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Lean six sigma

Lean Six Sigma, effectiveness, and
efficiency of internal auditing
Hamideh Asnaashari and Fatemeh Khodabandehlou
Department of Accounting, Shahid Beheshti University, Tehran, Iran

Received 28 March 2023

Abstract Revised 2 August 2023
Purpose – In light of the recent changes in the internal audit (IA) landscape, the role of auditors has Accepted 21 November 2023
undergone a significant transformation. This paper aims to investigate the effects of applying Lean Six Sigma
(LSS) techniques on the effectiveness and efficiency of IA.
Design/methodology/approach – The study used a quantitative approach, surveying Iranian internal
auditors with a sample size of 384 participants. Data analysis involved confirmatory factor analysis and
structural equation modeling.
Findings – The analyses demonstrate a significant association between LSS application and IA
effectiveness and efficiency. In addition, an exploratory analysis indicates that the application of LSS
techniques by less experienced internal auditors had a reverse effect on IA function quality as a component of
IA competency. However, IA motivation factors, including education and position, did not mediate the impact
of LSS on IA effectiveness and efficiency.
Research limitations/implications – This study was conducted with Iranian internal auditors, which
may limit the generalizability of the findings to other countries. However, the primary academic implication of
this research lies in its novel perspective on emphasizing the concept of continuous improvement in IA
through the use of LSS techniques. By focusing on the need for internal auditors to add value to the business
in new ways, this research contributes to the literature on IA quality.
Practical implications – This study has significant implications for the effective management of IA
departments. By promoting the application of LSS techniques in IA, lean auditing is enhanced, and IA can
create value by improving the quality of its functions. Moreover, IA regulators can benefit from this study as
it emphasizes providing guidance and training on LSS techniques to enhance IA skills.
Originality/value – This research is pioneering in applying LSS methodology to enhance the effectiveness
and efficiency of internal auditing. It also considers the integration of lean thinking into current audit
practices, making it unique and valuable in internal auditing research.
Keywords Lean Six Sigma, Internal audit effectiveness, Internal audit efficiency,
Internal audit function quality
Paper type Research paper

