Abdolmohammadi 2011

Available online at www.sciencedirect.
com
The International Journal of Accounting

46 (2011) 365 – 389
An Investigation of the Association between Cultural

Dimensions and Variations in Perceived Use of and
Compliance with Internal Auditing Standards
in 19 Countries☆,☆☆
Mohammad J. Abdolmohammadi a,⁎, Gerrit Sarens b
a
Bentley University, Waltham, MA 02452-4705, United States
b
Université Catholique de Louvain, Louvain School of Management, Belgium
Received 14 August 2009
Abstract
Using a large sample of chief audit executives and internal audit managers from 19 countries, we in-
vestigate potential associations between cultural dimensions and variations in perceived use/compliance
with the internal auditing standards. We find uncertainty avoidance to be inversely related to both use
and compliance. We also find assertiveness and human orientation to be positively related to compliance
but not to use of Standards. Among control variables, we find positive associations for the length of In-
stitute of Internal Auditors (IIA) membership, professional certification in internal auditing, and hours of
continuing professional education (CPE) training on both perceived use and compliance. Finally, we
find “Cost of compliance” and “Compliance not expected in my country” to be inversely related to per-
ceived use/compliance. Implications of these findings are discussed.
© 2011 University of Illinois. All rights reserved.
Keywords: Cultural dimensions; Internal auditing standards
☆
Data availability: Data used in this study are available from the Institute of Internal Auditors and public sources.
☆☆
We thank the Institute of Internal Auditors for the grant to develop and the permission to use its Common
Body of Knowledge in Internal Auditing (CBOK, 2006) database for this study. The paper has benefitted greatly
from comments by an anonymous reviewer, Laurie Pant, Sri Ramamoorti, Mahbub Zaman, and particularly our dis-
cussant, Tim Bell. The paper has also benefitted from presentations at the 2009 meetings of the American Accounting
Association, the Canadian Academic Accounting Association, the European Accounting Association, the National
Auditing Conference of the British Accounting Association, the European Academic Conference on Internal Audit
and Corporate Governance, and the Illinois International Accounting Symposium.
⁎ Corresponding author.
0020-7063/$ - see front matter © 2011 University of Illinois. All rights reserved.
doi:10.1016/j.intacc.2011.09.004
366 M.J. Abdolmohammadi, G. Sarens / The International Journal of Accounting 46 (2011) 365–389
1. Introduction
At the core of the practice of internal auditing is the perceived use of and compliance
with The International Standards for the Professional Practice of Internal Auditing (Stan-
dards) issued by the Institute of Internal Auditors (The IIA, 2008). According to the IIA's
Code of Ethics, these Standards are authoritative and must be used and complied with by
all members who perform internal audits worldwide. Thus, Standards are the ultimate in-
strument for the IIA to promote professionalism and uniformity of internal auditing prac-
tice around the globe. To this end, The IIA's (2008) quality assessment review guidance
strongly focuses on compliance with Standards as a part of the effectiveness of the internal
audit activities. However, internal audit activities are performed in diverse cultural and
legal environments, where internal auditors are influenced by their respective cultures
and legal regimes.
The objective of this paper is to investigate the relationships between cultural dimen-
sions in various countries and the use of/compliance with Standards. The Common
Body of Knowledge study by the IIA (CBOK, 2006) was conducted in part to investigate
differences in internal auditing practice and perceived use/compliance with Standards
around the globe. We use the CBOK (2006) database as well as complementary data on
cultural dimensions (Hofstede, 2001; House, Hanges, Javidan, Dorfman, & Gupta,
2004), legal system (CIA World Fact Book 2009), and affiliate age (The IIA, 2008,
2009a, 2009b, 2009c) for our investigation.
Prior research has documented evidence of significant variations in perceived use and
compliance with Standards in Anglo-Saxon countries (Abdolmohammadi, 2009) and other
countries (Burnaby, Hass, & Abdolmohammadi, 2009). For example, Abdolmohammadi
(2009) reports that two variables, “Cost of compliance” and “Compliance not expected in
my country,” are significantly associated with use of Standards. However, these studies do
not investigate potential associations between cultural dimensions and variations in perceived
use of/compliance with Standards. Our exploratory study complements prior research on in-
ternal auditing that has mainly described the role of the internal audit activity in corporate
governance (see Allegrini, D'Onza, Melville, Paape, & Sarens, 2006; Cooper, Leung, &
Wong, 2006; Hass, Abdolmohammadi, & Burnaby, 2006 for reviews). Use of/compliance
with Standards may be viewed as an objective measure of the quality of work performed
by the internal audit activity that is useful for internal stakeholders (e.g., management) and ex-
ternal stakeholders (e.g., external auditors) in their judgment of whether or not they can rely
on the work of internal auditors (cf., International Standards on Auditing 610). Thus, it is im-
portant to investigate potential reasons why internal auditors may deviate from use of
Standards.
A related issue of investigation is whether internal auditors who perceive that Standards
are used in their internal audit activities also indicate that these Standards are fully complied
with. Use and compliance are two different issues, but very little research is available in the
accounting or auditing literature to address this issue. In accounting, using a sample of non-
U.S. firms that adopted U.S. Generally Accepted Accounting Principles (GAAP), Bradshaw
and Miller (2008) find that most firms that adopt U.S. GAAP adjust their accounting methods
to those required by U.S. GAAP, but they do not fully converge. In the context of this study,
“perceived use” of Standards refers to the intention of chief audit executives (CAEs) and
M.J. Abdolmohammadi, G. Sarens / The International Journal of Accounting 46 (2011) 365–389 367
internal audit managers (IAMs) to apply Standards as a framework, whereas “compliance”

refers to their perceptions of application of the Standards in practice.
We use a large sample of 2,783 CAEs and IAMs for our investigation. We find
highly significant differences between the five cultural clusters in perceived use
of/compliance with Standards. Using summary data from House et al. (2004), we
investigate associations between various cultural dimensions and the perceived use
of/compliance with Standards. We find uncertainty avoidance to be inversely related
to both use and compliance, while assertiveness and human orientation are positively
related to compliance with but not use of Standards. We also investigate several control
variables and find positive associations for the length of IIA membership, professional
certification in internal auditing, and hours of CPE training on both perceived use
and compliance. Finally, we find “Cost of compliance” and “Compliance not expected
in my country” to be inversely related to perceived use of/compliance with Standards.
The remainder of the paper is organized as follows. A review of the literature is provid-
ed in Section 2 as a means of identifying the study's research questions. The research meth-
od and results are presented in Sections 3 and 4, followed by a summary and implications
from the study in Section 5.
2. Literature review and research questions
The IIA (2008) uses “careful study, consultation, and deliberation about the basic prin-
ciples for providing internal audit services” to develop its Standards. These Standards:
(1) delineate basic principles that represent the practice of internal auditing as it should
be; (2) provide a framework for performing and promoting a broad range of value-added
internal audit activities; (3) establish the basis for the evaluation of internal audit perfor-
mance; and (4) foster improved organizational processes and operations (The IIA, 2008).
According to the IIA's Code of Ethics, these Standards are authoritative and must be
used and complied with by all members who perform internal audits.
2.1. Cultural differences in general
The theory of cultural differences advanced by Hofstede (1980) and refined by House et
al. (2004) posits that cultural differences have significant effects on the development and
operations of various professional practices, such as internal auditing. While use of and
compliance with Standards are essential to the practice of internal auditing (The IIA,
2008), cultural differences may significantly influence the degree of use and compliance
with Standards in different countries.
Hofstede (1983) used the theory of cultural differences from Hofstede (1980) to classify
50 countries into various cultural clusters. He used four cultural dimensions (uncertainty
avoidance, power distance, individualism versus collectivism, and masculinity/femininity)
as his criteria for this classification. House et al. (2004) extended Hofstede's list to nine di-
mensions, and classified 62 societies into various cultural clusters. Hofstede's (1983) and
House et al.'s (2004) dimensions and definitions are presented in Table 1. This table is
adapted from Burnaby et al. (2007, p. 359). As detailed in the Section 3, we consulted
Table 1
Cultural dimensions.
Dimension Definition
1. UA a The extent to which members of an organization or society strive to avoid uncertainty by
Uncertainty relying on established social norms, rituals, and bureaucratic practices.
avoidance
2. PD a The degree to which members of an organization or society expect and agree that power
Power distance should be stratified and concentrated at higher levels of an organization or government.
3. IC b The degree to which organizational and societal institutional practices encourage and reward
Institutional collective distribution of resources and collective action.
collectivism
4. IgC b The degree to which individuals express pride, loyalty, and cohesiveness in their
In-group organizations or families.
collectivism
5. GE c The degree to which an organization or society minimizes gender role differences while
Gender promoting gender equality.
egalitarianism
6. AT c The degree to which individuals in organizations or societies are assertive, confrontational,
Assertiveness and aggressive in social relationships.
7. FO d The degree to which individuals in organizations or societies engage in future-oriented
Future orientation behaviors, such as planning, investing in the future, and delaying individual or collective
gratification.
8. PO d The degree to which an organization or society encourages and rewards group members for
Performance performance improvement and excellence.
orientation
9. HO d The degree to which individuals in organizations or societies encourage and reward
Human orientation individuals for being fair, altruistic, friendly, generous, caring, and kind to others.
Definitions are from House and Javidan (2004, pp. 11–13).
Adapted from Burnaby et al. (2007, p. 359).
a
These two criteria are the same as those of Hofstede (1980).
b
These two criteria are based on Hofstede's (1980) Individualism versus Collectivism.
c
These two criteria are based on Hofstede's (1980) Masculinity versus Femininity.
d
House et al. (2004) added these based on literature other than Hofstede (1980).
the House et al. (2004) study to determine the cultural clusters of the 19 countries in our
sample.
2.2. Previous studies on the association of cultural differences with professional

