Corporate Managers’ Reliance on Internal Auditor Recommendations

Posted: 7 Mar 2011 Last revised: 20 May 2015

See all articles by F. Greg Burton

F. Greg Burton

Brigham Young University - School of Accountancy

Scott A. Emett

Arizona State University (ASU) - School of Accountancy

Chad Simon

Utah State University - School of Accountancy

David A. Wood

Brigham Young University - School of Accountancy

Date Written: January 17, 2012

Abstract

We investigate whether corporate managers' reliance on internal auditors' recommendations in an operational setting is influenced by three recommendation attributes: (1) whether the recommendation was consistent with or inconsistent with management preferences, (2) whether the recommendation was given by an outsourced or in-house internal auditor, and (3) whether the recommendation was quantitative or qualitative in nature. We use a 2 × 2 × 2 fractional factorial design to test our predictions. We find that managers change their initial position more when presented with preference-inconsistent recommendations than when presented with preference-consistent recommendations. We do not find differences in managers' reliance on the preference-inconsistent, non-quantified recommendations of outsourced versus in-house internal auditors. However, we find that managers are more likely to rely on the preference-inconsistent recommendations of in-house internal auditors when their recommendations are quantified as opposed to non-quantified, an effect that is not observed with outsourced internal auditors.

Available at: http://dx.doi.org/10.2308/ajpt-10234

Keywords: Internal Audit, In-House, Outsourcing, Competence, Objectivity

JEL Classification: M4, M40, M41, D21, M51, M10

Suggested Citation

Burton, Fielding Greg and Emett, Scott A. and Simon, Chad A. and Wood, David A., Corporate Managers’ Reliance on Internal Auditor Recommendations (January 17, 2012). Burton, F.G., Emmett, S., C.A. Simon, and D.A. Wood. 2012. Corporate Managers’ Reliance on Internal Auditor Recommendations. Auditing: A Journal of Practice and Theory 31 (2): 151-166., Available at SSRN: https://ssrn.com/abstract=1776446 or http://dx.doi.org/10.2139/ssrn.1776446

Fielding Greg Burton

Brigham Young University - School of Accountancy ( email )

Provo, UT 84602
United States

Scott A. Emett

Arizona State University (ASU) - School of Accountancy ( email )

Tempe, AZ 85287
United States

Chad A. Simon

Utah State University - School of Accountancy ( email )

School of Accountancy
Jon M. Huntsman School of Business
Logan, UT 84322-3540
United States

David A. Wood (Contact Author)

Brigham Young University - School of Accountancy ( email )

518 TNRB
Brigham Young University
Provo, UT 84602
United States
801-422-8642 (Phone)
801-422-0621 (Fax)

HOME PAGE: http://marriottschool.byu.edu/employee/employee.cfm?emp=daw44

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