


52

INSOURCED ORGANIZATIONAL INTERNAL AUDITOR

SURVEY RESPONDENTS

(wave two, after securing initial response from insourced internal auditors)

We sincerely appreciate your participating in this survey that is part of an IIA

Research Foundation funded study, ―Behavioral Dimensions of Internal

Auditing.‖ Two of the authors of this study have been members of The IIA

organization collectively for more than 70 years, and are convinced that it takes

much more than mere technical competence to succeed as a contemporary internal

auditor in a global professional environment. That is why we also have a well-

trained social psychology researcher on the research team. By means of this study

we intend to help internal audit practitioners and academics update and enhance

their understanding of the behavioral foundations of the internal audit profession.

As in everyday life, successful internal audit professionals are those

simultaneously scoring high on the intelligence quotient (IQ) as well as emotional

quotient (EQ). Our goal is to contribute to internal auditor professionalism, make

them more effective and successful in their value-adding contributions to

organizations, and thus raise the profile of individual internal auditors as well as

the internal audit profession worldwide.

It is critical that we gather the ―self-insight‖ of insourced internal auditor survey

participants, but we must also seek to understand how internal audit clients

perceive us (after all, they are the customers and users of internal audit services).

Hence, we request you to provide us with the e-mail address of your audit

committee chairman to see if he/she could get one or even two clients of your

services over the past year to respond to a different survey. Please note that we are

doing this solely to obtain independent, objective feedback about the internal

audit function and its value-adding contributions within organizations. All

responses will remain confidential and will be reported only as aggregated data in

the final study.

By participating in this survey you are helping advance the global internal audit

profession. We are grateful for your participation without which such surveys

would simply not be possible. If you are interested in learning more about how

your input got baked into the overall survey responses and how the study itself

turned out, as noted earlier, we will be happy to provide you with an author

discount of 40 percent on the published hardcopy version of the full study.

Figure 2

Follow-up Letter (approximately February 15, 2006)

53

Research Sponsor Recognition

The vision of The IIA Research Foundation is to understand, shape, and advance the

global profession of internal auditing by initiating and sponsoring intelligence gathering,

innovative research, and knowledge-sharing in a timely manner. As a separate, tax-

exempt organization, The Foundation does not receive funding from IIA membership

dues but depends on contributions from individuals and organizations, and from IIA

chapters and institutes, to move our programs forward. We also would not be able to

function without our valuable volunteers. To that end, we thank the following:

Research Sponsors

IIA-Chicago Chapter

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Principal Partners

Strategic Partners:

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CCH® TeamMate

Partners:

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Ernst & Young LLP

PricewaterhouseCoopers LLP

Visionary Circle

The Family of Lawrence B. Sawyer

Chairman’s Circle

Michael J. Head, CIA ExxonMobil Corporation

Stephen D. Goepfert, CIA

Patricia E. Scipio, CIA

Itau Unibanco Holding S.A.

JCPenney Company, Inc.

Paul J. Sobel, CIA Lockheed Martin Corporation

Southern California Edison Company

Diamond Donor

IIA-Central Ohio Chapter

IIA-New York Chapter

IIA-San Jose Chapter

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54

THE IIA RESEARCH FOUNDATION

BOARD OF TRUSTEES

President: Patricia E. Scipio, CIA, PricewaterhouseCoopers LLP

Vice President-Strategy: Mark J. Pearson, CIA, Boise Inc.

Vice President-Research and Education: Philip E. Flora, CIA, CCSA, FloBiz &

Associates, LLC

Vice President-Development: Wayne G. Moore, CIA, Wayne Moore Consulting

Treasurer: Stephen W. Minder, CIA, YCN Group LLC

Secretary: Douglas Ziegenfuss, Ph.D., CIA, CCSA, Old Dominion University

Neil Aaron, The McGraw-Hill Companies

Richard J. Anderson, CFSA, DePaul University

Urton L. Anderson, PhD, CIA, CCSA, CFSA, CGAP, University of Texas-Austin

Sten Bjelke, CIA, IIA Sweden

Michael J. Head, CIA, TD Ameritrade Holding Corporation

James A. LaTorre, PricewaterhouseCoopers LLP

Marjorie Maguire-Krupp, CIA, CFSA, Coastal Empire Consulting

Leen Paape, CIA, Nyenrode Business University

Jeffrey Perkins, CIA, TransUnion LLC

Edward C. Pitts, Avago Technologies

Michael F. Pryal, CIA, Federal Signal Corporation

Larry E. Rittenberg, PhD, CIA, University of Wisconsin

Carolyn Saint, CIA, Lowe's Companies, Inc.

