Internal Auditing Effectiveness: Multiple Case Study Research in Germany That Hardens Role Theory and the Relational Theory of Coordination

Posted: 3 Dec 2011 Last revised: 12 Mar 2016

See all articles by Rainer Lenz

Rainer Lenz

Louvain School of Management (UCL)

Gerrit Sarens

Université Catholique de Louvain

Date Written: April 14, 2012

Abstract

Subsequent to preceding literature research, access to multiple case studies was gained through a snapshot questionnaire. Sixteen semi-structured interviews of heads of Internal Audit (CAE) and members of Senior Management (SM) in the same organization were conducted. The interviews were recorded and transcribed, and data analysis software was used to explore the data. This research augments the understanding of Internal Auditing (IA) effectiveness by studying organizational, personal, and particularly interpersonal factors framed by the lenses of Role Theory (Kahn et al. 1964) and supplemented by the Theory of Relational Coordination (Gittel 2006). Within the specific German Corporate Governance context, where SM is generally regarded as the “chief stakeholder” of IA, the study reveals differences between more or less effective IA functions (IAFs) and addresses questions of a “why” type. Customer satisfaction as a key concept when measuring IA effectiveness can easily be misleading, as expectations in practice vary significantly, and, sometimes, only very little may be demanded. Interpersonal factors can enhance or detract from IA effectiveness. CAEs who interact frequently and timely with SM using problem-solving communication nurture IA effectiveness, especially when such communication is supported by shared goals, shared knowledge, and mutual respect. Organizational factors play an important role, evidenced by “hidden champions” that demand and benefit from effective IA practices. Personality factors also affect IA effectiveness. “Swimming in the organization” and “Fingerspitzengefühl” are suggested metaphors for effective internal auditors while added value of IA designations for CAEs was not found in practice.

Keywords: Internal auditing, effectiveness, role theory, theory of relational coordination

JEL Classification: M10, M40, M41

Suggested Citation

Lenz, Rainer and Sarens, Gerrit, Internal Auditing Effectiveness: Multiple Case Study Research in Germany That Hardens Role Theory and the Relational Theory of Coordination (April 14, 2012). CAAA Annual Conference 2012. Available at SSRN: https://ssrn.com/abstract=1966285 or http://dx.doi.org/10.2139/ssrn.1966285

Rainer Lenz (Contact Author)

Louvain School of Management (UCL) ( email )

Place des Doyens 1
Louvain-la-Neuve, 1348
Belgium

Gerrit Sarens

Université Catholique de Louvain ( email )

Place des Doyens, 1
Louvain-la-Neuve, 1348
Belgium
+32 10 47 84 41 (Phone)
+32 10 47 83 24 (Fax)

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