A Comparative Study of Internal and External Auditors' Judgment of Internal Auditor Independence

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The purpose of this study is to provide empirical evidence relevant to perceptions of internal auditor independence. Specifically, this study investigates how the auditor practitioners (both internal and external auditors) perceive the importance of five selected factors that characterize the organizational settings of an internal audit department. Role theory is the frame of reference used to develop the conceptual model for this study in which the judgment of internal auditor independence is viewed as the role perception of internal auditors. A modified version of the Brunswik's lens model was developed to provide "paramorphic" representation of judgment of independence. The research ... continued below

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iii, 186 leaves: ill.

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Pei, Ker-Wei May 1986.

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  • Pei, Ker-Wei

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Description

The purpose of this study is to provide empirical evidence relevant to perceptions of internal auditor independence. Specifically, this study investigates how the auditor practitioners (both internal and external auditors) perceive the importance of five selected factors that characterize the organizational settings of an internal audit department. Role theory is the frame of reference used to develop the conceptual model for this study in which the judgment of internal auditor independence is viewed as the role perception of internal auditors. A modified version of the Brunswik's lens model was developed to provide "paramorphic" representation of judgment of independence. The research methodology of this study is based upon a laboratory experiment in which a replicated factorial design was used to elicit the subjects' judgments of independence. The data collected from this experiment were analyzed by three statistical methods: conjoint measurement, multiple regression, and cluster analysis. The major findings follow. First, the five selected factors were not perceived as equally important by the subjects. In general, internal auditor's scope of audit. scope o^ service, and reporting level were perceived as more important than adequacy of organizational support. and formalization of audit policies. Second, the two groups of auditors disagree, significantly, on the relative importance of scope of internal audit service. Third, while large individual differences existed on the relative importance of the five selected factors, the degree of judgment consensus, in general, is high within each auditor group. Fourth, the internal auditor's perceived role conflict and role ambiguity were inversely related to his perceived level of professional autonomy. Finally, the internal auditors' judgments were not notably affected by the perceptions of their own organizational environment. However, as evidenced by the different types of experienced role conflict and ambiguity, the nature of these auditors' environment varied considerably, Given the above findings, the following implications are suggested: First, the organizational settings are critical of internal auditor independence. Improperly structured settings not only affect the perceived independence but also are detrimental to professional autonomy — de facto independence. Second, rule making bodies should provide more explicit guidelines concerning internal audit independence evaluation, particularly, in the area of scope of internal audit service. Third, while the auditor's reporting level is an important factor to independence, it should not be the only consideration. Other factors, such as the ones used in this study, should be also evaluated to avoid misleading results.

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iii, 186 leaves: ill.

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UNT Theses and Dissertations

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  • May 1986

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  • Aug. 22, 2014, 6 p.m.

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  • April 26, 2016, 9:21 a.m.

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Pei, Ker-Wei. A Comparative Study of Internal and External Auditors' Judgment of Internal Auditor Independence, dissertation, May 1986; Denton, Texas. (digital.library.unt.edu/ark:/67531/metadc331822/: accessed August 17, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; .