Practice Variation in Public Sector Internal Auditing: An Institutional Analysis

Abstract

This article aims to analyze the rise of practice variations in public sector internal auditing (IA), giving special attention to the role of agents’ embeddedness in multiple institutional arrangements. IA's trends of development and the characteristics of the public sector context, in fact, make IA inherently subject to multiple institutional forces that interact with the system of values and beliefs of individual internal auditors. The empirical analysis, which relies on case study methodology, highlights the inherent tensions associated with the changing role of IA and shows how different types of IA developed in three case settings, shaped by the agents’ embeddedness in different institutional fields. This article provides a more comprehensive approach to the study of IA adoption and development in public sector organizations than previous literature, and it highlights the relevance of the interplay between actors’ contemporary embeddedness in professional systems and the focal social system as a relevant source of practice variation. In this respect, the case of IA can contribute to previous studies of practice variation in the field of management accounting, shedding some light on the types of tensions that emerge when persons with mixed professional identities are involved in a field.

Acknowledgments

The authors thank the Associate Editor, Prof. Andrea Mennicken, and two anonymous reviewers for their helpful comments on earlier versions of this article.

Notes

¹In this article, we refer to generally accepted definitions of different types of internal auditing services: financial auditing refers to the evaluation of internal accounting controls, financial information, and related reports; compliance auditing refers to the evaluation of adherence to policies, plans, procedures, laws, regulations, contracts, or other requirements; operational/performance auditing refers to the evaluation of operational processes and related internal controls aimed at ensuring the efficiency and effectiveness of business operations.

²For an analysis of new public management (NPM) trends in the Italian context see also Panozzo (2000).

³In 2013, CIVIT was replaced again by Autorità Nazionale AntiCorruzione e per la valutazione e la trasparenza delle amministrazioni pubbliche (ANAC).

⁴The Operational Programme is a document approved by the Commission, in which the entity defines the objectives, the sets of priorities, and the multi-year activities to be performed. It is the reference document for implementation of co-funded projects.