INFLUENCE OF LEADERSHIP STYLE AND SUBORDINATION ON THE JUDGMENT AND DECISION MAKING OF THE INTERNAL AUDITOR
DOI:
https://doi.org/10.17524/repec.v16i1.2936Keywords:
Internal audit, Subordination, Leadership style, Decision making, Recommendations ReportAbstract
OBJECTIVE: To analyze the effect of leadership style and reporting on the internal auditor's judgment and decision-making. METHODOLOGY: Descriptive, quasi-experimental and quantitative. The experimental case was based on the decision of the internal auditor to demonstrate the level of reporting of a report of recommendations, two styles of leadership of the financial director were presented to the participants, these being the autocratic and the democratic style, as well as different opinions of the chief financial officer on irregularities, to characterize the subordination. RESULTS: The results showed that auditors tend to report to a lesser degree when the superior is an autocratic leader and questions or rejects the report. In addition, the time differences for auditors to make the reporting decision was determined by the leadership style, mainly autocratic for longer decision-making time. CONTRIBUTIONS: Discussions about the effect of the internal auditor's leadership and subordination in their judgment are contributions, as the financial statements reflect the quality of the internal audit. In this way, users can be alerted that the exposure of risks to irregularities may be close to the company and, at times, may even come from the organization itself.References
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Carpenter, T. D. & Reimers, J. L. (2013). Professional skepticism: The effects of a partner's influence and the level of fraud indicators on auditors' fraud judgments and actions. Behavioral Research in Accounting, 25(2), 45-69.
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Dezoort, F. T., Houston, R. W. & Hermanson, D. R. (2003). Audit committee member support for proposed audit adjustments: A source credibility perspective. Auditing: A Journal of Practice & Theory, 22(2), 189-205.
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Eisenhardt, K. M. (1989). Agency theory: An assessment and review. Academy of management review, 14(1), 57-74.
Goodwin, J. & Yeo, T. Y. (2001). Two factors affecting internal audit independence and objectivity: Evidence from Singapore. International Journal of Auditing, 5(2), 107-125.
Goulart Júnior, E. & Lipp, M. E. N. (2011). Estilo de liderança e stress: uma pesquisa em escolas estaduais de ensino fundamental. Revista Brasileira de Política e Administração da Educação, 265-283.
Hall, J. A. & Halberstadt, A. G. (1994). “Subordination” and sensitivity to nonverbal cues: A study of married working women. Sex Roles, 31(3-4), 149-165.
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Institute Of Internal Auditors – IIA. (1999). Denition of Internal Auditing. Altamonte Springs, Florida: The Institute of Internal Auditors.
Johnson, E. N., Lowe, D. J. & Reckers, P. MJ. (2016). The influence of mood on subordinates’ ability to resist coercive pressure in public accounting. Contemporary Accounting Research.
Libby, R. & Luft, J. (1993). Determinants of judgment performance in accounting settings: Ability, knowledge, motivation, and environment. Accounting, Organizations and Society, 18(5), 425-450.
Libby, R. (1981). Accounting and human information processing: Theory and applications. Prentice Hall.
Libby, R. (1985). Availability and the generation of hypotheses in analytical review. Journal of Accounting Research, 648-667.
Mustafa, G., Fatima, S., Saleem, S. & Ain, N. U. (2016). An empirical study of internal audit and firm performance: a proposed research framework. International Journal of Information Research and Review, 3(3), 1952-1956.
Peters, J. M. (1993). Decision making, cognitive science and accounting: An overview of the intersection. Accounting, Organizations And Society, 18(5), 383-405.
Pratt, J. & Jiambalvo, J. (1981). Relationships between leader behaviors and audit team performance. Accounting, Organizations and Society, 6(2), 133-142.
Seol, I., Sarkis, J. & Wang, Z. (2017). A cross-cultural comparative study of internal auditor skills: UK vs Korea. Journal of Applied Accounting Research, 18(3), 341-355.
Simon, H. A. (1978). Rationality as process and as product of thought. The American economic review, 68(2), 1-16.
Tamošiūnienė, R. & Savčuk, O. (2007). Internal Audit Subordination Principles for Lithuanian Companies. Engineering Economics, 5(55), 37-43.
Zohar, D. (2002). The effects of leadership dimensions, safety climate, and assigned priorities on minor injuries in work groups. Journal of Organizational Behavior, 23(1), 75-92.
