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1. Introduction
A decade ago, Bailey et al. (2003) presented research opportunities in internal audit (IA) that helped to advance IA by inspiring a growing academic IA community. Ten years on, this paper provides an overview of what the relevant academic literature says about IA effectiveness. Empirical studies based on internal auditors' self-assessments and empirical studies based on other stakeholders' perspectives ("outside-in") are reviewed through an "effectiveness lens". After identifying common themes, we synthesize the main threads into a model that comprises macro and micro factors that influence IA effectiveness. We then present an updated set of IA research opportunities. These directions for future research constitute the main value of this paper.
Developing and maintaining organizational relevance are key challenges to any support function including IA. Understanding what effectiveness and added value mean, and appreciating the fundamental role of internal auditors, i.e. employees who are not connected directly to the profit and loss account, is not an easy task (Nobel, 2010). Presently, the perceived value and professional image of IA among stakeholders outside the IA community is not where IA professionals and the IA profession would wish it to be. When taking a closer look at reality (Anderson, 2009; KPMG, 2009; PWC, 2010; Ernst & Young, 2012; Lenz and Sarens, 2012; PWC, 2013), a certain degree of disappointment among IA stakeholders in regard to the role and relevance of IA before, in and after the last financial crisis that started in 2007 cannot be ignored.
Anderson (2009, p. 26) summarizes:
Non-executive directors and Audit Committee chairmen are often surveyed and respond that: Heads of internal audit are not up to the job, internal audit lacks adequate independence [...] They have not properly defined the role that they wish internal audit to fulfil.
KPMG (2009) concludes that only about one quarter of board and audit committee members have the full knowledge of IA's activities and are very confident that the company's IA function (IAF) delivers the value to the organization that it should. In the vast majority of cases, IA activities and its value remain somewhat obscure. A study by Ernst & Young (2012, p. 1) shows that 80 per cent of IAFs have potential for improvement.
PWC (2010) suggests "internal audit must seize opportunities...