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Do Management Training Grounds Reduce Internal Auditor Objectivity and External Auditor Reliance? The Influence of Family Firms

Journal of business ethics, 2021-09, Vol.173 (1), p.205-227 [Peer Reviewed Journal]

Springer Nature B.V. 2020 ;Springer Nature B.V. 2020. ;ISSN: 0167-4544 ;EISSN: 1573-0697 ;DOI: 10.1007/s10551-020-04507-3

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  • Title:
    Do Management Training Grounds Reduce Internal Auditor Objectivity and External Auditor Reliance? The Influence of Family Firms
  • Author: Suh, Ikseon ; Masli, Adi ; Sweeney, John T.
  • Subjects: Auditors ; Audits ; Business and Management ; Business Ethics ; Companies ; Education ; Ethics ; Family owned businesses ; Family roles ; Governance ; Internal auditors ; Management ; Management development programmes ; Management training ; Objectivity ; Original Paper ; Philosophy ; Quality of Life Research ; Reliance ; Training
  • Is Part Of: Journal of business ethics, 2021-09, Vol.173 (1), p.205-227
  • Description: We test competing theoretical perspectives of family firm governance in two separate studies by investigating whether family firm control moderates the detrimental effect of a management training ground (MTG) on internal auditor objectivity and on the external auditor’s decision to rely on the internal audit function (IAF). In Study 1, we assess the objectivity of internal auditors working under an IAF that serves as a MTG or non-MTG and located in a family or non-family firm. A key result of Study 1 is the mitigating role of family firm control, as we find that the objectivity of internal auditors is reduced when the IAF serves as a MTG but only in non-family firms. When the IAF is located in a family-controlled firm, the objectivity of internal auditors is unaffected by the opportunity to be promoted into management positions outside of the IAF. In Study 2, we utilize a controlled laboratory experiment with experienced Big 4 auditors as participants and examine their decision to rely on an IAF when it serves as a MTG. Our analyses indicate that external auditors reduce their reliance on non-family firm IAFs that are also MTGs and their decision is fully mediated by the perceived objectivity of non-family firm internal auditors. In contrast, external auditors’ reliance on family firm IAFs and their perceptions of internal auditor objectivity are unaffected under a MTG regime. The results of Studies 1 and 2 provide support for the alignment perspective of family firms.
  • Publisher: Dordrecht: Springer Netherlands
  • Language: English
  • Identifier: ISSN: 0167-4544
    EISSN: 1573-0697
    DOI: 10.1007/s10551-020-04507-3
  • Source: ProQuest One Psychology
    ProQuest Central
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