Internal Audit Stigma

Let’s face it, we all care about what others think of us. Unfortunately, sometimes those thoughts get in the way. A new study from Portland State University examines this perception of the views of others on the work performed by internal auditors. 

Associate accounting professor Joleen Kremin and colleagues published the study “Internal Audit Stigma Impairs Internal Audit Outcomes” in Corporate Ownership & Control. Surveying internal auditors from a variety of sectors and in the US and Europe, the researchers found that when auditors are aware of a stigma about internal audits, they also report less ability to add value to the organization, less influence within the organization, more resistance from others to implement recommendations and more pressure to change audit findings.   This study confirms that significant, even educated professionals experience stigma, and the stigma negatively impacts their work. 

“We all want to be able to say that we don’t care about the naysayers or people who don’t like us. The truth is that those perceptions hurt more than just the stigmatized. The mission and health of the organization are threatened when internal auditors are stigmatized.”

According to Kremin, this research highlights the importance of top executives creating an environment of respect and appreciation for the work of the internal audit function. 

This study surveyed Chief Audit Executives (CAE) in the US from the public sector and private from Europe (specifically Germany, Austria, and Switzerland).  Interestingly the CAEs from Europe reported feeling less stigmatized than the US CAEs. 

Decades of research surrounding the value proposition of internal audit functions taut that the benefit to corporate governance is significant. Benefits range from improved financial performance, improved risk management, reduction in fraud and earnings management, improvement to internal controls, lowering external audit fees, to using technology to increase efficiency and effectiveness.

However, according to Kremin, “Organizations are threatening their own success by not viewing internal audit as an integrated and necessary function of the entity. And for internal auditors, this is a case of being stuck between a rock and a hard place. They can’t do their job well until management trusts that they can do their job.”