Identify the roles performed by contemporary internal auditors in an organization

As a result of the financial scandals of the early 2000s, the regulatory frameworks of governance and auditing in North America have undergone major reforms. Current regulations generally recommend sound governance practices aimed for the most part at providing reassurance to stakeholders (particularly investors and creditors) about the quality of organizational governance. As a result of various reforms in this area, public sector organizations in Canada have been required to introduce an internal audit function (IAF). The result has not only been a change in the general context governing internal auditing and other governance watchdogs (such as the audit committee and external auditors). There has also been a marked increase in the range of duties and responsibilities performed by actors in the field (Rezaee, 2005). Current governance regulations are not designed to regulate the activities of internal auditors (Archambeault et al., 2008, Holt and DeZoort, 2009, Messier, 2009). As a result, the governance role of internal auditors and their relations with audit committee members (AC members) remain largely nebulous issues (Beasley et al., 2009, Davies, 2009, Gendron and Bedard, 2006, Mat Zain and Subramaniam, 2007, Sarens et al., 2009b), particularly in the public sector (Davies, 2009, p. 42).

Although very little is known about the implications of the reform of organizational governance in the private sector, a vast governance reform of the Quebec public sector designed as part of the state modernization project was launched in 2004, before becoming a reality in 2006. As is often the case with new public management reforms, the spirit of the governance reform of the Quebec public sector was largely inspired by similar reforms in the private sector.

In recent years, financial scandals have revealed the insufficiency of control systems and the lack of transparency on the part of certain organizations. In the wake of this situation, new management trends have emerged, including in the public sector, and internal audit can play a key role in taking these changes into account.

(Auditor General of Quebec, 2005, Vol. 1, Art. 4.02)

Despite being seen as a governance watchdog, the usefulness of internal auditing has yet to be demonstrated, since we do not know what role the IAF actually performs (Archambeault et al., 2008). Very little is known about the roles performed by internal auditors and about how internal auditors perform their duties. Public administration in Quebec provides a useful context for examining the roles performed by internal auditors working in public sector governance since the Quebec government justified the NPM reform by arguing that the IAF (viewed as a governance watchdog) will ensure greater transparency in public management and greater accountability among top managers. The plan for the modernization of the Quebec state is based on the assumption that the IAF is one of the key mechanisms for promoting ‘respect for transparency, ethics and good governance values, the improvement of the quality of the services provided to citizens and the disciplined, diligent and profitable use of public funds’ (Plan de modernisation de l’État québécois 2004–2007, section 2.2.4, p. 14). In this document, the Gouvernment of Quebec made the commitment to reinforce internal auditing in order ‘to guarantee its independence and preserve its credibility’ (Plan de modernisation de l’État québécois, 2004–2007, section 2.2.4, p. 14). The aim of the government was to reassure citizens on the sound management of the state in the wake of the financial scandals that affected Canada and the United States in the early 2000s. An analysis of the roles performed by public sector internal auditors will help to improve our understanding of the extent to which the trust seemingly granted to internal auditing by regulatory bodies and stakeholders is in fact justified. Therefore, by focusing on a governance reform occurred in the public sector, this paper contributes to this special issue in Public Sector Accountability and Corporate Governance of Critical Perspectives on Accounting (see Funnell and Wade, 2012, English, 2013, Habersam et al., 2013, Mutiganda, 2013, Saliterer and Korac, 2013, Vinnari and Nasi, 2013 for other critical papers on this particular research theme). More specifically, the purpose of the paper is to examine the extent to which the roles performed by internal auditors are congruent with regulatory expectations by addressing the following question: what roles do internal auditors play in the public sector, and what are the organizational, professional and individual factors that shape these roles?

To answer these questions, a field study was conducted in 13 public sector organizations in Quebec. 42 in-depth interviews were conducted among experienced internal auditors working in these organizations. The interviews were semi-structured and focused on interviewees’ personal conception of their roles, the activities and assignments they perform as internal auditors, and the strategies they use to cope with role conflicts.

