Internal auditor independence as a situated practice: four archetypes

Abstract

PurposeThis study aims to understand independence in internal auditing by investigating how internal auditor independence is constructed when analysed in its corporate governance context.Design/methodology/approachA critical discourse analysis (CDA) of the corporate governance reports of Swedish large stock market listed non-financial companies, for three consecutive years, is undertaken, using a theoretical lens of organisational embeddedness and operational coupling to understand independence as a situated practice.FindingsThe study develops four archetypes of internal auditor independence – autarchic, instrumental, symbiotic and subservient – and discusses each archetype's implications for independence, related to tripartite relations with management and the audit committee, regarding who has the mandate to direct work and how the work is done. It finds that internal auditors always have a capacity to be independent. Although they are not independent in relation to agents in the subservient archetype, they are independent of those down the organisational chain of command, suggesting independence is both situational and relational.Research limitations/implicationsThe analysis contributes a novel approach to the literature and develops a conception of independence using the dimensions of embeddedness and coupling. The archetypes offer an analytical framework for future studies on independence.Practical implicationsInternal auditors may understand their practice differently through the archetypes that result from this study.Social implicationsInternal auditors' power relations within corporate governance further an understanding of the pressures on internal auditors and their role.Originality/valueThis study contributes new knowledge on the situatedness of independence by showing how internal auditors are embedded and coupled helps build their independence.