The Impact of Management Influence and Incentive Based Compensation on Internal Auditors' Objectivity: A Cross Cultural Study

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Stewart, Jenny

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Ng, Chew

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The International Standards for the Professional Practice of Internal Auditing (Standards) highlight objectivity as an important criterion for internal auditors in performing their assurance and consulting activities. The Institute of Internal Auditors (IIA) recognises seven threats to internal auditors’ objectivity – (i) economic interest, (ii) self-review, (iii) social pressure, (iv) personal relationship, (v) familiarity, (vi) cognitive biases, and (vii) cultural, racial and gender biases. The primary objective of this study is to provide empirical evidence in terms of economic interest, social pressure and cultural threats. Specifically, it examines the impact on internal audit objectivity of two forms of management influence and two types of incentive based compensation (IBC). Management influence is explored from the perspectives of (i) using internal audit as a managerial training ground and (ii) the relationship between internal auditors and the audit committee. The two types of IBC are cash bonuses based on (i) company performance and (ii) individual performance. Given that prior studies also suggest that culture may be a factor for the differing results between Western and non-Western studies, the study also investigates whether the cultural background of internal auditors affects their objectivity in both management influence and IBC contexts. Australia and Malaysia are the two cultures examined as these nations differ on cultural dimensions such as power distance and individualism/collectivism. A secondary objective of the study is to gather descriptive evidence on internal audit practice in the two countries with respect to using internal audit as a training ground, relationships with the audit committee and the payment of IBC to internal auditors.

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Thesis (PhD Doctorate)

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Doctor of Philosophy (PhD)


Griffith Business School

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The author owns the copyright in this thesis, unless stated otherwise.

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Internal auditing standards

Instute of Internal Auditors (IIA)

Internal auditing, Malaysia

Internal auditing, Australia

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