1. Introduction
Internal audit (IA) has evolved into a critical tool for controlling the governance and
operations of organizations (IIA, 2010). IA primarily focused on compliance assurance,
financial control and asset safeguarding (Turetken et al., 2020; Allegrini et al., 2006; Dellai
and Omri, 2016). However, in recent years, IA has undergone changes that have expanded
its scope of involvement and increased its potential to add value. The Institute of Internal
Auditors (IIA) has provided a widely accepted definition of IA, emphasizing its role as an
independent, objective assurance and consulting activity to add value and improve an
organization’s operations (IIA, 2017). In the present context, IA’s added value has become
crucial, driven by growing regulatory requirements and a heightened focus on governance
and risk management (Turetken et al., 2020; Cohen and Sayag, 2010). Nevertheless, how IA International Journal of Lean Six
Sigma
can bring value to an organization depends on how effectively it is managed (Turetken et al., © Emerald Publishing Limited
2040-4166
2020; Dittenhofer, 2001; Mihret and Wondim Yismaw, 2007). DOI 10.1108/IJLSS-03-2023-0058
IJLSS The success of the IA function is determined by meeting the expectations of various
stakeholders, including managers, audit committee (AC), external auditors and auditees
(Sarens and De Beelde, 2006; Lenz et al., 2017; Sarens et al., 2009; Soh and Martinov-Bennie,
2011; Cohen et al., 2002; Bame-Aldred et al., 2013; Roussy and Brivot, 2016; Elliot et al., 2007).
This emphasis on value delivery aligns with the IIA Standards, particularly Standard 2000
– Managing the IA Activity, which emphasizes the need for the chief audit executive (CAE)
to effectively manage the IA function to ensure it adds value to the organization (Coleman,
2015).
Accounting literature has recently acknowledged the need to reconsider the IA
strategy and possibly adopt a new paradigm. Some studies (Lenning and Gremyr, 2022;
Delloite, 2010; Price Waterhouse Coopers [PWC], 2010) suggest that the focus of IA
should shift from auditing specific organizational units to emphasizing continuous
improvement and processes. This change is believed to be more effective and value-
adding. However, such a shift requires improvements in the skills and competencies of
internal auditors (Abuazza et al., 2020; Balague et al., 2014; Berlitz and Gaelzer, 2009;
Bernardo et al., 2010).
Over the years, continuous improvement models focused on enhancing quality and
streamlining production processes have grown significantly. These models have been
extensively studied and applied in various industries (Belekoukias et al., 2014; Carvalho,
2019; Costa et al., 2019; De Sanctis et al., 2018; Jasti and Kodali, 2015; Knol et al., 2018; Ribeiro
et al., 2019; Rodrigues et al., 2019; Sabet et al., 2016; S
a et al., 2019; Sezen et al., 2012).
Continuous improvement is widely recognized and closely associated with total quality
management principles, such as Six Sigma and lean manufacturing. Lean thinking, as
defined by Womack and Jones (1997), enables organizations to identify value, organize
value-creating actions efficiently and execute them promptly upon request, resulting in
improved effectiveness. The central focus of Lean Thinking is to deliver value to the end
customer by meeting their needs at the right time and with appropriate pricing (S
a et al.,
2022).
The Six Sigma approach is a business problem-solving methodology that aims to
improve processes by understanding customer needs, identifying causes of quality
variations and using data and statistical analysis (Coleman, 2015). Implementing Six Sigma
in IA can lead to more valuable audit recommendations and cost reduction. It also helps
internal auditors assess risks across all systems and processes at the operational level. By
using Six Sigma to assess risk management in IA, organizations can achieve greater
efficiencies and focus on essential aspects that add or preserve value (Hafez, 2015; Hirth,
2008). Six Sigma uses the DMAIC methodology, which involves five phases: define,
measure, analyze, improve and control (Sin et al., 2015). The DMAIC approach is used to
identify the root cause of process variation and implement permanent process
improvements (Ellis, 2016).
The combination of lean manufacturing and Six Sigma, known as LSS, has emerged as a
highly efficient approach for achieving sustainable-oriented operational improvement. LSS
integrates the principles and tools of Six Sigma with those of lean manufacturing to create a
unified problem-solving algorithm and is widely recognized as a robust business improvement
methodology (Jamil et al., 2020; Mustapha, 2017; Fonseca and Domingues, 2018; Laureani and
Antony, 2012). LSS positively impacts various aspects of organizational performance,
including profitability, efficiency, customer satisfaction and quality (Cherrafi et al., 2016).
Coleman (2015) and Barlow (2013) have demonstrated that integrating Lean tools into current
audit methodologies can enable auditors to delve deeper into business systems, identify
weaknesses and facilitate continuous improvement. Smoth (2016) also showed that Lean
Sigma-related tools could effectively enhance audit planning, implementation and follow-up Lean six sigma
activities, including corrective and preventive actions.
There are specific tools in the lean toolbox that are well-suited for auditors to use in
continuous improvement efforts to eliminate waste and enhance processes. These tools
include value stream mapping (VSM), which helps identify actions that are value-add or not
(Chiarini, 2011), and process capability, which is used to assess the ability of a process to
meet customer requirements consistently (Coleman, 2015; Ellis, 2016). The 5-WHYs
technique is used to investigate an issue by asking “why” repeatedly to determine the root
cause (Ellis, 2016), while the Ishikawa diagram, also known as the fishbone diagram, is used
to identify the cause-and-effect relationships leading to the root cause (Coleman, 2015;
DeZoort and Pollard, 2023).
Implementing LSS offers numerous advantages, including increased productivity,
greater efficiency, quicker production and improved customer and stakeholder satisfaction
(de Freitas and Costa, 2017). Performance analysis is a critical procedure to assess how
effectively a system achieves its objectives (Raval et al., 2020; Lenz et al., 2017; Roussy and
Brivot, 2016).
However, LSS also has some limitations (Abuazza et al., 2020; Smoth, 2016). These
include cultural resistance to change among employees and management (Sreedharan et al.,
2018), inadequate training and IA competence (Turetken et al., 2020; IIA, 2017; Dellai and
Omri, 2016). Furthermore, the lack of a culture of continuous improvement (Alnadi and
McLaughlin, 2021) and challenges in quantifying the improvements achieved by LSS
implementation can result in a lack of motivation for further implementation and
performance realization.
Iran’s IA profession has experienced significant growth since 2012. According to
Iranian regulations, internal auditors are expected to add value by using a risk-based
approach to evaluate and enhance the effectiveness of risk management and control
processes (Securities and Exchange Organization [SEO], 2013). Moreover, Smoth (2016)
highlighted that LSS-related tools could be effectively used in audit planning,
implementation and corrective and preventive actions. This suggests that
incorporating LSS tools and techniques could improve the efficiency and effectiveness
of IA in Iran and lead to greater customer satisfaction. As a result, the research question
is focused on the question as follow:

