Hany Elbardan

The dilemma of internal audit function adaptation: The impact of ERP and corporate governance pressures

Purpose – The purpose of this paper is to provide a conceptual framework that helps to investigate how the internal audit function (IAF) responds to both the introduction of the control logic of Enterprise Resource Planning (ERP) systems, and corporate governance’s (CG) institutional pressures. Furthermore, the paper aims to articulate the concurrence between the external pressures of CG and internal control logic of ERP systems. Design/methodology/approach – The paper presents a review of the normative literature pertaining to the increase in significance of CG in the light of the worldwide economic crisis. The paper highlights a literature gap related to the lack of studies focusing on the impact of ERP systems implementation on the IAF practices. Findings – The authors articulate institutional theory to formulate a conceptual framework that explains the reciprocal interplay between the macro external governance pressures, micro internal institutional logics inscribed in the ERP systems and their effect...

Enterprise Resource Planning Systems Introduction and Internal Auditing Legitimacy: An Institutional Analysis

ABSTRACT In this article, the authors examine how the internal audit function maintains its legitimacy when enterprise resource planning systems are introduced. This work centers on an in-depth case study of a multinational bank and finds that enterprise resource planning systems impose an institutional logic of control based on interlinked assumptions. These assumptions motivate changes in the practice and structure of the internal audit function to become an integrated and comprehensive function to maintain its legitimacy.

Investigating the associations between executive compensation and firm performance: Agency theory or tournament theory

While there have been extensive empirical investigations of pay-performance sensitivity, the perspective of performance-pay has received less attention to date. While executive compensation is sensitive to firm performance, firm performance is also likely to be affected by executive compensation. Adopting multiple theoretical perspectives, the purpose of this paper is to examine whether executive compensation has a greater influence on firm performance or whether the latter has a greater influence on compensation.,Using data from a five-year period (2010-2014) for Financial Times and Stock Exchange 350 companies, the authors employ a set of simultaneous equation modelling to jointly investigate, after accounting for endogeneity problem, the mutual association of executive compensation and firm performance by employing four control variables (board size, non-executive directors, leverage and boardroom ownership).,The authors find strong evidence for the greater influence of executive compensation on firm performance than the pay-performance framework. This finding supports the tournament theory compared with the agency perspective.,Inevitably, there are limitations in a wide-ranging study of this nature that could be addressed in future research. As any empirical study utilising company data, there may be concerns to the effect of survivorship bias and the manner in which companies have reorganised, if there is any, themselves during the period under examination. There are also issues as to missing data, some measures relating to both executive compensation and corporate governance are not provided by the BoardEx database.,The study results provide evidence that using the tournament perspective by remuneration committees as a guide for determining executive compensation helps in achieving better performance. This helps in developing appropriate mechanisms for setting executive remuneration.,This paper combines an empirical investigation of the frameworks of pay-performance and performance-pay and develops a system of six simultaneous equations to examine the associations between executive compensation and firm performance.

An Interpretive Approach for Data Collection and Analysis

This chapter has explained the research design and the methods used in the book. The researcher explicitly articulated the nature of the research problem and determined the ontological stance which led to the epistemological and methodological stances. The study is designed under an interpretive paradigm, which took the form of a multiple-case study and the analysis of a considerable amount of primary and secondary qualitative data. This enabled the researchers to interact closely with the participants and to explore issues in depth. Researchers should be aware that qualitative methodology is more applicable to develop an in-depth understanding of contextual-related problems. Qualitative design is more sensitive to context and flexible to embracing emerging new themes. The richness of data produced through using multiple-case studies helped better to investigate the phenomenon of the IAF adaptation as a response to the ERP systems implementation. The use of case studies provided greater internal and external validity than other quantitative methods would have done. Triangulation of methods was achieved through the use of semi-structured interviews, focus groups and non-participant observation. The qualitative content analysis was found to be the appropriate technique for analysing the data. A qualitative content analysis technique was deemed more desirable for this study as it preserves as much as possible the deep meaning of the qualitative data. Furthermore, it enabled the interpretation of all transcribed interviews, documents and notes of observation and relating each one to the whole in order to gain a holistic picture of the phenomenon. The trustworthiness strategies which were used in this research and the related procedures and techniques were found to be interlinked that fostered the coherence and validity of the research.

The Legitimacy of Internal Auditing Practice

This book draws on institutional theory to interpret IAF changes. It is used to interpret results as it examines how institutions influence organisational actors and provides a mean of analysis. The internal audit change process is viewed as a response to the new ERP system which constrains activities and shapes the cognitive processes of internal auditors, and corporate governance’s forces that influence specific configuration of the IAF. Between these two main aspects is the process of resolution of institutional misalignments through the strategic response to institutional pressures. While the majority of researchers work from a macro- or a micro-social perspective, the two may be best understood as complementary processes. ERP technologies exert pressures on the social organisation of work. Moreover, human actions are constrained by forces beyond the control of actors and often outside their awareness. Therefore, a comprehensive model of the relation between IT and organisations would address micro- and macro-forces at the same time.

