Drivers of value of internal audit function: the perception of internal auditors and other primary stakeholders

What the paper says

Purpose The study aims to examine the role of the internal audit function (IAF) in corporate governance, internal controls and risk management (RM) and its impact on value creation, based on the perspectives of internal auditors (IAs) and their stakeholders. Design/methodology/approach Staff involved in internal audit functions, along with key stakeholders such as audit committee chairs, senior management and board members of corporate organisations in Ghana, participated in a survey and interviews. A mixed-method approach was employed, using partial least squares structural equation modelling to test the hypotheses and thematic analysis to analyse the interview data. Findings The quantitative and qualitative findings indicate that corporate governance, internal controls and RM have contributed positively to value addition. However, no statistically significant relationship exists between the role of IAF in RM and value-added contribution. This was also supported by qualitative evidence that demonstrated RM is typically the responsibility of independent risk or compliance units, while the IAF provides assurance over these processes instead of contributing directly to risk identification and mitigation. Research limitations/implications The participants sampled in this study are IAs and stakeholders of corporate organisations in Ghana, and this limits the generalisability of the findings to this specific context. Thus, the conclusions only provide tentative insights into internal audit matters that may be transferable across other developing countries. Practical implications The study highlights the importance of a strong IAF in supporting corporate governance, internal controls and RM. The findings can be used by regulators, creditors and society at large to promote policies and practices that improve internal audit processes and ultimately organisational transparency, accountability and financial stability. Originality/value By placing the work of IAs within the stakeholder theory and agency theory, the research offers a theoretical rationale for explaining how audit committee chairpersons and senior management, who offer insights into the measures, along with heads of internal audits, who provide insights into the drivers, influence the shift towards more strategic and value-added internal audit practices. This broadens theoretical debate and practical consciousness within accounting and audit research, making the IAF central to both legitimacy creation (stakeholder theory) and efficiency enhancement (agency theory).