The Effects of Cultural Dimension on the Internal Audit Function - A Worldwide Comparison of Internal Audit Characteristics

25 Pages Posted: 16 Oct 2017 Last revised: 19 Oct 2017

See all articles by Marc Eulerich

Marc Eulerich

University of Duisburg-Essen, Mercator School of Management

Nicole V.S. Ratzinger-Sakel

University of Hamburg

Date Written: October 15, 2017

Abstract

Using a multinational sample of companies from different industries together with the five cultural dimensions of Hofstede (2001) as proxies for national culture, we analyze how cultural differences across countries affect the organization and work of internal audit functions (IAF). We use a unique research focus and a multinational dataset that examine the influence of national culture on IAFs in multiple dimensions. We cover all five Hofstede’s cultural dimensions to obtain a holistic view on the effects of national culture and directly link them, to relevant proxies, which describe the structure and work of the IAF. Our dataset is based on the so-called "Common body of knowledge" - study from the IIA, representing 166 different countries and 3,323 Chief Audit Executives (CAE) responses from a broad industry and size range. Our results indicate a positive association between the cultural dimensions, long-term orientation and uncertainty avoidance, and an objective and independent IAF. In contrast, individualisms does not seem to be supportive for an objective and independent IAF. We contribute to the existing literature with our exploratory study in several ways. First of all, we use a completely new research approach and dimension of IAF research. Second, our study shows that different cultural dimensions have significant effects on specific IAF characteristics. With the operationalization of IIA’s ten Core Principles, we try to find a comprehensible way to measure typical factors of an effective work and structure of the IAF. Our results should open new research streams on the internationalization and effects of culture on the IAF.

Keywords: Internal Audit Function, Auditing, National Cultures, Hofstede

JEL Classification: M40, M49

Suggested Citation

Eulerich, Marc and Ratzinger-Sakel, Nicole V.S., The Effects of Cultural Dimension on the Internal Audit Function - A Worldwide Comparison of Internal Audit Characteristics (October 15, 2017). Available at SSRN: https://ssrn.com/abstract=3053619 or http://dx.doi.org/10.2139/ssrn.3053619

Marc Eulerich (Contact Author)

University of Duisburg-Essen, Mercator School of Management ( email )

Lotharstrasse 65
Duisburg, 47057
Germany
00492033792600 (Phone)

HOME PAGE: http://www.msm.uni-due.de/ircg

Nicole V.S. Ratzinger-Sakel

University of Hamburg ( email )

Allende-Platz 1
Hamburg, 20146
Germany

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