Abstract:
Purpose: Unethical behaviors such as fraud are continuously
hurting organisations. Although internal auditors are expected to
report unethical behaviours, such as fraud, when witnessed, some
remain silent for fear of retaliation. Drawing on upper-echelon
theory, this study examines whether the chief executive officer's
(CEO's) openness is associated with internal auditors’ moral
courage to speak out on ethical concerns.
Design: This explanatory study collected data from 128 internal
auditors in formal financial institutions using structured
questionnaires and used partial least squares structural equation
modeling to test the hypothesis.
Findings: CEOs' openness to internal auditors'
recommendations is positively associated with internal auditors’
moral courage.
Practical implications: CEOs may appreciate listening to
internal auditors as a way of motivating them to speak.
Furthermore, boards of governors can encourage CEOs to show
openness to internal auditor recommendations.
Originality: This study adds to the scant empirical evidence on
the factors that influence internal auditors’ moral courage. The
empirical findings further confirm that contrary to the idea that
internal auditors are independent of CEOs, CEOs influence
internal auditors, thereby validating the broader applicability of
upper-echelon theory.