IDEAS home Printed from https://ideas.repec.org/p/ems/eureri/6891.html

Sourcing of Internal Auditing: An Empirical Study

Author

Listed:
  • Speklé, R.F.
  • van Elten, H.J.
  • Kruis, A.M.

Abstract

In recent years, the scope of internal auditing has broadened considerably, increasing the importance of internal auditing as part of the organization’s management control structure. This expanding role has changed the demands being put on internal auditors. Their new role requires different skills and competencies, and many organizations now need to face the choice whether to develop these broader competencies internally or to outsource internalauditing to outside service providers. This paper studies the factors associated with organizations’ internal audit sourcing decisions, building from a previous study by Widener & Selto (1999; henceforth W&S). In their study, W&S used Transaction Cost Economics (TCE) to explain the organization of internal auditing. Our study seeks to replicate their results, using newly collected data from 66 companies headquartered in the Netherlands. Our findings are supportive of W&S. Like W&S, we find asset specificity and frequency (both individually and in interaction) to be significantly associated with sourcing decisions in a regression model that explains 65% (adjusted R2 = 0.63) of the variance in outsourced internal auditing. Additional analyses reinforce the importance of these TCE variables in explaining organizations’ internal auditing sourcing behaviour.

Suggested Citation

  • Speklé, R.F. & van Elten, H.J. & Kruis, A.M., 2005. "Sourcing of Internal Auditing: An Empirical Study," ERIM Report Series Research in Management ERS-2005-046-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    • Handle: RePEc:ems:eureri:6891
    as

