Good Cop or Bad Cop: What Drives the Self-Image of Internal Audit Functions?

Abstract

The internal audit activity’s stereotype as a “corporate watchdog” has dominated practice for decades despite efforts to shed this image in favor of a trusted advisor role in which it partners with management to protect and add value to the organization. Using a sample of 256 Chief Audit Executives, we find that a mix of professional and interpersonal characteristics representative of the components of trustworthiness (ability, benevolence, and integrity) are associated with the perception of the internal audit activity as a trusted advisor to the organization. Additionally, we find evidence that internal audit activities perceived as trusted advisors provide observable benefits to the organization in the form of audit effectiveness, efficiency, and usability. Our findings contribute to the growing academic knowledge of internal auditing and equip practitioners with an operationalizable set of incentives and goals for shifting the perception of their internal audit activity to that of a trusted advisor.