External Auditors’ Perceptions of and Willingness to Work in Outsourced and In-House Internal Audit Functions

Abstract

While the internal audit function (IAF) plays a critical role in organizations, it faces challenges in finding sufficient numbers of high-quality job applicants to fill its ranks. We examine experienced external auditors’ perceptions of internal auditing and how their perceptions may influence the nature of communications they have with job-seeking students about careers in internal audit. The results of two experiments suggest that practicing external auditors are twice as likely to apply for positions that are labeled as accounting positions rather than either in-house or outsourced internal audit positions. The results also suggest that external auditors believe there are negative perceptions of internal auditors — especially in-house internal auditors relative to outsourced internal auditors — and are more likely to recommend that mediocre students apply to work in internal auditing. We also provide survey results from experienced professionals that identify aspects of internal auditing that may be improved to make it a more attractive career option. Taken together, the results suggest internal auditing faces hiring challenges, but these challenges may be mitigated — which can have important ramifications for the important role internal auditing serves in the business world.

Keywords: Internal Audit, Hiring Decisions, Outsourcing, External Auditors

JEL Classification: M4, M40, M41, M49, G3, G34, M5, M51, M54