Correlates of the internal audit function’s use of data analytics in the big data era: Global evidence

Abstract

In the big data era, internal audit functions (IAFs) should innovate their techniques so as to add value to their organizations. The use of data analytics (DA) increases IAFs’ ability to extract value from big data, helping IAFs to enhance their activities’ efficiency and effectiveness. We use responses from 1,681 Chief Audit Executives (CAEs) in 82 countries to investigate the correlates of IAFs’ DA usage. From the literature, we identify five main variables expected to be associated with IAFs’ DA use. We find a positive and significant association between DA use and (i) the IAF reporting to the audit committee (AC) and (ii) CAEs’ ability to build positive relationships with managers. These findings suggest that IAF independence and CAEs’ soft skills are important to innovate IAF techniques favoring DA use. We also find a positive association between DA use and IAFs’ involvement in the assurance of enterprise risk management, fraud detection, and IT risk audit activities. Our findings contribute to the internal auditing and DA literatures, and should be of interest to CAEs, ACs, corporate boards, and professional associations.