Behind the two objectives mentioned above, there are several motivations for the research:
Attractiveness of internal auditing
The field of internal auditing has gained in attractiveness and importance over the last decades (Amling, Bantleon, 2007, pp. 81-83). In its early days, the internal audit function was primarily charged with validating financial figures. Little to no attention was paid to topics outside the financial field. Also, audit engagements were conducted in an inflexible manner, i.e. in strict adherence to predefined plans (Kagermann, 2006, pp. 16-23). Over the years, internal auditing was influenced by a range of developments, resulting in the function becoming more open to non-financial business aspects. Audit activities were realigned to foster shareholder value. Fo-cus also shifted from validating results to evaluating causes. Moreover, processes and IT sys-tems have increasingly become subject to internal audit activities (Peemöller, Kregel, 2014, pp.
19-20).
Consequentially, these developments have affected the auditor’s role. As part of their daily work, auditors gain knowledge over a wide field of business topics, receive information from different hierarchy levels, and are among the first ones to be informed about relevant news. In many companies, auditors have developed to take over an internal consulting role (Amling, Bantleon, 2007). As a result, job satisfaction has improved considerably and the profession is perceived as more and more appealing. Given this positive change, companies have started to use their internal audit department as a prime entity to employ applicants with high potential (Peemöller, Kregel, 2014, p. 154). Internal auditing can therefore be said to be in vogue.
CA as a promising methodology to overcome meta challenges
Over the last decade, there has been a striking public debate about buzz words such as ‘big data’, ‘industry 4.0’, or ‘digitalisation’ (Tecchannel, 2016). Indeed, companies are faced with growing volumes of data. At the same time, data itself is becoming more and more heterogenous and complex in its structure (BigDataMadeSimple, 2015). Also, with digitalisation progressing, companies increasingly have to cope with streamlining and automising their processes (McKin-sey, 2019).
Inevitably, internal auditing will continue to be subject to these external challenges. Auditors need to adapt in what they do to ensure their services still provide the expected value. Moreover, changes in the business environment will create the necessity for auditors to shorten the time between the trigger of an audit engagement (e.g. identification of a major deficiency) and the
conduction of an audit engagement as well as between the conduction of an audit engagement and the publication of its results (Coderre, 2007).
CA, as a comparably new methodology, is already being credited for helping auditors to over-come the aforementioned challenges (Moeller, 2004). Many advantages are discussed in theory.
By applying CA, auditing is said to increase the efficiency and effectiveness of the audit process by reducing audit costs and enhancing overall audit quality (Grasegger, Weins, 2012, pp. 231-238; Marks, 2009, p. 51). It is intended to help companies comply with laws and regulations (Woodroof, Searcy, 2001, pp. 169-191). It is found to allow the handling of large volumes of data and thereby enables auditors to approach subjects previously not auditable (Chan, Vasar-helyi, 2011, pp. 152-160). Due to its strict processual approach, it is also supposed to strengthen auditors’ independence and help clarifying auditors’ responsibilities (Institute of Internal Au-ditors, 2005, p. 5).
Given these positive attributes, the concept of CA is very promising. From a purely scientific standpoint, this methodology can be considered as an “all-purpose weapon” which, from a prac-tical perspective, is too good to be true. Therefore, a detailed analysis of the pracprac-tical applica-bility of CA is the logical consequence of the previous academic discussion around CA.
No clear picture of adoption rate and its reasons
The degree of adoption of CA has been subject to only a few academic articles. Comparing these articles, it is difficult to find a common line. While some authors claim that CA adoption rate is high (e.g. PwC, 2006; Galvanize/IIA, 2008), others find that only a few companies make partial or full use of CA (e.g. Vasarhelyi, Alles, Kuenkaikaew, Littley; 2012). There is no pirical research explicitly covering the reasons for a given adoption rate, nor is there any em-pirical research which break CA down into its elements and analyse the adoption rate on a more detailed level.1 Thus, the current scientific discussion leaves considerable gaps which this re-search intends to close.
German internal audit departments as an unexplored research object
Many CA research articles are based on data from the U.S.A. There is little research that covers other countries or which features an international approach (e.g. Gonzalez, Sharma, Galletta,
1 Based on a literature review covering database EconLit and GoogleScholar
2012). Yet, Germany can be considered as a suitable research object when it comes to CA due to several reasons:
• Germany has one of the leading economies worldwide. According to the IMF’s figures of 2019, German has the 4th largest GDP worldwide (behind the U.S.A., China, and Japan) and is the third largest export country (International Monetary Fund, 2019). Ac-cording to the World Economic Forum (2018), Germany also ranks fifth on the global competitive index. Assuming that the high number of U.S.-based CA research articles is a result of the U.S.-American economy being among the largest economies world-wide, Germany represents a comparable and thus equally appropriate market for CA research.
• At the same time, Germany is found to be among those countries which are highly reg-ulated in the economic field (Die Deutschen Versicherer, 2020). Labour laws are strict, production is shaped by many production rules, and the amount of consumer protection regulation is extensive (Welt, 2015). Meanwhile, the existence of internal auditing and its growth in Germany over the last 30 years has been influenced positively by laws and regulations imposed by legislature (e.g. International Professional Practices Framework issued by the Institute of Internal Auditors (IIA) in 2008 or the DIIR Revisionsstandards no. 2 to 5 issued subsequently). Especially in highly regulated industries (e.g. banking, insurance), legislature has introduced several laws and regulations (e.g. the Mindestan-forderungen an das Risikomanagement of 2005, the Basel standards resulting from the financial crisis of 2007/2008) which requires companies to run internal audit depart-ments and to appoint chief audit executives (CAEs). Internal auditing can therefore be considered as a significant (in parts even obligatory) function of German companies (Amling, Bantleon, 2007, pp. 81-150).
• As a further reason, cultural habits of the Germans provide a solid framework for the application of CA. Time is of central importance to German culture. Also, knowledge is of high value. Many Germans seek to obtain as much relevant information as possible before they make decisions. Germans also believe in solid procedures and have a strong feeling for structure and conformity. Obeying rules is of importance and business is considered a serious matter (Lewis, 2010, pp. 228-231).
• CA aims at providing prompt and relevant information. If CA is thoroughly applied, it will deliver precisely the pieces of information that the auditor requires for further pro-cedures. Other unnecessary pieces are omitted. Solid procedures which are conse-quently followed play a decisive role and ensure the proper functioning of CA models (Chan, Vasarhelyi, 2011, pp. 152-160). Thus, the aforementioned German values sup-port the underlying preconditions of CA.
• Germany has not been an explicit subject to any CA adoption research before. Simply because of this non-consideration, coverage of German internal audit departments as a research object bears the potential for totally new scientific discoveries.