Keywords

internal audit, emerging technology, innovation, relational embeddedness, social network theory

Abstract

Organizations use innovations to adapt, grow their business, and differentiate themselves from their competitors. However, innovations can introduce new risks to the organization that the internal audit function (IAF) should address. We interview and survey internal auditors about how they respond to innovations, such as the use of emerging technologies, adopted by their organizations. We find that social network theory provides a useful lens through which to interpret our interview results and to guide our survey development and analysis. In particular, we find that the embeddedness of the internal auditors with management, but not with the audit committee, is a key factor in internal auditors’ ability to prepare for and effectively respond to innovation. Furthermore, we find that IAFs that are better able to prepare for innovations are more likely to increase staff and improve the mix of staff skills to effectively respond to innovation. Also, when organizations rely on outsourced IAFs, we find that those IAFs are less prepared for, but respond more effectively to innovations. These findings reveal that social network factors are important for internal auditors to develop embeddedness and to be prepared for and effective in their response to innovation in their organizations.

Original Publication Citation

Christ, Margaret H. and Eulerich, Anna Katharina and Eulerich, Marc and Wood, David A., Internal Auditors’ Role in Organizational Innovation: A Social Network Perspective (October 3, 2022). Available at SSRN: https://ssrn.com/abstract=4236769 or http://dx.doi.org/10.2139/ssrn.4236769

Document Type

Peer-Reviewed Article

Publication Date

2022

Publisher

SSRN

Language

English

College

Marriott School of Business

Department

Accountancy

University Standing at Time of Publication

Full Professor

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Accounting Commons

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