- Author : Zhe Wang
- Publisher :
- Release : 2014
- ISBN :
- Pages : 402 pages
The Impact of Tone at the Top and Control Mechanisms on the Objectivity of Internal Auditor Judgment
Download or read book The Impact of Tone at the Top and Control Mechanisms on the Objectivity of Internal Auditor Judgment written by Zhe Wang and published by . This book was released on 2014 with total page 402 pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this thesis is to examine the effects of tone at the top and control mechanisms on the objectivity of internal auditors' judgments. Prior empirical evidence suggests that employees' judgments can be influenced by top management through the tone at the top of the organisation. As employees, internal auditors also make judgments within the ethical climate - the tone at the top created by management. Given the important role of internal auditors in ensuring effective corporate governance, this thesis first investigates whether the quality of the tone at the top influences the objectivity of internal auditors' judgments on management-related fraud risk and internal control weaknesses. This thesis then investigates whether bias in internal auditors' judgments under a poor tone at the top can be mitigated by coordination between internal and external auditors, or by a high quality audit committee. This thesis includes two studies. The first study examines the objectivity of internal auditors' fraud risk assessments. The findings from an experiment involving 64 internal auditors suggest that internal auditors are more sceptical when the tone at the top is poor. The results of the coordination between internal and external auditors suggest that the existence of such coordination can be used as an effective mechanism to mitigate the influence of a poor tone on internal auditors' fraud risk assessments. The second study investigates the objectivity of internal auditors' internal control evaluations. The results from an experiment involving 80 internal auditors suggest that internal auditors' internal control evaluations are biased towards the management's favour under a poor tone at the top. The results of the quality of the audit committee indicate that the influence of a poor tone at the top on internal auditors' internal control evaluations can be mitigated by an effective audit committee with a high level of independence and expertise.