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

Author

Listed:
  • Florian Hoos

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Natalia Kochetova-Kozloski
  • Anne d'Arcy

Abstract

The position of an internal audit function (IAF) as a "servant of two masters" (i.e., management and the audit committee) may lead to a conflict of priorities. In this setting, the tone at the top set by the Chief Audit Executive (CAE) plays a critical role in balancing the potentially competing priorities of the "two masters." We test two hypotheses in a mixed experimental design with the communicated preferences of the CAE to subordinates (cost reduction vs. effectiveness of internal controls) as a between-subjects factor, and levels of ambiguity (low, medium, high) manipulated within-subjects. Findings suggest that the emphasis in the CAE's message can influence internal auditors' judgments, and such influence is more pronounced when task ambiguity is high, resulting in the elimination of a significantly greater number of internal controls and the design of less effective processes. We discuss implications of our results for modern IAFs and the role of the CAE.

Suggested Citation

  • Florian Hoos & Natalia Kochetova-Kozloski & Anne d'Arcy, 2013. "'Serving Two Masters' and the Chief Audit Executive's Communication: Experimental Evidence About Internal Auditors’ Judgments," Working Papers hal-02011436, HAL.
    • Handle: RePEc:hal:wpaper:hal-02011436
    as

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