RQ. To what extent do LSS tools and techniques contribute to the effectiveness and
efficiency of internal auditors in carrying out their responsibilities?
Our study contributes to the existing literature by using data from Iran, an emerging
country. First, while auditing organizations’ activities is crucial in identifying early signs of
upcoming changes and threats, there is limited research on lean auditing (Dobrowolski et al.,
2022; García-Meca et al., 2021; Cohen and Sayag, 2010). Most existing research in LSS has
concentrated on specific industries such as manufacturing, healthcare, construction and
higher education (Jamil et al., 2020; Sreedharan and Sunder, 2018; Antony et al., 2017).
However, there is a growing motivation to change the IA perspective from a traditional
compliance focus to a new perspective (Turetken et al., 2020; Allegrini et al., 2006; Arena and
Azzone, 2009), which calls for further research in the IA area. In this regard, DeZoort and
Pollard (2023) emphasize the importance of root cause analysis (RCA) as a crucial tool within
the IA profession. In addition, Gueorguiev (2018) highlights the improvement of IA
procedures using suppliers, inputs, processes, outputs and customers (SIPOC). Our study
addresses the gap by focusing on applying LSS tools and techniques in IA, which previous
research has not explored extensively.
IJLSS Second, the effectiveness and efficiency of IA play a crucial role in maintaining and
enhancing its credibility (the International Professional Practices Framework (IPPF), 2010).
Internal auditors face significant challenges in finding approaches to improve IA function
quality (Hafez, 2015; Turetken et al., 2020; Dittenhofer, 2001; Mihret and Wondim Yismaw,
2007). Despite extensive research on IA effectiveness, the relationship between effectiveness,
efficiency and LSS remains inadequately understood. Previous studies have mainly focused
on exploring the impact of internal auditors’ competencies (Arena and Azzone, 2009; Soh
and Martinov-Bennie, 2011) and the quality of relationships between CAE and the AC (Soh
and Martinov-Bennie, 2011) as the most recognized drivers of IA effectiveness and efficiency
(Roussy et al., 2020; Lenz et al., 2014). However, the connections between IA quality and the
application of LSS have not been thoroughly explored and investigated in this study.
Third, it is essential to consider the contextual features of organizational culture and IA
competency. While existing studies have predominantly focused on industries in developed
countries, there is limited research on the impact of LSS application in developing countries
(Zahraee, 2016; Mustapha et al., 2019; Scheller et al., 2021). These developing countries have
different barriers, critical success factors (CSFs) and implementation strategies of LSS that
can influence the effectiveness and efficiency of LSS. In this regard, Iran presents a unique
opportunity to explore the effect of LSS on IA quality, as it is a developing country where all
public companies must have IA functions and adhere to regulations comparable to
international standards. Investigating the impact of LSS in such a context can provide
valuable insights and contribute to understanding how LSS can be effectively implemented
and integrated into IA practices in diverse settings.
The paper’s structure follows: Section 2 provides background information and presents the
hypothesis development. Section 3 describes the research design, while Section 4 shows the
descriptive statistics. The main empirical results are presented in Section 5, followed by Section
6, which concludes the paper.

