The ethical pathway of the chief audit executive reporting relationships and the influence of the boundary span of knowledge and geography

Al Fayi, Salem Mesfer A.

July 2017

Thesis or dissertation

© 2017 Salem Mesfer A Al Fayi. All rights reserved. No part of this publication may be reproduced without the written permission of the copyright holder.

Internal auditing is an essential part of an organisation's internal control, governance and risk management. The nature and value of internal audit quality are measured by objectivity, competence and application of a systematic and disciplined approach. however, a close relationship with the appropriate authority, such as those charged with governance, supports the independence and objectivity of the internal auditors and complies with organisation independence standards. Nonetheless, previous literature has indicated that the chief audit executive's primary responsibilities may be compromised due to 'who they report to' (e.g., the board of directors, audit committee, chief executive officer, chief financial officer or other executives).

Internal audit reporting relationships have attracted a great deal of attention. Several attempts have been made by academic researchers and professional practitioners to investigate internal audit reporting relationship with mixed results. The vast majority of them support reporting on the execution and results of internal audit activities to the organisation's high authority. In contrast, other studies argued the difficulties of chief audit executives reporting deficiencies in full as well as reporting directly to a higher authority. However, no previous study has examined the ethical pathway of the chief audit executive's reporting relationships.

the primary purpose of this research is to examine the ethical pathways of the chief audit executives' reporting relationships with the appropriate authority and the interactions between their perceptions and decision choices. Further, it explores the interactions between the chief audit executive's assessment regarding internal audit technical expertise and the activities of internal audit in terms of governance review and information technology risk and cybersecurity with the extent of using information technology tools and techniques. In addition, investigates the influence of the boundary span on the ethical pathway of the chief audit executive's reporting decision. The types of boundary span on which this study focuses are the boundary span of knowledge and geographical region.

The Ethical Process Thinking Model was applied to examine the relationships among the investigated factors, which provides a better understanding of dealing with governance review and information technology risk and cybersecurity issues and effective reporting relationships. A world-wide survey administered by the Institute of Internal Auditors Research Foundation is used to test the proposed hypotheses. The results indicate that chief audit executives follow different decision-making pathways depending on the internal audit activities and characteristics. In addition, the boundary span of chief audit executives' knowledge and geographical regions are proven to be associated with significant difference in chief audit executives' ethical pathway. Finally, the nature and extent of internal audit activities are associated with the chief audit executives' reporting relationships.

Business School, The University of Hull
Rodgers, Waymond
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