Based on data analysis using role theory (Katz and Kahn, 1978) and the ‘model of coping with role conflict’ developed by Hall (1972), it became apparent that a new typology of the roles performed by internal auditors was required. Internal auditors perform two key roles: a protector role and a helper role. First, internal auditors act as protectors to serve as a shield protecting the top manager, AC members and managers against possible obstacles or pitfalls. In the event of an inter-sender role conflict, the protection provided by internal auditors may favor the top manager at the expense of AC members and managers. The protection provided by internal auditors may also extend to the entire organization in the event that the organization is threatened by an external body such as the Auditor General of Quebec or by public opinion. Internal auditors also act as keepers of the secrets of the top manager against AC members and as keepers of the public secrets of the organization against the oversight body of public administration in Quebec or public opinion. Second, internal auditors also act as helpers. As helpers, internal auditors support organizational performance and provide guidance when a new administrative rule is implemented or a new management strategy or measure is adopted by the organization.

I argue that it is important not to view the IAF as a governance watchdog since the roles performed by internal auditors within the IAF are not based on a commitment to this principle. This argument is important for understanding internal auditing in a governance context and is a serious warning for the relevant regulatory bodies: internal auditing is not viewed as a governance watchdog by internal auditors and, based on the roles performed by IAF professionals, it would appear that the IAF does not fully perform the governance role expected by regulatory bodies. The analysis also indicates that internal auditors have developed a nuanced conception of independence (defined as ‘grey independence’) in order to perform their roles. Therefore, the paper also sheds light on the issue of internal auditor independence.

Section 2 outlines the theoretical framework, while Section 3 presents the methodology. Section 4 presents the results and begins with a broad overview of the current legal and normative environment of internal auditing in the Quebec public sector. Finally, Section 5 discusses the results and concludes the paper.

Role theory and role conflict coping strategies

The conceptual framework of this study is based on role theory (Katz and Kahn, 1978) and the ‘model for coping with role conflict’ (Hall, 1972). In role theory, an individual working in an organization is required to perform a wide range of roles. The roles performed by an individual may or may not be in conflict. The conceptual basis of this research incorporates the ‘model of coping with role conflict’ elaborated by Hall (1972) since Hall's study is generally considered to be a reference in

Methodological design

The paper is based on a field study conducted among internal auditors working in the Quebec public sector. The organizations examined in this study were non-commercial government organizations and state-owned enterprises and ministries. As well as being selected based on their specific status and nature, the organizations examined in this research were also chosen because they have an active IAF. One of the key indicators of internal audit activity is the number of internal auditors working in

Received roles and role behaviors of internal auditors

The analysis of the results begins with abroad overview of the legal and normative environment of internal auditing in the Quebec public sector. The analysis proper begins with an analysis of their conceptions (i.e. received roles) before focusing on the roles effectively performed by internal auditors (i.e. role behaviors) since, as noted in Section 2, the theoretical framework of this study implies that the roles performed by internal auditors are mostly shaped by their personal conception of

Discussion and conclusion

The aim of this paper was to understand how the roles performed by internal auditors impede their watchdog role – a key role that the regulatory bodies and the various stakeholders expect internal auditors to perform in a public sector context. The following research question was addressed: what roles do internal auditors perform in a public sector context, and what are the organizational professional and individual circumstances that shape these roles? A qualitative study based on role theory (

Acknowledgments

This paper is the first extract from my doctoral thesis. I am particularly grateful to the internal auditors who agreed to be interviewed as part of this research. I am also grateful to Danielle Morin, my doctoral supervisor at HEC Montreal, for her support and for her comments on my work. I also wish to thank the members of my Ph.D. committee, Claude Pilote and Louise Côté, and my examiners, Ann Langley and Évelyne Lande, for their comments and suggestions. I am also grateful to the three

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