An Examination of Whether Incentive Compensation and Stock Ownership Affect Internal Auditor Objectivity

摘要: Recent events in the corporate sector have increased prominence of internal auditing. The bankruptcies, financial reporting irregularities, and fraudulent activities that took place Enron, WorldCom other firms greatly scrutiny on monitoring. Especially light external audit failures associated with these events, audit's role monitoring is sure to be expanded. While auditors are concerned primarily reporting, typically do not spend most their time dealing reporting. A survey by Barrett et al. (1985) found that, average, 32 percent audits. Interestingly, though, a KPMG Peat Marwick (1999) were more likely discover fraud than auditors. Treadway Commission points out, however, auditors' full potential "often realized, part because statements at consolidated level often limited ... concentrate review controls division, subsidiary, or business component level, rather level. Independent public accountants, hand, generally responsible for examination level" (1987: 39). In recent years, received incentive compensation form bonuses tied overall company performance (Stapp, 1991; DeZoort al., 2000). Internal seen as adding value firm consultants areas such controls, effectiveness efficiency operations, compliance organizational policies procedures. Hence, many organizations believe should rewarded successes firm. Moreover, rewarding will increase productivity well improve morale motivation (DeZoort According (Stewart, 1997), 51 auditing department heads incentive-based compensation. 179 auditors, (2000) report almost half respondents indicated was available organizations. Of those availability compensation, 70 this based performance. majority measures related reported earnings, net income, earnings per share, return equity, assets. also sometimes own stock companies which they employed (Simpson, 1999). fact, study reports 23 who awarded options. (1) These types situations could raise concerns about conflicts interest (Heaston 1993). For both situations, would benefit when company's high. Whether price, might tend overlook management actions overstate earnings. Indeed, 56 felt potentially impairs auditor objectivity independence. Also, since higher affect price positive manner, compaW Objectivity key element an function. Panel Audit Effectiveness asserted "internal must objective respect activity being audited" (2000: 62). …