development
We are not aware of any studies on the impact of cultural differences in the internal
auditing context, but several studies address associations with professional developments
in accounting and external auditing. Gray (1988) proposed a framework for the relation-
ship between the four cultural dimensions developed by Hofstede (1980) and the develop-
ment of accounting systems, the regulation of accounting, and attitudes toward financial
management and disclosure. Other researchers have used Gray's (1988) framework in a
number of contexts. For example, Doupnik and Salter (1995) tested the effects of culture
on the development of international accounting and found significant effects. Based on
data from 29 countries, Salter and Niswander (1995) found that Gray's (1988) framework
is best at explaining financial reporting practices, but is relatively weak in explaining ex-
tant professional and regulatory structures. Cohen, Pant, and Sharp (1995) found that cul-
ture was related to differences in ethical decision making of auditors in Latin America,
Japan, and the United States, where auditors from high power distance and collectivism
cultures were associated with high ethical standards.
Abdolmohammadi and Tucker (2002) used empirical data from the United Nations to
show that accounting, auditing, and internal auditing development in various countries is
associated with culture. Chan, Lin, and Lan Mo (2003) found that power distance and in-
dividualism have significant explanatory power in differentiating the materiality of ac-
counting errors detected in different cultural enterprises. Patel (2003) found that,
compared to Indian and Chinese cultures, whistleblowing as an internal control mechanism
is likely to be more effective in the Australian culture. Similarly, Tsakumis (2007) found
that national culture plays a role in accountants' disclosure judgments, which could hinder
the usefulness of financial statements prepared under a common set of accounting stan-
dards across countries. Doupnik (2008) demonstrated that there are cross-national differ-
ences in earnings management due to cultural differences, and Tsakumis (2007) found
that Greek accountants are less likely to disclose information than U.S. accountants.
In conclusion, cultural differences have been found to have significant associations
with a number of variables related to the accounting and auditing profession. However,
this line of research has not established a theoretical framework to predict directional
effects for the practice of internal auditing in various cultural settings. Through an ex-
ploratory study, we investigate potential associations between various cultural clusters/
dimensions and the perceived use of and compliance with Standards in internal audit-
ing. The IIA has affiliates in over 100 countries (The IIA, 2008) located in various con-
tinents and cultural clusters. While some countries can easily be identified with a
certain culture (e.g., the United Kingdom and the United States as Anglo-Saxon),
other countries have a mix of cultures (e.g., both Germanic and French cultures in
the case of Switzerland). To mitigate this concern, we select countries for investigation
that are clearly classified into a specific cultural cluster by House et al. (2004) to inves-
tigate the following two research questions:
RQ1a: Does perceived use of Standards vary by cultural clusters?

RQ1b: Does perceived compliance with Standards vary by cultural clusters?
2.3. Cultural dimensions
Overall, if culture is related to differences in perceived use/compliance between various

countries, what specific cultural dimensions are associated with these differences? In this
section, we briefly discuss the nine dimensions listed in Table 1. As explained below
straightforward theoretical arguments are lacking in the literature with respect to the rela-
tionship of these cultural dimensions and the perceived use of/compliance with Standards,
which means that directional hypotheses are difficult to establish. Thus, we present a gen-
eral research question with respect to the relationship between perceived use of and
compliance with Standards and cultural dimensions. We organize the discussion in the
order in which the dimensions appear in Table 1.
2.3.1. Uncertainty avoidance

Uncertainty avoidance (UA) addresses the extent to which ambiguous situations are
threatening to individuals, to which formalized rules and order are preferred, and to
which uncertainty is tolerated in a society (House et al., 2004). On one hand, adoption
of new standards may introduce significant uncertainty to the point that internal auditors
may shy away from use of Standards (thus, a negative association with use of Standards).
On the other hand, it can be argued that by providing formalized rules and procedures to
follow, Standards may reduce uncertainty and ambiguity in practice (thus, enhancing
use of/compliance with Standards). The tension in these expectations makes it difficult
to offer directional hypotheses.
2.3.2. Power distance

This dimension reflects the extent to which a community accepts and endorses authority,
power differences, and status privileges (House et al., 2004). Thus, power distance is the ex-
tent that unequal distribution of power between a superior and a subordinate is perceived by
the subordinate as acceptable (Cohen et al., 1995). In internal auditing, Standards encourage
open discussion and joint decision making between CAEs/IAMs and their subordinates.
Open discussion and joint decision making suggest reduced power distance (cf., Wayne &
Green, 1993), which can enhance competence building and learning (cf., House et al.,
2004). Thus, power distance may not have significant presence in internal auditing practice.
2.3.3. Individualism versus collectivism

Individualism and collectivism are the too extreme ends of the state in which one acts
strictly to benefit the individual as compared to behaving in the best interest of the
group. Chatman, Polzer, Barsade, and Neale (1998) define collectivist cultures as those
that emphasize shared objectives, interchangeable interests, and commonalities among mem-
bers. Those in collectivist cultures exhibit the behavioral characteristics typically associated
with collectivism with members of the in-group (IgC). By contrast, with out-group (IC) mem-
bers, their behavior may resemble that of subjects from individualistic cultures (Kagitçibasi,
1997).
This IgC/IC distinction is applicable to the context of the current study because within
the internal audit profession (in-group), collectivism may be the behavior promoted by the
IIA through its slogan “progress through sharing” and in following high ethical standards
(cf., Cohen et al., 1995). This will, in turn, promote long-term personal commitment and
loyalty between the IIA members, so to satisfy their duties and obligations to the profession
(cf. Triandis, 1995), the IIA provides its members with support in areas such as training,
personal development, and career development.
This argument suggests that in-group collectivism may be strong among internal audi-
tors, and this may be positively associated with perceived use of/compliance with Stan-
dards. However, turnover in internal audit activity is generally high, since people use
the knowledge, skills, and experience they have developed in internal auditing practice
to move into higher-level jobs. Thus, internal auditors may exhibit individualism in their
relationships with other individuals in the organization (the out-group) to advance their
own career. Chan et al. (2003) argue that members of an individualist culture act according
to their own interest (e.g., moving to a higher-level job) and champion individual achieve-
ments, even if this conflicts with the intentions of their professional organization (e.g., the
IIA). Further support for this argument are findings by Marshall (1997) and Triandis
(1994) that those in high socioeconomic classes, such as internal auditors, tend to be
more individualistic. The arguments for the presence of both individualistic and collectivist
behavior in internal auditing makes it difficult to establish directional hypotheses.
2.3.4. Gender egalitarianism

The IIA Standards are gender egalitarian (GE) in the sense that they promote perfor-
mance by internal auditors regardless of their gender. While gender role differences are ob-
served in various parts of the world, we do not have a theory to predict any influence of
gender egalitarianism on perceived use of/compliance with Standards.
2.3.5. Assertiveness
Assertiveness (AT) reflects the belief that people are or should be encouraged to be as-
sertive, aggressive (in the positive sense of the word: being positive or confident in a per-
sistent way; enterprising or taking initiative), and tough in social relationships in order to
achieve results (House et al., 2004). Assertiveness is accomplished by being explicit and
direct in communications, by using unambiguous language (so-called “low-context lan-
guage”) (Holtgraves, 1997). Non-assertiveness (i.e., being non-dominant) can be linked
to what Goldberg (1990) calls “agreeableness.” Agreeable people are cooperative (trusting,
caring) and likable (good natured, gentle); they are softhearted and tolerant. Non-
assertiveness is related to the use of high-context language, which is less direct, often
more ambiguous, and more subtle (Schneider & Barsoux, 1997).
The IIA Standards indicate that internal auditors should be generally assertive, even
confrontational at times. This may be needed to remain objective in contentious audit sit-
uations and to collect sufficient, reliable, relevant, and useful evidence to support unambig-
uous audit conclusions. Use of/compliance with Standards could be a way to convince
senior managers and board members of the value added by internal auditing. To do so, in-
ternal auditors need to be assertive, direct, and unambiguous when presenting their find-
ings. This argument suggests a positive association between assertiveness and perceived
use of/compliance with Standards.
2.3.6. Future orientation