Mark L. Salamasick, CIA, University of Texas at Dallas

Susan D. Ulrey, CIA, KPMG LLP

Jacqueline K. Wagner, CIA, Ernst & Young LLP

Shi Xian, Nanjing Audit University

55

THE IIA RESEARCH FOUNDATION

COMMITTEE OF RESEARCH AND EDUCATION ADVISORS

Chairman: Philip E. Flora, CIA, CCSA, FloBiz & Associates, LLC

Vice-chairman: Urton L. Anderson, PhD, CIA, CCSA, CFSA, CGAP, University of Texas-Austin

Members George R. Aldhizer III, Ph.D., CIA, Wake Forest

University

Ulrich Hahn, CIA, CCSA, CGAP

Lalbahadur Balkaran, CIA John C. Harris, CIA, Aspen Holdings/FirstComp

Insurance Company

Kevin W. Barthold, CPA, City of San Antonio Sabrina B. Hearn, CIA, University of Alabama

System

Thomas J. Beirne, CFSA, The AES Corporation Katherine E. Homer, Ernst & Young LLP

Audley L. Bell, CIA, Habitat for Humanity

International

Peter M. Hughes, Ph.D., CIA, Orange County

Toby Bishop, Deloitte & Touche LLP David J. MacCabe, CIA, CGAP

Sezer Bozkus, CIA, CFSA, KPMG LLP Gary R. McGuire, CIA, Lennox International Inc.

John K. Brackett, CFSA, RSM McGladrey, Inc. John D. McLaughlin, Smart Business Advisory

and Consulting LLC

Adil S. Buhariwalla, CIA, Emirates Airlines Steven S. Mezzio, CIA, CCSA, CFSA, Resources

Global Professionals

Thomas J. Clooney, CIA, CCSA, KPMG LLP Deborah L. Munoz, CIA, CalPortland Company

Jean Coroller Frank M. O‘Brien, CIA, Olin Corporation

Mary Christine Dobrovich, Jefferson Wells

International

Michael L. Piazza, Professional Development

Institute

Susan Page Driver, CIA, Texas General Land Office Amy Jane Prokopetz, CCSA, Farm Credit Canada

Donald A. Espersen, CIA, despersen & associates Mark R. Radde, CIA, Resources Global

Professionals

John C. Gazlay, CPA, CCSA Vito Raimondi, CIA, Zurich Financial Services

NA

Randall R. Fernandez, CIA, C-Force , Inc. Sandra W. Shelton, Ph.D., DePaul University

Dan B. Gould, CIA Linda Yanta, CIA, Eskom

Behavioral Dimensions of Internal Auditing:An Exploratory Survey of Internal Auditors

Behavioral Dimensions of Internal Auditing: An Exploratory Survey of Internal AuditorsThis report describes results of a survey conducted by the authors to identify the

behavioral dimensions of basic areas, issues, and techniques that affect internal

auditors in the field. From the data, observed trends assisted in suggesting

recommendations and conclusions as to how internal auditors should function

by recognizing the importance of these behavioral issues and the corresponding

opportunities presented.

These trends assisted the authors in their development of Behavioral Dimensions

of Internal Auditing: A Practical Guide to Professional Relationships in Internal

Auditing, a guide for internal auditors in the field on the human dimensions of

internal auditing.

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Order No. 5015.2.dlIIA members US $0 Nonmembers US $0

11329

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Behavioral D

imensions of Internal A

uditing: An E

xploratory Survey of Internal A

uditors

Mortimer A. Dittenhofer, PhD, CIA, CGFMSridhar Ramamoorti, PhD, CIA, CPA, CFEDouglas E. Ziegenfuss, PhD, CIA, CPA, CFER. Luke Evans, MA

Documents

Behavioral Dimensions of Internal Auditing: Behavioral ... · of Internal Auditing: A Practical Guide to Professional Relationships in Internal Auditing, a guide for internal auditors