Some of the material in is restricted to members of the community. By logging in, you may be able to gain additional access to certain collections or items. If you have questions about access or logging in, please use the form on the Contact Page.
The purpose of internal audit, according to the Institute of Internal Auditors (IIA), is to evaluate and improve the effectiveness of an organization's risk management, control, and governance processes. Weaknesses in any of these areas pose a threat to the organization's legitimacy with its stakeholders. Many organizations worldwide are required to adopt internal audit. However, other institutions, like American municipalities, are not. A municipality's decision to adopt internal audit is the responsibility of local leadership. Current economic pressures require that leaders consider a cost/benefit analysis before making a decision. Defining the costs of internal audit is relatively easy, but measuring its benefits is more elusive. This research examines whether the results of external audits may be used as an objective measure of internal audit benefits. The literature on internal audit quality does not identify externally derived measures that are independent of the function. This dissertation fills this gap. A logit model is used with data from 162 Florida cities to determine whether the presence of an internal audit reduces the likelihood of a city receiving findings in the independent external annual audit of their financial reports. The results are evaluated using legitimacy theory. Examining internal audit through this framework explains the difficulty in measuring the effectiveness of internal audit. The results indicate that objectively defining the benefits of internal audit may not be possible. They indicate instead that internal audit benefits, while real, may largely be abstract or symbolic. The internal audit role is best viewed as deterrent in nature. This poses challenges to those attempting to identify objectively measurable benefits. The implication is that municipal leadership should seek to understand the conceptual nature of the internal audit function before making resource allocation decisions. The loss of benefits from cuts to or elimination of the internal audit function may not be evident until sometime after making those funding decisions. The results of this research demonstrate the importance of internal audit, as well as the need for more investigation to further understand the nature of its effects.
Audit, Governance, Internal Audit, Legitimacy, Local Government, Municipal
Date of Defense
June 18, 2013.
A Dissertation submitted to the Reubin O' D. Askew School of Public Administration and Policy in partial fulfillment of the requirements for the degree of Doctor of Philosophy.
Includes bibliographical references.
James Bowman, Professor Directing Dissertation; Gerald Ferris, University Representative; Lance deHaven-Smith, Committee Member; Kaifeng Yang, Committee Member; Brad Gomez, Committee Member.
Florida State University
Use and Reproduction
This Item is protected by copyright and/or related rights. You are free to use this Item in any way that is permitted by the copyright and related rights legislation that applies to your use. For other uses you need to obtain permission from the rights-holder(s). The copyright in theses and dissertations completed at Florida State University is held by the students who author them.