Internal auditors’ job satisfaction higher with incentive pay, survey finds

BY KEN TYSIAC

Internal auditors who receive incentives based on profits or revenue report higher job satisfaction and loyalty to their organizations without having their objectivity compromised, according to a new survey report.

Among the 1,600 internal auditors who responded to the survey conducted in North America, about 50% of chief audit executives, 56% of directors of internal audit, 48% of audit managers, and 39% of audit staff receive profit- or revenue-based bonuses.

On a scale of 1 to 5, those who receive profit- or revenue-based incentives rated their job satisfaction at 3.94, compared with 3.85 for those who do not receive incentives.

Internal auditors who receive incentives also reported higher levels of identification with their organization (3.79 vs. 3.61) and lower levels of conflict between their organizations’ work standards/procedures and their ability to act according to professional judgment (2.28 vs. 2.39).

The survey results did not show that auditors’ objectivity is impaired when their incentives are tied to profits, according to the survey report by Venkataraman Iyer, CPA, Ph.D., an accounting professor at the University of North Carolina at Greensboro.
 
Auditors who receive profit-based compensation actually showed a higher propensity to suggest a write-down and higher estimates of inventory obsolescence in a hypothetical case study presented in the survey. These results ran opposite to the idea that auditors’ judgment may be impaired if they receive profit-based incentives.

The report, Job Satisfaction for Internal Auditors: How to Retain Top Talent, was published by The Institute of Internal Auditors Research Foundation. Other findings include:

  • Lower-ranking internal audit staff members have lower levels of identification with their employers and their profession.
  • One-tenth of respondents indicated a sense of conflict between organizational procedures and their professional judgment as internal auditors.
  • About 72% of respondents disagreed or disagreed strongly that there was a conflict between work standards and their ability to use professional judgment. Lower-ranking, staff-level respondents reported higher levels of conflict between their organizations’ work standards/procedures and their ability to act according to professional judgment.
  • Chief audit executives who report to the audit committee perceive less organizational/professional conflict than those who report to management. This supports the idea that reporting to the audit committee enhances auditors’ independence, according to the report.


Ken Tysiac ( ktysiac@aicpa.org ) is a JofA editorial director.

SPONSORED REPORT

Revenue recognition: A complex effort

Implementing the new standard requires careful judgment. Learn how to make significant accounting judgments and document them and collaborate with peers for consistent application.

TECHNOLOGY Q&A

How to create maps in Excel 2016

Microsoft Excel 2016 has two new mapping capabilities. J. Carlton Collins, CPA, demonstrates how to make masterful 2D and 3D maps in Excel 2016.

QUIZ

News quiz: Economy and health care changes top CPAs’ list

CPA decision-makers’ economic outlook and the House Republicans’ proposed tax changes as part of replacing the Patient Protection and Affordable Care Act received attention recently. See how much you know with this short quiz.