According to House et al. (2004), future orientation (FO) is the extent to which mem-
bers of a society or an organization focus on investment in their future, believe that their
current actions will influence their future, believe that they will have a future that matters,
believe in planning for developing their future, and look far into the future for assessing the
effects of their current actions.
By focusing on long-term development and improvement of the internal audit activity
(e.g., via quality assessment and improvement programs and continuous professional de-
velopment), Standards encourage internal auditors to be future-oriented. Tendam (1987)
states that future orientation is also related to flexibility, the ability to adapt to changing
environments and to pursue new goals. This is consistent with Brommer and De La Porte
(1992), who argue that future orientation involves preparing the organization to meet future
environmental changes. These arguments suggest a positive association between future ori-
entation and perceived use of/compliance with Standards.
2.3.7. Performance orientation

Performance orientation (PO) refers to the extent to which a community encourages and
rewards innovation, high standards, and performance improvement (House et al., 2004).
One of the major goals of Standards is to stimulate continuous improvement in the internal
audit activity. Therefore, Standards stimulate training and development (e.g., via continu-
ous professional education) and view feedback (e.g., via internal and/or external quality as-
sessment) as necessary for continuous improvement. These arguments suggest that
performance-oriented societies may be positively associated with perceived use
of/compliance with Standards. However, an opposing argument can also be made that per-
formance-oriented societies may not need the IIA Standards for their internal audit activ-
ities. They may already have high-performance orientation regardless of the source of
guidance (Standards or local guidance). This argument suggests that the relationship be-
tween performance orientation and perceived use of/compliance with Standards is theoret-
ically unclear.
2.3.8. Human orientation

Human orientation (HO) is defined by House et al. (2004) as the degree to which an or-
ganization or society encourages and rewards individuals for being fair, altruistic, friendly,
generous, caring, and kind to others. As reported by Burnaby et al. (2007), internal auditors
view interpersonal skills, relationship building, and being team players as being increasing-
ly important. In 2009, a global task force of the IIA introduced the “Internal Auditor Com-
petency Framework” (The IIA, 2009a), which has more than 120 attributes covering
communication, management, leadership, conflict management, team capabilities, collabo-
ration, and cooperation skills. Collectively, these attributes are crucial in fulfilling the sup-
port role that the internal audit activity provides and in complying with the IIA's focus on
human orientation. However, theory is lacking in the association, if any, of these human
orientation dimensions and perceived use of/compliance with Standards.
Overall, this discussion of various cultural dimensions presents a mixed picture about
potential associations between these dimensions and the perceived use of/compliance
with Standards. As reported later, some of these cultural dimensions are highly correlated.
For these reasons, we use correlation analysis to identify cultural dimensions to enter in our
regression models as independent variables to answer the following two research questions:
RQ2a: Is perceived use of Standards associated with cultural dimensions?

RQ2b: Is perceived compliance with Standards associated with cultural dimensions?
2.4. Control variables
The IIA is a worldwide professional association, whose membership is voluntary, but

when an internal audit practitioner is accepted to be a member, he/she is required to adhere
to the Standards and also remain an IIA member in good standing. “Good standing” means
that a member should become professionally certified and keep his/her knowledge current
through Continuing Professional Education (CPE). 1 The IIA prepares and administers
the Certified Internal Auditor (CIA) exam worldwide and considers the CIA designation
as the only globally accepted certification for internal auditors (The IIA, 2009b).
Coupled with CPE requirements, the CIA certification provides an indication of a base-
line for qualification to practice internal auditing. Since Standards are expected to be
used and complied with by the IIA members, we expect the length of membership in
the IIA to be positively associated with the perceived use of/compliance with Stan-
dards. Also, certification as a CIA (or equivalent) requires the internal audit practitioner
to be familiar with Standards and to commit to using them in practice. As such, we expect
certification to be positively associated with perceived use of/compliance with Stan-
dards. Similarly, CPE is expected to improve an internal audit practitioner's knowledge
of the Standards, and thus it should be associated with perceived use of/compliance
with Standards.
Other variables with potential association with perceived use/compliance include inter-
nal auditors' academic degrees (graduate versus undergraduate), academic major (accoun-
ting/auditing/internal auditing versus other majors), and years of experience in the
profession. However, as reported later, internal auditing experience is highly correlated
with length of membership in the IIA. For this reason, we do not include internal audit ex-
perience in our regression models. Another control variable may be the position in the in-
ternal audit activity (CAE versus IAM). While CAEs and IAMs are knowledgeable in the
internal audit activity, they may differ in the way they perform their tasks. Specifically, in
large organizations, CAEs may have a more administrative role in the internal audit activ-
ity, while IAMs may take a more operational role. As such, IAMs may actually know more
about whether or not Standards are being used and complied with than CAEs. 2 We use this
distinction as a control variable in our regression models to see if there is any difference
between the responses of the two groups.
Cost of compliance with Standards, whether or not such compliance is expected in the
country of domicile and whether or not there are inter-country differences in legal systems,
are other variables with potential associations with perceived use of/compliance with Stan-
dards. In a study of Anglo-Saxon countries, Abdolmohammadi (2009) found that cost and ex-
pectation of compliance with Standards are significantly correlated with use of Standards.
Thus, we include these as control variables in our multivariate models. Regarding legal sys-
tems, recent literature (e.g., Dallas, 2004; La Porta, Lopez-de-Salines, Shleifer, & Vishny,
1997, 1998, 2000) suggests that in comparison to civil law countries, those with common
law systems generally have better corporate governance, more economic development, better
investor protection, and higher market capitalization. As an important monitoring mechanism
that reduces agency costs (cf. Carcello, Hermanson, & Raghunandan, 2005; Goodwin-
Stewart & Kent, 2006, Wallace & Kreutzfeldt, 1991), the internal audit activity may have
1
CBOK (2006) collected data on CPE every 36 months and every 12 months. The 36-month period provides
more meaningful data for analysis because it indicates a longer-term commitment to training than training over
only a 12-month period.
2
In small audit shops, the CAE and IAM positions may be performed by the same person.
higher quality (that is, higher use of/compliance with Standards) in common law countries
than civil law countries. To provide a control variable for this potential association, we con-
sulted the CIA World Factbook (2009) to classify the 19 countries in our sample into common
law or civil law regimes and established a new binary variable called LegalSys (common
law = 1; civil law = 0) to be included in our regression models. However, we found LegalSys
to be highly correlated with cultural clusters (Pearson = .930, p b .001) and various cultural di-
mensions (ranging from -.083 for correlation with GE to .867 for correlation with HO). Due to
these high correlations, we do not include LegalSys in our multivariate regression models but
will test it in as part of our additional analysis in Section 4.3.
Finally, the age of the IIA affiliate in each country provides the length of the time in
which a country has been officially practicing internal auditing as an affiliate of the IIA.
The longer the years of affiliation, the higher the expectation of perceived use
of/compliance with Standards. Thus, affiliate age can be used as a control variable in
our analysis. However, as reported later, this variable is highly correlated with some cultur-
al dimensions. Thus, we do not specify this variable in our multivariate model, rather, we
analyze its influences in Section 4.3.
2.5. Model specification
The variables identified in the earlier sections are the independent variables in regres-
sion models that we test. The dependent variables are perceived use of/compliance with
Standards. Given the binary nature of the response to the use question (yes/no), a binary
logistic regression analysis is appropriate to use for perceived use (Model 1). For Model
2, which tests perceived compliance, subjects were asked to indicate for each of the
IIA's 11 Standards whether they fully complied, partially complied, did not comply, or
did not know. We focus on full compliance and develop a metric based on the proportion
of the 11 Standards for which subjects indicated full compliance (see Table 4 in Section
4.1). This proportion is a number between 0 and 100%. Thus, we use linear regression
analysis to test Model 2. The general form of our regression model is as follows:
Y ¼ α þ β1 Dimension1 þ β2 Dimension2 þ β3 Dimension3 þ β4 Degree ð1Þ

þβ5 Major þ β6 MembershipYrs þ β7 IACertification þ β8 TrainingHours
þβ9 Position þ β10 UseCostly þ β11 UseNotExp þ ε
where:
Y = Perceived use of Standards: 1/0 for yes/no (Model 1); Perceived

compliance with Standards: 0 to 100 percent (Model 2)
Dimension1 = Cultural Dimension 1 (identified by correlation analysis)
Degree = 1 if Graduate degree; 0 if undergraduate degree
Major = 1 if Accounting/auditing/internal auditing; 0 if others
MembershipYrs = 1 if 6 years or more; 0 if 5 years or less
IACertification = 1 if professionally certified as internal auditor; 0 otherwise
TrainingHours = Number of hours of training over the past 36 months
Position = 1 if CAE; 0 if IAM

UseCostly = 1 if too costly to use/comply with Standards; 0 otherwise
UseNotExp = 1 if compliance is not expected by the country; 0 otherwise
ε = Error term
3. Research method
3.1. Sources of data
With data from over 100 countries, CBOK (2006) is the most comprehensive database
on the current state of the internal auditing profession worldwide (Burnaby et al., 2007).
We used two screening criteria to select countries for our investigation. The first criterion
was to select those countries from which a sufficient sample from CAEs and IAMs was
available for statistical analysis. Specifically, to be included, a country had to be repre-
sented with at least double-digit responses from CAEs and IAMs. The second screening
criterion was that the country had to be clearly identified by House et al. (2004) as belong-
ing to a specific cultural cluster. While CBOK (2006) has data from over 100 countries,
House et al. (2004) has cultural classification for only 62 societies. In some cases, a coun-
try is included as comprising more than one society. For example, Switzerland consists of
two societies: Germanic and French. These societies have significantly different ratings.
For example, while the Germanic rating for Assertiveness in Switzerland is 4.51 (in a 1
to 7 Likert scale from strongly disagree to strongly agree with the rating of the dimension
in a culture), the French Switzerland rating is 3.47. Since CBOK (2006) does not separate
Switzerland by its Germanic and French cultures, we do not include this country in our
sample.
The screening criteria used resulted in a sample of 19 countries classified into five cul-
tural clusters. Table 2 presents the sample sizes from each of these countries by cultural
cluster and position (i.e., CAEs and IAMs). As reported in the table, Venezuela, with 20
responses, has the smallest sample size, and the United States, with 1,748 responses, has
the largest sample. Overall, our sample consists of 2,783 responses from CAEs
(n = 1,497) and IAMs (n = 1,286).
The source of data for the dominant legal system in each country is the CIA World
Factbook (2009). It provides a classification for each country based on whether or not it
is primarily a common law or a civil law country. Finally, we requested and received an
IIA internal document that among other information provides the year in which an IIA af-
filiate was established in the country. From this information, we calculated the age of each
affiliate as of the year 2006.
4. Data analysis
Table 3 presents descriptive statistics on independent variables. Panel A presents vari-

ables with binary responses for which the results of χ 2 tests of observed versus expected
are reported. Panel B presents the means and standard deviations of continuous variables,
Table 2
The sample.
Cluster Sample Size
CAEs IAMs All
Anglo
Australia 72 39 111
New Zealand 13 15 28
UK/Ireland 68 75 143
United States 760 706 1466
Total 913 835 1748
Eastern Europe
Poland 8 17 25
Russia 50 20 70
Total 58 37 95
Germanic Europe
Austria 57 6 63
Germany 40 32 72
Netherlands 26 30 56
Total 123 68 191
Latin America
Argentina 13 17 30
Brazil 11 19 30
Colombia 25 28 53
Costa Rica 16 6 22
Mexico 24 24 48
Venezuela 7 13 20
Total 96 107 203
Latin Europe
France 69 48 117
Italy 129 97 226
Portugal 14 24 38
Spain 95 70 165
Total 307 239 546
Grand Total 1497 1286 2783
including the mean ratings of each of the nine cultural dimensions by cultural cluster that
we have adopted from House et al. (2004). 3
The first variable in Table 3 is the length of IIA membership of CAEs and IAMs. 4
Overall, 48.6% of all CAEs and IAMs were members of the IIA for 5 years or less, leaving
51.4% as members for 6 years or more. However, the χ 2 of 159.4 indicates highly signif-
icant differences between the five cultural clusters (p b .001). Not surprisingly, the Eastern
European (69.5%) and Latin American (73.5%) countries had the highest percentage of
3
House et al. (2004) report separate averages for UK/Ireland and for the former east/west Germany. However,
CBOK (2006) has data for UK/Ireland as one unit and for Germany as a unit. Consequently, we used the averages
for these units for analysis. While there were some minor variations, the ratings were quite close to each other. For
example, UK and Ireland had exactly the same mean rating (5.15) for power distance. For Germany, the rating for
gender egalitarianism was 3.06 for the former East Germany and 3.10 for the former West Germany.
4
Since data were collected by the IIA from its membership, there is no reason to believe that any of the CAEs in
the sample were not members of the IIA.
Table 3
Descriptive statistics — independent variables.
Variable Cluster 1: Cluster 2: Cluster 3: Cluster 4: Cluster 5: Total Chi-Sq.
Anglo East-EU German-EU Latin-AM Latin-EU (n = 2783) a (P-value)
(N =1748) a (N = 95) a (N = 191) a (N = 203) a (N = 546) a
Panel A: discrete variables — percentage of responses
1. IIA membership:
5 years or less 40.2% 69.5% 48.9% 73.5% 62.8% 48.6% 159.4
6 years or more 59.8% 30.5% 51.1% 26.5% 37.2% 51.4% (b0.001)
2. Degree:
Undergraduate 61.6% 64.2% 30.4% 61.1% 59.4% 59.1% 70.9
Graduate 38.4% 35.8% 69.6% 38.9% 40.6% 40.9% (b0.001)
3. Major:
Accounting/ 70.9% 46.3% 57.1% 82.3% 38.6% 63.6% 234.0
auditing/ (b0.001)
internal
auditing
Other 29.1% 53.7% 42.9% 17.7% 61.4% 36.4%
4. Certification:
CIA or 51.1% 27.4% 44.0% 30.0% 29.1% 44.0% 112.0
equivalent (b0.001)
Other 48.9% 72.6% 56.0% 70.0% 70.9% 56.0%
5. Legal system:
Common law 100% 0% 0% 0% 0% 35% 2,618.2
Civil law 0% 100% 100% 100% 100% 65% (b0.001)
Panel B: Continuous variables: mean and (standard deviation) of responses

Variable Cluster 1: Cluster 2: Cluster 3: Cluster 4: Cluster 5: Total F-stat.
(N =1748) a (N = 95) a (N = 191) a (N = 203) a (N = 546) a
6. Internal audit 13.05 5.22 11.60 12.42 7.82 11.63 47.7
experience (9.53) (3.23) (8.04) (9.16) (5.78) (8.96) (b0.001)
(years)
7. 36 months 124.36 149.40 101.80 200.45 125.28 129.53 17.1
training (112.44) (126.15) (109.78) (193.37) (178.65) (136.93) (b0.001)
(hours of
training)
8. Affiliate 63.20 6.79 10.08 27.61 30.67 48.67 6,994.57
age (years) (5.09) (1.33) (0.82) (11.54) (8.04) (20.70) (b0.001)
9. Uncertainty 4.20 3.07 5.04 3.74 3.99 4.15 2353.86
avoidance (0.13) (0.33) (0.22) (0.26) (0.24) (0.38) (b0.001)
(1–7 scale)
10. Power 4.89 5.41 4.87 5.35 5.43 5.05 1260.59
distance (0.08) (0.19) (0.52) (0.26) (0.09) (0.30) (b0.001)
(1–7 scale)
11. Institutional 4.24 4.51 4.11 3.88 3.80 4.13 1453.02
collectivism (0.10) (0.01) (0.34) (0.13) (0.11) (0.24) (b0.001)
(1–7 scale)
12. In-group 4.27 5.60 4.29 5.55 5.01 4.55 2409.20
collectivism (0.13) (0.05) (0.45) (0.20) (0.41) (0.52) (b0.001)
(1–7 Scale)
(continued on next page)
Table 3 (continued)
Panel B: Continuous variables: mean and (standard deviation) of responses
13. Gender 3.35 4.06 3.21 3.57 3.29 3.37 962.06
egalitarianism (0.03) (0.02) (0.19) (0.12) (0.25) (0.20) (b0.001)
(1–7 Scale)
14. Assertiveness 4.47 3.78 4.54 4.23 4.16 4.37 550.65
(1–7 Scale) (0.20) (0.17) (0.14) (0.19) (0.21) (0.26) (b0.001)
15. Future 4.13 2.94 4.37 3.51 3.41 3.92 5148.68
orientation (0.09) (0.10) (0.21) (0.30) (0.14) (0.40) (b0.001)
(1–7 scale)
16. Performance 4.46 3.52 4.30 3.91 3.82 4.25 2809.29
orientation (0.08) (0.22) (0.11) (0.25) (0.24) (0.34) (b0.001)
(1–7 scale)
17. Human 4.19 3.85 3.60 3.94 3.51 3.99 3425.22
orientation (0.05) (0.15) (0.25) (0.24) (0.18) (0.32) (b0.001)
(1–7 scale)
a
Due to missing data, the actual responses may not match this sample size.
membership in the category of less than 5 years, while Anglo-Saxon countries had the low-
est with 40.2%.
Investigation of academic degrees and majors indicates that while 59.1% of the respon-
dents possess only an undergraduate degree, 40.9% have earned graduate degrees. Howev-
er, there is significant variation between cultural clusters, where the χ 2 of 70.9 is highly
significant (p b 0.001). Table 3 also shows that there is a statistical significance
(χ 2 = 234.0, p b 0.001) for the academic major, where cluster 4 has the highest percentage
(82.3%) of the respondents majoring in accounting/auditing/or internal auditing as com-
pared with cluster 5 (38.6%) and cluster 2 (46.3%). The proportion of respondents certified
as CIA or equivalent indicates that overall only 44% are certified. Of these, cluster 1 has
the highest proportion of CIA (51.1%) while clusters 2 (27.4%) and 5 (29.1%) have the
lowest level of certification, and the differences are statistically significant (χ 2 = 112.0,
p b 0.001). Finally, while all countries in the Anglo-Saxon cluster were using common
law systems, all other clusters were classified as civil law clusters, thus a highly significant
difference (χ 2 = 2,628.2, p b 0.001).
ANOVA results in Table 3 show highly significant differences by cultural clusters for
the three continuous variables. Specifically, with an average of 13.05 years, the Anglo-
Saxon cluster has the highest internal audit experience, while the Eastern European cluster
has the lowest level at 5.22 years of experience. The other three clusters are somewhere in
between these two categories, and the differences are highly significant (F-statistic = 47.7,
p b 0.001). The variable, “hours of training over the last 36 months” also indicates high var-
iation among the five clusters (F-statistic = 17.1, p b 0.001), where the Latin American clus-
ter, with 200.45 h, has the highest level of training and the Germanic Europe cluster has the
lowest, at 101.8 h. Similarly, with an average age of 63.20 years, the Anglo-Saxon cluster
has the oldest affiliates (chapters in the case of the United States), followed by Latin
Europe (30.67 years), and Latin America (27.61 years). Eastern-Europe (6.79 years) and
Germanic Europe (10.08 years) have the youngest affiliates. These differences are highly
significant (F-statistic = 6,994.57.1, p b 0.001).
Because House et al. (2004) used dimensions ratings to classify countries into various
cultural clusters, we would expect and find highly significant differences by cultural cluster
for all of the nine cultural dimensions at the b 0.001 level (see Panel B of Table 3). The
summary statistics for each country were adopted from House et al. (2004) and entered
into the data set for each of the participants in every country to investigate our research
questions.
4.1. Dependent variables and the relationship with cultural clusters (RQ1a & RQ1b)
Descriptive statistics on dependent variables (i.e., perceived use and compliance) are
presented in Table 4. The data reveal that while a great majority (84.9%) of CAEs and
IAMs indicates use of Standards, a significant minority (15.1%) does not. The χ 2 of
18.2 is highly significant (p = 0.001), indicating differences between cultural clusters.
The lowest use is in Germanic Europe (78.8%) and Latin Europe (80.7%), and the highest
use (90.4%) belongs to Eastern Europe, leaving Anglo-Saxon and Latin America in the
middle. These descriptive data answer RQ1a, “Does perceived use of Standards vary by
cultural clusters?”
For those participants who perceived use of Standards to be lacking, we provide descrip-
tive statistics on two reasons: “Compliance is too costly” and “Compliance is not expected
in my country.” As reported in Table 4, 22.2% of Eastern European respondents and 17.0%
of Latin European respondents selected “cost” as the reason for lack of use/compliance.
These responses were significantly greater than those in the remaining three clusters
(χ 2 = 11.9, p = 0.018). Also, 66.7% of the Eastern European respondents indicated that com-
pliance was not expected in their countries, followed by Latin America with 23.1%. Other
clusters selected this reason at significantly lower rates (χ 2 = 136.3, p b 0.001).
The CAEs and IAMs who indicated use of Standards were also asked to indicate the
degree of full compliance with each of the 11 specific Standards. As summarized on
line 15 of Table 4, the overall percentage of full compliance for all Standards is only
61.4 percent, where the F-statistic of 25.71 indicates high variation between the five cultur-
al clusters (p b 0.001). The lowest perceived compliance belongs to Eastern Europe at only
41.3%, while the highest perceived compliance of 67.1% can be found in the Anglo-Saxon
culture cluster. Analysis by Standard also indicates high variation at b 0.001 for each of the
11 Standards by cultural cluster. These results provide descriptive data to answer RQ1b,
“Does perceived compliance with Standards vary by cultural clusters?”
4.2. Cultural dimensions and perceived use of/compliance with Standards (RQ2a & RQ2b)
Table 5 presents a correlation matrix of independent variables, where statistically signif-

icant Pearson correlation coefficients are highlighted. As shown in the table, many of the
correlation coefficients between cultural dimensions reach or surpass the 0.50 level that
causes concern for the possibility of multicollinearity. An examination of individual vari-
ables in Table 5 indicates that IC, IgC, FO, PO, PD, and GE are highly correlated with
other variables. For this reason, we select UA, AT, and HO as the three cultural dimensions
Table 4
Descriptive statistics — dependent variables. Perceived use of and compliance with Standards.
Variable Cluster 1: Cluster 2: Cluster 3: Cluster 4: Cluster 5: Total Chi-Sq.
(N =1748) a (N = 95) a (N = 191) a (N = 203) a (N = 546) a
1. Use IIA standards
Yes 86.3% 90.4% 78.8% 86.6% 80.7% 84.9% 18.2
No 13.7% 9.6% 21.2% 13.4% 19.3% 15.1% (0.001)
If not used, why not?
2. Use is too costly 12.2% 22.2% 12.8% 7.7% 17.0% 13.4% 11.9
(0.018)
3. Compliance not 1.7% 66.7% 17.9% 23.1% 14.0% 9.2% 136.3
expected (b0.001)
Full compliance with:
4. AS 1000: purpose, 74.5% 47.3% 58.1% 58.1% 59.8% 68.5% 64.14
authority and (b0.001)
responsibility
5. AS 1100: 76.7% 56.6% 71.8% 68.4% 68.6% 73.5% 24.76
independence and (b0.001)
objectivity
6. AS 1200: proficiency 75.5% 50.7% 59.2% 66.7% 60.1% 70.0% 57.47
and due care (b0.001)
7. AS 1300: quality 44.6% 21.9% 29.3% 38.1% 31.5% 39.9% 38.39
assurance and (b0.001)
improvement
8. PS 2000: managing 70.2% 44.7% 58.7% 54.5% 52.0% 63.9% 64.03
the internal (b0.001)
audit activity
9. PS 2100: nature 69.2% 43.2% 45.4% 59.1% 53.2% 63.1% 65.69
of work (b0.001)
10. PS 2200: 67.5% 48.7% 46.7% 59.6% 57.0% 62.9% 37.97
engagement planning (b0.001)
11. PS 2300: 71.2% 44.0% 49.2% 55.5% 59.0% 65.3% 60.88
performing (b0.001)
the engagement
12. PS 2400: 75.6% 45.3% 59.8% 63.2% 62.5% 70.1% 60.34
communicating (b0.001)
results
13. PS 2500: 65.1% 37.3% 52.0% 52.0% 45.4% 58.6% 67.72
monitoring progress (b0.001)
14. PS 2600: resolution 63.5% 20.3% 37.7% 37.5% 35.8% 53.2% 157.30
of management's (b0.001)
acceptance of risks
15. All standards 67.1% 41.3% 50.3% 55.3% 52.1% 61.4% 25.71 b
(b0.001)
(Note that AS stands for Attribute Standard and PS stands for Performance Standard.)
a
Due to missing data, the actual responses may not match the sample size.
b
This F-statistic of the ANOVA test of differences in overall mean proportion of full compliance of all 11
Standards listed above.
M.J. Abdolmohammadi, G. Sarens / The International Journal of Accounting 46 (2011) 365–389
Table 5
Correlation matrix between all independent variables.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
1 UA 1.00
2 PD −.42 1.00
3 IC .18 −.66 1.00
4 IgC −.57 .81 −.45 1.00
5 GE −.44 .03 .38 .23 1.00
6 AT .37 −.46 .03 −.47 −.49 1.00
7 FO .66 −.82 .50 −.74 −.32 .70 1.00
8 PO .55 −.79 .55 −.78 −.29 .70 .87 1.00
9 HO .01 −.67 .70 −.50 .20 .19 .56 .57 1.00
10 Degree .17 −.09 .03 −.07 .05 0.03 .09 .08 −.10 1.00
11 Major .06 −.25 .17 −.14 .06 .20 .22 .28 .20 .03 1.00
12 IAexp .09 −.18 .12 −.15 −.07 .15 .22 .21 .21 −.01 .07 1.00
13 MemYrs .13 −.20 .14 −.19 −.12 .16 .22 .22 .16 .02 .05 .50 1.00
14 IAcert .10 −.14 .10 −.18 −.02 .09 .17 .15 .15 .06 .08 .18 .29 1.00
15 CPEhrs −.10 .01 −.01 .09 .06 −.05 −.06 −.05 .00 .05 .07 .03 .05 .06 1.00
16 Position −.03 −.01 .00 −.02 0.02 .00 .01 .01 .04 .00 −.04 −.08 −.06 .09 .00 1.00
17 UseCostly −.05 .04 .00 .03 0.04 −.04 −.07 −.04 −.03 −.02 .01 −.01 −.02 −.05 −.01 −.08 1.00
18 UseNotExp −.13 .20 −.04 .21 .15 −.20 −.22 −.21 −.14 −.01 −.04 −.04 −.09 −.07 .04 −.02 .10 1.00
19 LegalSys .14 −.62 .56 −.66 −.08 .48 .63 .73 .87 −.08 .22 .22 .21 .18 −.03 .05 −.04 −.19 1.00
20 AffiliateAge .08 −.52 .33 −.66 −.15 .53 .55 .71 .70 −.07 .17 .18 .18 .16 −.06 .05 −.04 −.22 .89 1.00
Significant Pearson Correlation Coefficients at the .10 or lower are highlighted.
381
for our initial tests of the two models. These dimensions are then replaced with other di-
mensions for additional analysis.
IAexp is also highly correlated with a number of variables, and LegalSys is highly corre-
lated with cultural dimensions and some other variables. Similarly, AffiliateAge is highly cor-
related with a number of cultural dimensions, including AT (Pearson = 0.53), HO
(Pearson = 0.70), as well as LegalSys (Pearson = 0.89). To avoid multicollinearity, these
three variables are dropped from our initial regression models but are analyzed in Section 4.3.
The refined set of independent variables is presented in Table 6. This table shows that none of
the Pearson correlation coefficients in the set of refined variables reaches the critical level of
0.50 to cause concern for the possibility of multicollinearity.
Due to the binary nature of the first dependent variable (yes/no), we use binary logistic re-
gression to test Model 1. Variable coefficients (B), the Wald statistic, and its significance are
provided in the first three columns of Table 7, where statistically significant results are
highlighted. The overall model χ 2 statistic and its significance are presented in the bottom
of Table 7. As reported, the Chi-square statistic of 114.670 is highly significant (pb 0.001),
with a classification accuracy of 84.5% and the Nagelkerke pseudo R 2 of 7.7%. Model 2 in
Table 7 shows the results of a linear regression testing the overall proportion of perceived
compliance with all 11 Standards (see Table 4). The standardized βs indicating the coefficient
of each of the variables is presented along with its T-statistic and significance. Overall, Model
2 in Table 7 is highly significant (F-statistic = 21.114, p b 0.001), with an R 2 of 10.3 percent.
As reported in Table 7, uncertainty avoidance has negative and significant coefficients
for both Use (Wald = 8.903, p = 0.003) and Compliance (T-stat = − 1.820, p = 0.069). This
finding suggests that societies with high uncertainty avoidance are associated with lower
use of and compliance with Standards. The next two cultural dimensions, assertiveness
and human orientation, are not significant for use, but are both highly significant for com-
pliance at the p b 0.001 level (T-stat = 5.465 and 4.261, respectively). This means that soci-
eties characterized by a high degree of assertiveness and human orientation are associated
with higher compliance with Standards.
As to the control variables, degree, major, and position (CAE versus IAM) are neither
significant in Model 1 nor Model 2. However, length of IIA membership, IA certification,
Table 6
Correlation matrix between refined independent variables.
Variable 1 2 3 4 5 6 7 8 9 10 11
1 UA 1.00
2 AT 0.37 1.00
3 HO 0.01 0.19 1.00
4 Degree 0.17 0.03 −0.09 1.00
5 Major 0.05 0.20 0.20 0.03 1.00
6 MemYrs 0.13 0.16 0.16 0.02 0.05 1.00
7 Iacert 0.10 0.09 0.15 0.06 0.08 0.29 1.00
8 CPEhrs −0.10 −0.05 0.00 0.05 0.07 0.05 0.06 1.00
9 Position − 0.03 0.00 0.04 0.00 − 0.04 − 0.06 0.09 0.00 1.00
10 UseCostly −0.05 − 0.04 − 0.03 − 0.02 0.01 − 0.02 − 0.05 −0.01 −0.08 1.00
11 UseNotExp −0.13 −0.20 −0.14 − 0.01 − 0.04 − 0.09 − 0.07 0.04 −0.02 0.10 1.00
Significant Pearson Correlation Coefficients at the .10 or lower are highlighted.
Table 7
Multivariate analysis. Refined Logistic Regression Model for Use of IIA Standards (Model 1) and Ordinary Least Square
Regression for Compliance with IIA Standards (Model 2) as Dependent Variables.
Y = α + β1Dimension1 + β2 Dimension2+ β3 Dimension3+β4Degree + β5Major + β6MembershipYrs+
β7IACertification + β8TrainingHours + β9Position + β10UseCostly + β11UseNotExp + ε.
Model 1 perceived use (yes/no) Model 2 perceived compliance (%)
Variable B Wald P-value β T-stat. P-value
1 UA −0.459 8.903 0.003 − 0.044 − 1.820 0.069
2 AT −0.180 0.570 0.450 0.133 5.465 b0.001
3 HO 0.104 0.333 0.564 0.097 4.261 b0.001
4 Degree −0.027 0.054 0.817 0.027 1.208 0.227
5 Major 0.043 0.127 0.721 − 0.001 − 0.034 0.973
6 MembershipYrs 0.612 25.126 b0.001 0.084 3.610 b0.001
7 IA Certification 0.623 23.930 b0.001 0.048 2.095 0.036
8 TrainingHrs 0.001 2.948 0.086 0.051 2.319 0.020
9 Position 0.043 0.139 0.710 0.025 1.130 0.258
10 UseCostly −0.197 1.336 0.248 − 0.174 − 7.999 b0.001
11 UseNotExp −1.096 22.780 b0.001 − 0.090 − 4.050 b0.001
12 Constant 3.354 7.630 0.006 − 3.094 0.002
Chi-sq (P-value) F-Statistic (P-value)
114.670 (b0.001) 21.114 (b0.001)
Classification Accuracy 84.5%
Nagelkerke (pseudo) R2 7.7% Adjusted R2 10.3%
Where:
Y = Perceived use of Standards: 1/0 for yes/no (Model 1); Perceived compliance with Standards:
0 to 100 percent (Model 2).
Dimension1 = Cultural Dimension 1 (identified by correlation analysis).
Degree = Graduate degree = 1; undergraduate degree = 0.
Major = Accounting/auditing/internal auditing = 1; others = 0.
Membership Yrs = 1 if 6 years or more; 0 if 5 years or less.
IACertification = 1 if professionally certified as internal auditor; 0 otherwise.
TrainingHours = Number of hours of training over the past 36 months2.
Position = 1 if CAE; 0 if IAM.
UseCostly = 1 if too costly to use/comply with Standards; 0 otherwise.
UseNotExp = 1 if compliance is not expected by the country,;0 otherwise
ε = Error term.
and CPE training hours are significant, demonstrating positive associations with perceived
use of and compliance with Standards. Not surprisingly, “Compliance not expected in the
country” (UseNotExp) is also highly significant in both models at the p b 0.001 level, but
while “Cost of compliance” (UseCostly) is not significant for use (p = 0.248), it is positive-
ly associated with perceived compliance (p b 0.001).
4.3. Additional analysis
As stated earlier, we consulted the CIA World Factbook (2009) to determine the dom-
inant legal system of each of the 19 countries in our sample and coded them into a binary
variable called LegalSys (common law = 1, civil law = 0). Due to high correlations with cul-
tural dimensions, we did not include LegalSys in the regression models in Table 7. How-
ever, we included this variable in the additional analysis and found that the overall model
statistics and initial results remained about the same. The LegalSys variable was insignif-
icant in its association on perceived use of Standards (Wald = 0.787, p = .0.375) but signif-
icant in its association with perceived compliance with Standards (T-stat = 2.218,
p = 0.027). This evidence indicates that common law countries are more associated with
compliance with Standards than civil law countries.
Also, as reported earlier, AffiliateAge was highly correlated with a number of variables.
For this reason, we dropped it from our initial model in Table 7 but included it in additional
analysis. We found it to be unrelated to use of Standards but significantly (T-stat = 3.537,
p b 0.001) related to compliance with Standards. This finding indicates that internal audit
departments in countries with older affiliates are more associated with compliance than in-
ternal audit departments in countries with younger affiliates.
Finally, we replaced the three cultural dimension variables (UA, AT, and HO) in our
analysis with the remaining six cultural dimensions and re-estimated Models 1 and 2.
The results indicated little change in the overall model statistics, and their significance
and the control variables stayed about the same. Interestingly, for the six cultural di-
mension variables, none was significant for perceived use at the 0.05 level (GE had a
marginal significance of 0.058). However, for perceived compliance, we found institu-
tional collectivism (T-stat = − 2.122, p = 0.034) to be inversely related, and performance
orientation (T-stat = 3.836, p b 0.001) to be positively related to compliance with
Standards.
5. Summary, limitations, and implications
5.1. Summary
In this study, we first present evidence that perceived use of and compliance with inter-
nal auditing Standards are significantly different between the five cultural clusters repre-
senting 19 countries that we investigated. Perceived lack of use ranges from a low of
9.6% for the Eastern Europe cluster to the high of 21.2% for the Germanic Europe cluster.
Also, we find perceived compliance with Standards to be quite low in all countries, but
particularly in Eastern Europe at 41.3%. The cultural cluster with the highest perceived
compliance is the Anglo-Saxon cluster with 67.1%. We analyzed cost and compliance ex-
pectations in the countries and found that a low of 7.7% of Latin American respondents
indicated cost to be a factor and a high of 22.2% of Eastern European respondents. Also,
66.7% of the Eastern European respondents indicated that compliance with Standards is
not expected in their countries. In comparison, only 1.7% of the Anglo-Saxon respondents
selected this option.
We then used correlation analysis to identify three cultural dimensions, uncertainty
avoidance, assertiveness, and human orientation, which we used as our test variables for
their association with perceived use of/compliance with Standards. We find uncertainty
avoidance to be inversely related to both use and compliance, while assertiveness and
human orientation are positively related to compliance but not use of Standards. We
also investigated several control variables and found positive associations for the length of
IIA membership, professional certification in internal auditing, and hours of CPE training
with both perceived use and compliance. Finally, we find “Compliance not expected in my
country” to be inversely related to perceived use of and compliance with Standards, while
“Cost of compliance” (UseCostly) is significant for perceived compliance but not use. How-
ever, college degree (graduate/undergraduate), academic major (accounting/auditing/internal-
auditing versus others), and professional position (CAE versus IAM) are not significantly as-
sociated with perceived use of/compliance with Standards. In additional analysis, we find
common law countries to be more associated with compliance than civil law countries. We
also found IIA affiliate age to be positively associated with compliance with Standards.
5.2. Limitations
Our study has a number of limitations, correction of which can present opportunities for
further research. First, the IIA collected CBOK data electronically, asking participants via
e-mail to log onto the IIA website and respond to the CBOK questionnaire. To encourage
participation, the IIA offered monetary reward (25 prizes of $200 each randomly selected
among all participants who provided their e-mail addresses). No site visits were made by
the IIA to ensure accurate reporting by respondents. As such the study's findings reflect
perceptions of use/compliance, not necessarily actual use/compliance. Since the subject
groups being CAEs and IAMs are highly skilled, experienced and insightful professionals,
we believe that their perceptions are formed from many years of practice, not from unedu-
cated or wild guesses. Nevertheless, future studies may benefit from an investigation of a
small number of questions from CBOK in a laboratory setting or via interviews with a
group of CAEs and/or IAMs to further corroborate our findings.
Second, Eastern European CAEs and IAMs reported the highest perceived usage but the
lowest perceived compliance with Standards. A potential reason for this result is that these
countries' internal audit activities were established in recent years after the breakup of the
Soviet Union. As such, they may have made the decision to use the IIA Standards as a
framework. This is consistent with the literature (e.g., Reed, 2002), indicating that in
their attempt to catch up with developed countries, less developed countries rapidly
move to adopt Anglo-American model of corporate governance. On the other hand, we
find that perceived compliance is positively associated with the maturity of internal audit-
ing as a profession (measured by the age of the IIA affiliate in each country). A research
direction related to this finding is to investigate whether the influence of cultural dimen-
sions changes along the journey from adoption of Standards as a framework to full com-
pliance with all individual Standards.
Third, use and compliance with Standards have significant costs (e.g., training and im-
plementation costs) that must be compared with their benefits (e.g., quality assurance
through use and compliance with AS 1300). We investigated a simple cost measure,
“Compliance too costly” and found it not to be significantly associated with perceived
use but significantly and inversely associated with perceived compliance. Future studies
may be needed to provide more details of the type of cost of use/compliance that may be
associated with Standards.
Finally, cultural dimension measures used in this study were adopted from House et al.
(2004). These measures are based on data representing societies as a whole. They do not
pertain to specific internal audit activities, or internal auditing standards. Yet, investigation
of the associations of cultural dimensions with perceived use and compliance may need
measurement of dimensions at the standard level. CBOK (2006) lacks such data. Future
studies may be needed to collect data on important cultural dimensions (e.g., uncertainty
avoidance) at the organizational level and investigate their effects on use/compliance
with Standards.
5.3. Implications
A general implication of the association of cultural dimensions with perceived use of

Standards is that these dimensions should be investigated in various societies to assess
their associations/effects on internal auditing standard setting and practice. While internal
auditing is practiced in diverse cultural environments, the IIA has promoted the use of and
conformance with a unified set of Standards as an essential part of internal auditing prac-
tice. Understanding the factors that promote Standards in various countries may have a
positive impact on use of and compliance with Standards and would be an important
step forward in the IIA's mission to enhance professionalism in internal auditing. In its re-
cently published International Professional Practices Framework (The IIA, 2009c), the IIA
recognizes that Standards are principles-based and, thus, have flexibility in compliance.
While there is recognition that awareness of cultural dimensions can play a role in the prac-
tice of internal auditing worldwide, further research is needed to investigate the nature of
the effect of various cultural dimensions on the practice of internal auditing.
The finding that perceived use of and compliance with Standards are inversely related
to uncertainty avoidance also indicates opportunities for future investigation. This finding
suggests that new Standards that introduce significant ambiguity/uncertainty in terms of
interpretation and application may be subject to low usage. For example, the low level
of perceived compliance (overall, 39.9% with a low of 21.9% and high of 44.6%) with
the new AS 1300 (Quality Assurance and Improvement) may be related to the ambigui-
ty/uncertainty of this standard. Thus, introduction of new standards should be accompanied
with clear and straightforward guidance as well as training on how to implement them in
practice. Both guidance and training are crucial to overcome the resistance to use, especial-
ly in countries characterized by high uncertainty avoidance (e.g., Germanic Europe). Thus,
research in developing effective guidance and training material, taking into consideration
the impact of cultural differences, may be a fruitful avenue for future investigation.
The next observation indicating that assertiveness has a positive relationship with com-
pliance is that the nature of internal audit practice is generally assertive, even confronta-
tional at times. For example, Performance Standard 2600 recommends a persistent
attitude for internal auditors when management has accepted a level of residual risk that
may be unacceptable to the internal auditor. Our results suggest that internal auditors in so-
cieties characterized by high degrees of assertiveness may be more open to comply with
this standard than those with low degrees of assertiveness. Moreover, it remains a contin-
uous challenge for internal auditors to defend their position in the organization, especially
during times when companies cut their budgets for support functions like internal auditing.
Finally, human orientation being positively related to compliance with Standards also in-
dicates an area for further research. It is not clear what aspects of human orientation (e.g.,
encouraging and rewarding individuals for being fair, altruistic, friendly, generous, caring,
and kind to others, per House et al., 2004) may be related to compliance with Standards.
Future research may be needed to investigate this issue further.
Another finding comes from the important control variables in our study; that is, inter-
nal audit certification (e.g., CIA) is positively and significantly associated with perceived
use of/compliance with Standards. This finding indicates that more effort should be placed
on increasing the proportion of IIA membership certified as internal auditors. As Table 3
shows, only 44% of the CAEs and IAMs in this study are currently certified as internal au-
ditors (with a low of 27.4% in Eastern Europe and a high of 51.1% in Anglo-Saxon coun-
tries). Because the CIA exam focuses on the use of/compliance with Standards as a
foundation of internal audit practice, increased emphasis on certification of internal audi-
tors should be given priority, as it could help overcome barriers to use of/compliance
with Standards. As reported earlier, while the length of IIA membership and continuing
professional education also are positively associated with perceived use of/compliance
with Standards, “cost of use” is negatively related with compliance, while “compliance
not expected in the country” is inversely associated with perceived use/compliance. The
latter evidence suggests a need for introducing ways in which cost of use/compliance
can be minimized.
References
Abdolmohammadi, M. (2009). Factors associated with the lack of use or compliance with the IIA standards: A
study of Anglo-culture CAEs. International Journal of Auditing, 13(1), 27–42.
Abdolmohammadi, M., & Tucker, R. (2002). The influence of accounting and auditing on a country's economic
development. Review of Accounting and Finance, 1(3), 42–53.
Allegrini, M., D'Onza, G., Melville, R., Paape, L., & Sarens, G. (2006). The internal audit profession in Europe: A
literature review. Managerial Auditing Journal, 21(8), 845–853.
Bradshaw, M. T., & Miller, G. S. (2008). Will harmonizing accounting standards really harmonize accounting?
Evidence from non-U.S. firms adopting U.S. GAAP. Journal of Accounting, Auditing & Finance, 23(2),
233–263.
Brommer, M., & De La Porte, R. (1992). A context for envisioning the future. National Productivity Review, 11,
549–552.
Burnaby, P. A., Abdolmohammadi, M., & Hass, S. (2007). A global summary of the common body of knowledge
2006 — Preview edition. Altamonte Springs Florida: The Institute of Internal Auditors Research Foundation.
Burnaby, P. A., Hass, S., & Abdolmohammadi, M. (2009, January/February). A global summary of the common
body of knowledge: US respondents compared to non-US respondents. Internal Auditing, 1–26.
Carcello, J. V., Hermanson, D. R., & Raghunandan, K. (2005). Factors associated with U.S. public companies'
investment in internal auditing. Accounting Horizons, 19(2), 69–84.
CBOK (2006). Common Body of Knowledge in Internal Auditing Data Base. Altamonte Springs Florida: The In-
stitute of Internal Auditors Research Foundation.
Chan, K. H., Lin, K. Z., & Lan Mo, P. L. (2003). An empirical study on the impact of culture on audit-detected
accounting errors. Auditing: A Journal of Practice & Theory, 22(2), 281–295.
Chatman, J. A., Polzer, J. T., Barsade, S. G., & Neale, M. A. (1998). Being different yet feeling similar: The in-
fluence of demographic composition and organizational culture on work processes and outcomes. Administra-
tive Science Quarterly, 43, 749–780.
CIA World Factbook (2009). Available at:. https://www.cia.gov/library/publications/the-world-factbook/fields/
2100.html
Cohen, J. R., Pant, L. W., & Sharp, D. J. (1995). An exploratory examination of international differences in au-
ditors' ethical perceptions. Behavioral Research in Accounting, 7, 37–64.
Cooper, B. J., Leung, P., & Wong, G. (2006). The Asia Pacific literature review on internal auditing. Managerial
Auditing Journal, 21(8), 822–834.
Dallas, G. S. (2004). Governance and Risk. New York: McGraw-Hill-Irwin.
Doupnik, T. S. (2008). Influence of culture on earnings management: A note. Abacus, 44(3), 317–340.
Doupnik, T. S., & Salter, S. B. (1995). External environment, culture, and accounting practice: A preliminary test
of a general model of international accounting development. The International Journal of Accounting, 30,
189–207.
Goldberg, L. R. (1990). An alternative “description of personality”: The Big Five factor structure. Journal of Per-
sonality and Social Psychology, 59, 1216–1229.
Goodwin-Stewart, J., & Kent, P. (2006). The use of internal audit by Australian companies. Managerial Auditing
Journal, 21(1), 81–101.
Gray, S. J. (1988). Towards a theory of cultural influence on the development of accounting systems internation-
ally. Abacus, 24(1), 1–15.
Hass, S., Abdolmohammadi, M., & Burnaby, P. (2006). The Americas literature review on internal auditing. Man-
agerial Auditing Journal, 21(8), 835–844.
Hofstede, G. (1980). Culture's consequences: International differences in work-related values. London: Sage
Publications.
Hofstede, G. (1983). Dimensions of national culture in fifty countries and three regions. In J. B. Deregowski, S.
Dziurawiec, & R. C. Annis (Eds.), Explications in cross-cultural psychology. London: Swets and Zeitlinger.
Hofstede, G. (2001). Culture's consequences: Comparing values, behaviors, institutions, and organizations
across nations. London: Sage Publications.
Holtgraves, T. (1997). Styles of language use: Individual and cultural variability in conversational indirectness.
Journal of Personality and Social Psychology, 73, 624–637.
House, R. J., Hanges, P. J., Javidan, M., Dorfman, P. W., & Gupta, V. (Eds.). (2004). Culture, leadership, and
organizations: The GLOBE study of 62 societies. Thousand Oaks, California: Sage Publications.
House, R. J., & Javidan, M. (2004). Overview of GLOBE. In R. J. House, P. J. Hanges, M. Javidan, P. W.
Dorfman, & V. Gupta (Eds.), Culture, leadership, and organizations: The GLOBE study of 62 societies. Thou-
sand Oaks, California: Sage Publications.
Kagitçibasi, C. (1997). Individualism and collectivism. In J. W. Berry, M. H. Segall, & C. Kagitçibasi (Eds.),
Handbook of cross-cultural psychology (2nd ed.). . Boston: Allyn & Bacon.
La Porta, R., Lopez-de-Salines, F., Shleifer, A., & Vishny, R. W. (1997, July). Legal determinants of external fi-
nance. Journal of Finance, 1131–1150.
La Porta, R., Lopez-de-Salines, F., Shleifer, A., & Vishny, R. W. (1998, December). Law and finance. Journal of
Political Economy, 1113–1155.
La Porta, R., Lopez-de-Salines, F., Shleifer, A., & Vishny, R. W. (2000). Investor protection and corporate gov-
ernance. Journal of Financial Economics, 58(1–2), 3–27.
Marshall, R. (1997). Variances in levels of individualism across two cultures and three social classe.. Journal of
Cross-Cultural Psychology, 28, 490–495.
Patel, C. (2003). Some cross-cultural evidence on whistle-blowing as an internal control mechanism. Journal of
International Accounting Research, 2, 69–96.
Reed, D. (2002). Corporate governance reforms in developing countries. Journal of Business Ethics, 37(3),
223–247.
Salter, S. B., & Niswander, F. (1995). Cultural influence on the development of accounting systems internation-
ally: A test of Gray's (1988) theory. Journal of International Business Studies, 26(2), 379–397.
Schneider, S. C., & Barsoux, J. L. (1997). Managing across cultures. London: Prentice Hall Europe.
Tendam, H. W. (1987). Managerial flexibility: A strategic asset. Leadership & Organization Development Jour-
nal, 8(2), 11–16.
The IIA (2008). The international standards for the professional practice of internal auditing. Available at:. http://
www.theiia.org/guidance/standards-and-practices/professional-practices-framework/standards/?
search=standards
The IIA (2009a). Internal auditor competency framework. Available at:. http://www.theiia.org/guidance/
additional-resources/competency-framework-for-internal-auditors/?search=competency%20framework
The IIA (2009b). Certified internal auditor. Available at:. http://www.theiia.org/certification/certified-internal-

auditor/
The IIA (2009c). International professional practices framework. Available at:. http://www.theiia.org/guidance/
standards-and-guidance/ippf/
Triandis, H. C. (1994). Culture and social behavior. New York: McGraw-Hill.
Triandis, H. C. (1995). Individualism & collectivism. Boulder, Colorado: Westview.
Tsakumis, G. T. (2007). The influence of culture on accountants' application of financial reporting rules. Abacus,
43(1), 27–48.
Wallace, W. A., & Kreutzfeldt, R. W. (1991). Distinctive characteristics of entities with an internal audit depart-
ment and the association of the quality of such departments with errors. Contemporary Accounting Research,
7(2), 485–512.
Wayne, S. J., & Green, S. A. (1993). The effects of leader-member exchange on employee citizenship and impres-
sion management. Human Relations, 46(12), 1431–1441.

Abdolmohammadi 2011

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Abdolmohammadi 2011

Uploaded by

Copyright:

Available Formats

Available online at www.sciencedirect.

The International Journal of Accounting

An Investigation of the Association between Cultural

Received 14 August 2009

Keywords: Cultural dimensions; Internal auditing standards

internal audit managers (IAMs) to apply Standards as a framework, whereas “compliance”

2. Literature review and research questions

2.1. Cultural differences in general

2.2. Previous studies on the association of cultural differences with professional

RQ1a: Does perceived use of Standards vary by cultural clusters?

2.3. Cultural dimensions

Overall, if culture is related to differences in perceived use/compliance between various

2.3.1. Uncertainty avoidance

2.3.2. Power distance

2.3.3. Individualism versus collectivism

2.3.4. Gender egalitarianism

2.3.6. Future orientation

2.3.7. Performance orientation

2.3.8. Human orientation

RQ2a: Is perceived use of Standards associated with cultural dimensions?

2.4. Control variables

The IIA is a worldwide professional association, whose membership is voluntary, but

2.5. Model specification

Y ¼ α þ β1 Dimension1 þ β2 Dimension2 þ β3 Dimension3 þ β4 Degree ð1Þ

Y = Perceived use of Standards: 1/0 for yes/no (Model 1); Perceived

Position = 1 if CAE; 0 if IAM

3.1. Sources of data

Table 3 presents descriptive statistics on independent variables. Panel A presents vari-

Panel B: Continuous variables: mean and (standard deviation) of responses

Table 5 presents a correlation matrix of independent variables, where statistically signif-

4.3. Additional analysis

5. Summary, limitations, and implications

A general implication of the association of cultural dimensions with perceived use of

The IIA (2009b). Certified internal auditor. Available at:. http://www.theiia.org/certification/certified-internal-

You might also like