An Examination of Promotion Opportunities and Evaluation Criteria as Mechanisms for Affecting Internal Auditor Commitment, Job Satisfaction and Turnover Intentions

A recent overview of the state of behavioral accounting research indicates that the reward system is one variable that has received "little, if any attention" in the auditing subfield of that research (Bamber, 1993: 11). This study examines the effects of two elements of the reward system, promotion opportunities and the evaluation criteria used, on internal auditor turnover intentions and the closely allied factors of job satisfaction and organizational commitment. Promotion opportunities and the promotion and reward evaluation criteria used are both under the direct control of an organization and subject to the organization's policies. If these two elements are found to have significant effects on outcomes such as organizational commitment, job satisfaction and turnover intent then that direct control permits their alteration as necessary to produce a positive impact on those outcomes. An increased understanding of the ways through which organizations can affect organizational commitment, job satisfaction and turnover intentions for internal auditors is needed due to the potential detrimental effects of those three elements on the increasingly important role of internal auditors in the auditing and reporting process. The recent issuance of Statement on Auditing Standards 65 (SAS 65) (AICPA, 1991) underscores the role of the internal auditor in relation to the independent audit process. Under the provisions of SAS 65 an independent auditor may rely to an extent on the work of internal auditors but must assess their competence and objectivity before doing so. To make that assessment SAS 65 identifies a number of specific criteria to be considered including: (1) the professional experience of the internal auditors, (2) their levels of professional certification and continuing professional education, (3) the practices regarding audit assignments, and (4) the policies prohibiting internal auditors from auditing areas where they were recently employed or are scheduled to be employed after leaving the internal audit function. However, low levels of organizational commitment and job satisfaction along with high levels of turnover may adversely impact these criteria. For example, high turnover in conjunction with low levels of job satisfaction and low organizational commitment may (1) reduce the level of professional experience and skill in the department, (2) reduce the emphasis on and opportunities for continuing professional education for internal auditors in the department, (3) alter internal auditor assignment policies so that repeat assignments are necessary, and (4) strain application and enforcement of the policies regarding prior and post internal audit department assignments. The possibility that low job satisfaction and high turnover intentions exist for internal auditors is suggested by two studies of internal auditors. Smith and Uecker (1976) report that internal auditors express lower levels of job satisfaction than do middle-level managers in general. A high level of turnover intent among internal auditors is suggested by Mautz, Tiessen and Colson (1984) in a study involving over 1,200 internal audit staff members. That study indicates that 75% of the internal auditors questioned did not plan to make internal auditing a career and of that group 61% planned to leave internal auditing within three years. In part the high internal auditor turnover intentions reported by Mautz et al. (1984) may be due to the use of internal audits as a "training ground" for other organizational units. If this is the case, then high turnover and the potential reduced role of the internal auditors in relation to the independent audit should be considered as unavoidable costs of that training. On the other hand if the desire to leave the internal audit function is being driven by personal characteristics or attributes that are strictly under the control of the individual, then high turnover may be considered an unavoidable cost of employing those particular individuals. …