Are Internal Audits Associated with Reductions in Perceived Risk?

What is it about?

This paper examines an important, but under-researched group, internal auditors. We expand prior internal audit research to examine how internal audit is associated with reductions in perceived risk. We use a strong, quasi-experimental design by surveying matched units within the same company- a unit that recently received an internal audit and a unit that did not. Furthermore, we supplement this data collection with a larger sample of CAE responses. We find that managers of audited units perceive greater declines in risk compared to managers of non-audited units. This effect is stronger when the internal audit has had a quality assurance review and is used as a management training ground. We believe this paper will help move the internal audit research literature forward. We are hopeful to have it published in Auditing: A Journal of Practice & Theory.

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