    Download full text from publisher

    File URL: https://repub.eur.nl/pub/6891/ERS%202005%20046%20F&A.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Luft, Joan & Shields, Michael D., 2003. "Erratum to "Mapping management accounting: graphics and guidelines for theory-consistent empirical research" [Accounting Organizations and Society 28 (2003) 169-249]," Accounting, Organizations and Society, Elsevier, vol. 28(7-8), pages 815-815.
    2. Benito Arrunada, 2000. "Audit quality: attributes, private safeguards and the role of regulation," European Accounting Review, Taylor & Francis Journals, vol. 9(2), pages 205-224.
    3. Oliver E. Williamson, 1999. "Strategy research: governance and competence perspectives," Strategic Management Journal, Wiley Blackwell, vol. 20(12), pages 1087-1108, December.
    4. William M. Dugger, 1996. "The Mechanisms of Governance," Journal of Economic Issues, Taylor & Francis Journals, vol. 30(4), pages 1212-1216, December.
    5. Dennis H. Caplan & Michael Kirschenheiter, 2000. "Outsourcing and Audit Risk for Internal Audit Services," Contemporary Accounting Research, John Wiley & Sons, vol. 17(3), pages 387-428, September.
    6. Otley, David T., 1980. "The contingency theory of management accounting: Achievement and prognosis," Accounting, Organizations and Society, Elsevier, vol. 5(4), pages 413-428, October.
    7. Ittner, Christopher D. & Larcker, David F., 2001. "Assessing empirical research in managerial accounting: a value-based management perspective," Journal of Accounting and Economics, Elsevier, vol. 32(1-3), pages 349-410, December.
    8. DeAngelo, Linda Elizabeth, 1981. "Auditor size and audit quality," Journal of Accounting and Economics, Elsevier, vol. 3(3), pages 183-199, December.
    9. Spekle, Roland F., 2001. "Explaining management control structure variety: a transaction cost economics perspective," Accounting, Organizations and Society, Elsevier, vol. 26(4-5), pages 419-441.
    10. Covaleski, Mark A. & Dirsmith, Mark W. & Rittenberg, Larry, 2003. "Jurisdictional disputes over professional work: the institutionalization of the global knowledge expert," Accounting, Organizations and Society, Elsevier, vol. 28(4), pages 323-355, May.
    11. Robert J. David & Shin‐Kap Han, 2004. "A systematic assessment of the empirical support for transaction cost economics," Strategic Management Journal, Wiley Blackwell, vol. 25(1), pages 39-58, January.
    12. Luft, Joan & Shields, Michael D., 2003. "Mapping management accounting: graphics and guidelines for theory-consistent empirical research," Accounting, Organizations and Society, Elsevier, vol. 28(2-3), pages 169-249.
    13. Hartmann, Frank G. H. & Moers, Frank, 1999. "Testing contingency hypotheses in budgetary research: an evaluation of the use of moderated regression analysis," Accounting, Organizations and Society, Elsevier, vol. 24(4), pages 291-315, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Grzegorz Gołębiowski, 2010. "The Internal Audit Outsourcing," Contemporary Economics, Vizja University, vol. 4(2), June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Artz, Martin & Homburg, Christian & Rajab, Thomas, 2012. "Performance-measurement system design and functional strategic decision influence: The role of performance-measure properties," Accounting, Organizations and Society, Elsevier, vol. 37(7), pages 445-460.
    2. Ahrens, Thomas & Chapman, Christopher S., 2006. "Doing qualitative field research in management accounting: Positioning data to contribute to theory," Accounting, Organizations and Society, Elsevier, vol. 31(8), pages 819-841, November.
    3. Robert H. Chenhall & Frank Moers, 2007. "The Issue of Endogeneity within Theory-Based, Quantitative Management Accounting Research," European Accounting Review, Taylor & Francis Journals, vol. 16(1), pages 173-196.
    4. Kilfoyle, Eksa & Richardson, Alan J., 2011. "Agency and structure in budgeting: Thesis, antithesis and synthesis," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 22(2), pages 183-199.
    5. Bisbe, Josep & Batista-Foguet, Joan-Manuel & Chenhall, Robert, 2007. "Defining management accounting constructs: A methodological note on the risks of conceptual misspecification," Accounting, Organizations and Society, Elsevier, vol. 32(7-8), pages 789-820.
    6. Adam Maiga & Anders Nilsson & Fred Jacobs, 2014. "Assessing the impact of budgetary participation on budgetary outcomes: the role of information technology for enhanced communication and activity-based costing," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 25(1), pages 5-32, September.
    7. Christoph Feichter & Isabella Grabner, 2020. "Empirische Forschung zu Management Control – Ein Überblick und neue Trends [Empirical Management Control Reserach—An Overview and Future Directions]," Schmalenbach Journal of Business Research, Springer, vol. 72(2), pages 149-181, June.
    8. Verbeeten, F.H.M., 2005. "New’ Performance Measures: Determinants of Their Use and Their Impact on Performance," ERIM Report Series Research in Management ERS-2005-054-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    9. Klaus Derfuss, 2015. "Relating Context Variables to Participative Budgeting and Evaluative Use of Performance Measures: A Meta-analysis," Abacus, Accounting Foundation, University of Sydney, vol. 51(2), pages 238-278, June.
    10. Carolyn Stringer, 2007. "Empirical performance management research: observations fromAOSandMAR," Qualitative Research in Accounting & Management, Emerald Group Publishing Limited, vol. 4(2), pages 92-114, June.
    11. Ellen Haustein & Robert Luther & Peter Schuster, 2014. "Management control systems in innovation companies: a literature based framework," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 24(4), pages 343-382, February.
    12. David Marginson & Laurie McAulay & Melvin Roush & Tony Van Zijl, 2010. "Performance measures and short‐termism: An exploratory study," Accounting and Business Research, Taylor & Francis Journals, vol. 40(4), pages 353-370.
    13. Joan Luft & Michael Shields, 2002. "Zimmerman's contentious conjectures: describing the present and prescribing the future of empirical management accounting research," European Accounting Review, Taylor & Francis Journals, vol. 11(4), pages 795-803.
    14. Maik Hamann & Thomas Günther, 2009. "Was ist ein Planungssystem? – Ein Metamodell zur Beschreibung von Planungssystemen als Basis für die empirische Planungsforschung," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 20(2), pages 143-173, October.
    15. James T. Mackey & F. Johnny Deng, 2016. "Examining the Role of Management Control Systems in the Creation of an Innovative Culture," International Journal of Innovation and Technology Management (IJITM), World Scientific Publishing Co. Pte. Ltd., vol. 13(03), pages 1-27, June.
    16. Bouwens, J.F.M.G. & van Lent, L.A.G.M., 2003. "Effort and Selection Effects of Incentive Contracts," Discussion Paper 2003-130, Tilburg University, Center for Economic Research.
    17. Gerdin, Jonas & Greve, Jan, 2008. "The appropriateness of statistical methods for testing contingency hypotheses in management accounting research," Accounting, Organizations and Society, Elsevier, vol. 33(7-8), pages 995-1009.
    18. Allan Hansen, 2011. "Relating performative and ostensive management accounting research," Qualitative Research in Accounting & Management, Emerald Group Publishing Limited, vol. 8(2), pages 108-138, June.
    19. Greve, Jan & Ax, Christian & Bedford, David S. & Bednarek, Piotr & Brühl, Rolf & Dergård, Johan & Ditillo, Angelo & Dossi, Andrea & Gosselin, Maurice & Hoozée, Sophie & Israelsen, Poul & Janschek, Ott, 2017. "The impact of society on management control systems," Scandinavian Journal of Management, Elsevier, vol. 33(4), pages 253-266.
    20. Cools, Martine & Emmanuel, Clive & Jorissen, Ann, 2008. "Management control in the transfer pricing tax compliant multinational enterprise," Accounting, Organizations and Society, Elsevier, vol. 33(6), pages 603-628, August.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ems:eureri:6891. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: RePub The email address of this maintainer does not seem to be valid anymore. Please ask RePub to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/erimanl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.