Findings from Case Study 3—National Bank (NB)

These chapters presented the analysis and descriptions of each of the four cases of the empirical fieldwork answering the research questions. Prior to introducing the analysis of each case study, an overview of the organisation, the interviewees’ positions and analysis of documents were discussed. Two cases were conducted in international organisations, where one is a bank and the other is a manufacturing company. The other two cases were conducted in national organisations, where one is a bank and the other is a manufacturing company. The within-case analysis was used to investigate each case study independently to get familiar with each of the studied organisations’ particular experience. The analysis showed that each organisation provided different views of the phenomena under investigation. Each organisation responded differently; while there were some similarities between the international organisations and between the national ones, there were more similarities between organisations from the same sector. The proposed conceptual framework is proven to be valid in interpreting the IAF adaptations. The structure of the data analysis presentation was based on the main constructs of the conceptual research framework. To offer a rigorous examination of the findings, the next chapter offers a cross-case comparison, analysis and discussion to identify similarities and differences on the issues and to extract the most significant patterns, key themes and concepts.

Findings from Case Study 4—The International Bank (IB)

These chapters presented the analysis and descriptions of each of the four cases of the empirical fieldwork answering the research questions. Prior to introducing the analysis of each case study, an overview of the organisation, the interviewees’ positions and analysis of documents were discussed. Two cases were conducted in international organisations, where one is a bank and the other is a manufacturing company. The other two cases were conducted in national organisations, where one is a bank and the other is a manufacturing company. The within-case analysis was used to investigate each case study independently to get familiar with each of the studied organisations’ particular experience. The analysis showed that each organisation provided different views of the phenomena under investigation. Each organisation responded differently; while there were some similarities between the international organisations and between the national ones, there were more similarities between organisations from the same sector. The proposed conceptual framework is proven to be valid in interpreting the IAF adaptations. The structure of the data analysis presentation was based on the main constructs of the conceptual research framework. To offer a rigorous examination of the findings, the next chapter offers a cross-case comparison, analysis and discussion to identify similarities and differences on the issues and to extract the most significant patterns, key themes and concepts.

Findings from Case Study 2—the National Company (NC)

These chapters presented the analysis and descriptions of each of the four cases of the empirical fieldwork answering the research questions. Prior to introducing the analysis of each case study, an overview of the organisation, the interviewees’ positions and analysis of documents were discussed. Two cases were conducted in international organisations, where one is a bank and the other is a manufacturing company. The other two cases were conducted in national organisations, where one is a bank and the other is a manufacturing company. The within-case analysis was used to investigate each case study independently to get familiar with each of the studied organisations’ particular experience. The analysis showed that each organisation provided different views of the phenomena under investigation. Each organisation responded differently; while there were some similarities between the international organisations and between the national ones, there were more similarities between organisations from the same sector. The proposed conceptual framework is proven to be valid in interpreting the IAF adaptations. The structure of the data analysis presentation was based on the main constructs of the conceptual research framework. To offer a rigorous examination of the findings, the next chapter offers a cross-case comparison, analysis and discussion to identify similarities and differences on the issues and to extract the most significant patterns, key themes and concepts.

Findings from Case Study 1—The International Company (IC)

These chapters presented the analysis and descriptions of each of the four cases of the empirical fieldwork answering the research questions. Prior to introducing the analysis of each case study, an overview of the organisation, the interviewees’ positions and analysis of documents were discussed. Two cases were conducted in international organisations, where one is a bank and the other is a manufacturing company. The other two cases were conducted in national organisations, where one is a bank and the other is a manufacturing company. The within-case analysis was used to investigate each case study independently to get familiar with each of the studied organisations’ particular experience. The analysis showed that each organisation provided different views of the phenomena under investigation. Each organisation responded differently; while there were some similarities between the international organisations and between the national ones, there were more similarities between organisations from the same sector. The proposed conceptual framework is proven to be valid in interpreting the IAF adaptations. The structure of the data analysis presentation was based on the main constructs of the conceptual research framework. To offer a rigorous examination of the findings, the next chapter offers a cross-case comparison, analysis and discussion to identify similarities and differences on the issues and to extract the most significant patterns, key themes and concepts.

Cross-Case Analysis and Discussion

The findings of the cross-case analysis highlight similarities among the four case study companies; however, there were some differences. In this study, the specific feature adopted is the strategic responses (Oliver in Strategic responses to institutional processes 16 145–179, 1991) of IAF and organisations to the ERP systems, considering that IAFs are subject to rules and regulations to which they tend to conform so as to ensure their legitimacy. Institutional theory (DiMaggio and Powell in The iron cage revisited: institutional isomorphism and collective rationality, Chicago, University of Chicago, 506–542, 1991) is adopted to explain and understand the dynamics of the change in the IAF. The focus therefore was on explaining and understanding how the change in the IAF was shaped by both macro- and micro-forces.Some conclusion can be drawn from these case studies. Internal auditors look upon current technological and governance developments as a golden opportunity to raise the level of expectations about what they can offer and add in terms of value. Nevertheless, they have to be equal to the task. They need to widen their own horizons, keep abreast of rapidly changing technologies, regulations and legislation. The IAF needs to adapt as rapidly as the working environment, or it will lose its legitimacy. Recognising the need to change is easier; implementing strategic change is so far the greater challenge.