Internal auditor perceptions of corporate governance in Greece after the crisis

Abstract

Purpose This paper aims to present the views of internal auditors in Greece on the relation between the internal audit function (IAF) and corporate governance (CG) after several years of European market integration and in the aftermath of the sovereign debt crisis.

Design/methodology/approach Data are collected using semi-structured interviews with 15 internal auditors working in firms with different size and in different sectors of activity. Interviewees have diverse experience and hold various positions in the firm.

Findings Respondents perceive a strong relation between the IAF and CG. They view the IAF as a preventive tool that provides monitoring and advisory services to firms. They stress the inadequate monitoring role of the board in the IAF, and they support a proactive intervention in the strategic audit planning process. They see a small role for shareholders in CG. They stress the need to focus more on the efficiency and effectiveness considerations in carrying out the IAF. They perceive CG-related information as important for meeting formal compliance needs rather than contributing to decision-making or audit process planning. They believe that audit committees (AC) are weak in implementing effective monitoring, due to inadequate knowledge and expertise of their members. They would like to see a two-way interaction between auditors, AC and management. They would like to enjoy more independence through the implementation of international standards of auditing and statutory regulation.

Research limitations/implications The sample covers 15 auditors from an equivalent number of firms and few sectors of activity. Accessing potential interviewees was difficult due to the perceived conflict between their work requirements and public statement of their views.

Practical implications The proposed method adds to the qualitative analysis literature with regard to measuring and evaluating the personal views of auditors on CG. The study provides empirical evidence of the need to use extensive qualitative research to assess the auditors’ views on the role of CG for their work.

Originality/value The role of internal audit in CG effectiveness is a key policy concern, especially in countries with diverse market environments. Greece is such an environment for it has undergone a major institutional change within a short period and suffered greatly from its sovereign debt crisis. Further, few studies have sought and evaluated the views of internal auditors by using semi-structured interviews. The latter provide details, which other methods cannot capture. The results of this study are especially useful to the competent regulators, for they reflect market perceptions on the importance and effectiveness of CG practices. They are also useful to practitioners to identify potential root causes of audit deficiencies.