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Internal audit involvement in enterprise risk management

Laura de Zwaan (Department of Accounting, Finance and Economics, Griffith Business School, Griffith University, Meadowbrook, Australia)
Jenny Stewart (Department of Accounting, Finance and Economics, Griffith Business School, Griffith University, Meadowbrook, Australia)
Nava Subramaniam (School of Accounting, Economics and Finance, Faculty of Business and Law, Deakin University, Burwood, Australia)

Managerial Auditing Journal

ISSN: 0268-6902

Article publication date: 26 July 2011

Abstract

Purpose

The purpose of this paper is to examine the impact of internal auditors' involvement in enterprise risk management (ERM) on perceptions of their willingness to report a breakdown in risk procedures and whether a strong relationship with the audit committee affects such willingness to report. The study also investigates the use of ERM and the role of internal audit in ERM in Australian private and public sector entities.

Design/methodology/approach

The study uses an experimental design, manipulating the internal auditor's involvement in ERM and the strength of the relationship between internal audit and the audit committee. Participants are 117 certified internal auditors. The study also gathers descriptive data on the use of ERM.

Findings

The study indicates that a high involvement in ERM impacts the perceptions of internal auditors' willingness to report a breakdown in risk procedures to the audit committee. However, a strong relationship with the audit committee does not appear to affect their perceived willingness to report. The study also finds that the majority of organisations have recently adopted ERM. Internal auditors are involved in ERM assurance activities but some also engage in activities that could compromise objectivity.

Research limitations/implications

There are internal and external validity threats associated with the experimental design.

Practical implications

The findings reinforce the need for organisations to adhere to the recommendations of the Institute of Internal Auditors and to ensure that internal auditors do not play an inappropriate role in ERM.

Originality/value

The paper contributes to our understanding of the impact of involvement in ERM on internal audit objectivity and of the current role of internal audit in ERM in Australia.

Keywords

Citation

de Zwaan, L., Stewart, J. and Subramaniam, N. (2011), "Internal audit involvement in enterprise risk management", Managerial Auditing Journal, Vol. 26 No. 7, pp. 586-604. https://doi.org/10.1108/02686901111151323

Publisher

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Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited