Gauging the Internal Auditor's Responsibility: The Case of a Tender Offer.

Current Institute of Internal Auditors (IIA) Standards for the Professional Practice of Internal Auditing clearly identify the organization as the chief overall beneficiary of the internal auditor's work. Such a broad definition allows for significant differences in internal auditors' perceived responsibilities to competing "organization" beneficiaries. Ambiguity among internal auditors as to the chief beneficiary of their work could result in problems for internal auditors, particularly when potential beneficiaries have conflicting interests. In this study, the case of a tender offer was presented to practicing internal auditors to determine if they would reach a consensus on the principal beneficiary when making a tender offer recommendation to management. An instrument was developed asking internal auditors to make tender offer recommendations to management on an 8-point Likert scale. The instrument informed the subject how each of four different interest groups (shareholders, the going concern, employees, and management) would stand to benefit from the tender offer and asked the respondent to make a recommendation to management based on how these different interest groups benefitted. The instrument was sent at random to 805 practicing internal auditors who were IIA members. A total of 113 were returned which were usable for this study. The participants in this study exhibited allegiance to each of the four interest groups, with no one group dominating the other in importance. Thus, there was no consensus as to which group the auditors should place in the priority position. This finding indicates that existing standards result in considerable ambiguity in defining the role of internal auditors. These results demonstrate the need for the IIA to provide additional standards for this and other areas of internal audit consultation in order to prevent internal auditors from being subjected to pressure to adopt a perspective of the organization which is consistent with the perspective of a specific organizational interest group. These results are limited to the extent that tender offers are a very unique case, the results of which may not be applicable to other cases demanding the expertise of the internal auditor.