Baron, J. (2004). Normative Models of Judgment and Decision Making. The Blackwell handbook of judgment and decision making.
Braga, R., Sousa, E. P. & Lima Filho, R. N. (2014). Julgamento e Tomada de decisões: Produção científica em Contabilidade no período de 1999 a 2012. Cadernos de Gestão e Empreendedorismo, 2(1), 17-31.
Carpenter, T. D. & Reimers, J. L. (2013). Professional skepticism: The effects of a partner's influence and the level of fraud indicators on auditors' fraud judgments and actions. Behavioral Research in Accounting, 25(2), 45-69.
Cattrysse, J. (2002). Reflections on corporate governance and the role of internal auditor. Antwerpen University, Belgium, 64.
Chun, C. (1997). On the functions and objectives of internal audit and their underlying conditions. Managerial Auditing Journal, 12(4/5), 247-250.
Dezoort, F. T., Houston, R. W. & Hermanson, D. R. (2003). Audit committee member support for proposed audit adjustments: A source credibility perspective. Auditing: A Journal of Practice & Theory, 22(2), 189-205.
Dillard, J. F. (1984). Cognitive science and decision making research in accounting. Accounting, Organizations and Society, 9(3), 343-354.
Eisenhardt, K. M. (1989). Agency theory: An assessment and review. Academy of management review, 14(1), 57-74.
Goodwin, J. & Yeo, T. Y. (2001). Two factors affecting internal audit independence and objectivity: Evidence from Singapore. International Journal of Auditing, 5(2), 107-125.
Goulart Júnior, E. & Lipp, M. E. N. (2011). Estilo de liderança e stress: uma pesquisa em escolas estaduais de ensino fundamental. Revista Brasileira de Política e Administração da Educação, 265-283.
Hall, J. A. & Halberstadt, A. G. (1994). “Subordination” and sensitivity to nonverbal cues: A study of married working women. Sex Roles, 31(3-4), 149-165.
Hastie, R. (2001). Problems for judgment and decision making. Annual review of psychology, 52(1), 653-683.
Institute Of Internal Auditors – IIA. (1999). Denition of Internal Auditing. Altamonte Springs, Florida: The Institute of Internal Auditors.
Johnson, E. N., Lowe, D. J. & Reckers, P. MJ. (2016). The influence of mood on subordinates’ ability to resist coercive pressure in public accounting. Contemporary Accounting Research.
Libby, R. & Luft, J. (1993). Determinants of judgment performance in accounting settings: Ability, knowledge, motivation, and environment. Accounting, Organizations and Society, 18(5), 425-450.
Libby, R. (1981). Accounting and human information processing: Theory and applications. Prentice Hall.
Libby, R. (1985). Availability and the generation of hypotheses in analytical review. Journal of Accounting Research, 648-667.
Mustafa, G., Fatima, S., Saleem, S. & Ain, N. U. (2016). An empirical study of internal audit and firm performance: a proposed research framework. International Journal of Information Research and Review, 3(3), 1952-1956.
Peters, J. M. (1993). Decision making, cognitive science and accounting: An overview of the intersection. Accounting, Organizations And Society, 18(5), 383-405.
Pratt, J. & Jiambalvo, J. (1981). Relationships between leader behaviors and audit team performance. Accounting, Organizations and Society, 6(2), 133-142.
Seol, I., Sarkis, J. & Wang, Z. (2017). A cross-cultural comparative study of internal auditor skills: UK vs Korea. Journal of Applied Accounting Research, 18(3), 341-355.
Simon, H. A. (1978). Rationality as process and as product of thought. The American economic review, 68(2), 1-16.
Tamošiūnienė, R. & Savčuk, O. (2007). Internal Audit Subordination Principles for Lithuanian Companies. Engineering Economics, 5(55), 37-43.
Zohar, D. (2002). The effects of leadership dimensions, safety climate, and assigned priorities on minor injuries in work groups. Journal of Organizational Behavior, 23(1), 75-92.
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Published
2022-04-23
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da Silva, A., Haveroth, J., & Roberto da Cunha , P. . (2022). INFLUENCE OF LEADERSHIP STYLE AND SUBORDINATION ON THE JUDGMENT AND DECISION MAKING OF THE INTERNAL AUDITOR. Journal of Education and Research in Accounting (REPeC), 16(1). https://doi.org/10.17524/repec.v16i1.2936
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