2. Literature review and hypothesis development

2.1 Lean Six Sigma and internal auditing
Organizational leaders today prioritize enterprise-wide risk management (ERM) more than
ever. In this context, IA plays a vital role in the ERM landscape (KPMG, 2007). According to
Standard 2000, the IA activity adds value to the organization and its stakeholders by
providing objective and relevant assurance, contributing to the effectiveness and efficiency
of risk management, control processes and governance (IIA, 2016).
LSS originated from two distinct methodologies: Six Sigma and Lean. While there is
some debate over the first use of Six Sigma (Pacheco et al., 2015), it is widely acknowledged
that it came into practice in the 1980s, with Motorola being a prominent adopter (Sareen
et al., 2015; Spasojevic Brkic and Tomic, 2016; Jamil et al., 2020). General Electric (GE) and
AlliedSignal further developed Six Sigma in the late 1990s (Braunscheidel et al., 2011). On
the other hand, Toyota pioneered the concept of Lean in the early 1990s, emphasizing
efficiency and doing more with less (Karim and Arif-Uz-Zaman, 2013; Sareen et al., 2015;
Spasojevic Brkic and Tomic, 2016; Johnson, 2017).
In the late 1990s, Lean and Six Sigma practitioners combined the two methodologies,
allowing organizations to select the most suitable tools to enhance their continuous
improvement process (Laureani and Antony, 2012). Over the last two decades of the 20th
century, many organizations independently adopted Lean and Six Sigma, achieving
significant improvements and positively impacting their performance (Antony et al., 2017;
Sahoo and Yadav, 2018; Patel and Patel, 2021). As the 21st century began, the LSS
methodology emerged as a preferred approach for continuous improvement, gaining
attention from academics, researchers and practitioners and being widely adopted in Lean six sigma
various organizations (Snee, 2010; Patel and Patel, 2021).
Motorola initially applied a four-stage problem-solving approach known as the Six
Sigma program to improve product quality using the measure, analyze, improve and control
(MAIC) framework (Brady and Allen, 2006; Desai et al., 2012). Later, based on experiences
from other companies adopting the Six Sigma program, GE added the “Define” stage,
leading to the DMAIC approach (Hoerl, 2001). In the 1990s, this methodology gained more
importance and widespread adoption (Hahn et al., 2000). DMAIC helps identify the root
cause of process variation and permanently improves the process (Ellis, 2016).
Various definitions of LSS have been put forward, some of which are as follows. George
(2002) defines LSS as a methodology aimed at maximizing shareholder value by achieving
the fastest improvement in customer satisfaction, cost, quality, process speed and invested
capital. Taghizadegan (2006) views it as a business strategy focused on improving the
bottom line and increasing customer satisfaction. Snee (2010) describes it as a business
strategy and a methodology that enhances process performance, improves customer
satisfaction and leads to better bottom-line results. Munro (2009) emphasizes that LSS is not
about working harder but working smarter.
The DMAIC methodology of LSS integrates the lean steps within the Six Sigma DMAIC
steps, which can be effectively used in IA as follows (Veena and Prabhushankar, 2020).
During the define phase, the IA team defines the problem, initiates the project, selects the most
advantageous project and forms a team (Hafez, 2015; Johnson, 2017; Veena and Prabhushankar,
2020). This phase involves preparing the audit plan, resource management plan, project
scheduling, quality metrics and quality checklists (Mustapha, 2017), using techniques such as
stakeholder analysis, voice of customers and affinity diagrams (Ellis, 2016).
In the measure phase, the existing process is thoroughly reviewed, and areas requiring
improvement are identified (Johnson, 2017; Stern, 2016). Staff assignments (Laux et al., 2015)
and data collection plans are prepared in this phase using techniques such as detailed process
maps, process capability analysis, statistical process control and Pareto charts (Ellis, 2016).
The analyze phase aids in identifying and analyzing the gaps between current and
desired performance, determining potential root causes contributing to process inefficiency
(Ellis, 2016; Johnson, 2017). Techniques used in this phase include brainstorming, 5-WHYs
Analysis, process maps, Cause-and-Effect Diagrams, correlation analysis, ANOVA and
statistical hypothesis testing (Ellis, 2016; Johnson, 2017).
In the improve phase, solutions to the identified problems are established, implemented
and action plans are developed (Stern, 2016). Techniques used in this phase include
brainstorming, decision matrices, pilots, project plans and failure mode effects analysis
(Sahno et al., 2015; Hafez, 2015; Johnson, 2017; Ellis, 2016).
During the control phase, the solutions are reviewed to ensure they meet the required
needs, and the process is deemed complete (Sahno et al., 2015). Benefits, difficulties and
lessons learned are then determined and incorporated into plans (Hafez, 2015; Johnson, 2017).
The control phase involves standardizing and documenting the new process, communicating
details to others and closing the project. Commonly used tools during this phase include the
return-on-investment formula, control charts and transition plans (Ellis, 2016).

2.2 Internal auditing in Iran

Before 2012, having an IA department was not mandatory in Iran. However, a series of
embezzlement cases in the early 2011s exposed weaknesses in internal controls (Nikbakht et al.,
2018), leading to the need for reforms in the corporate governance system. Consequently, the
SEO approved three directives in 2012 and 2013, focusing on internal controls, AC and IA
IJLSS activities (Menati et al., 2018). The internal control guidelines mandated listed companies to
assess and report on internal controls to shareholders (SEO, 2012). Furthermore, in February
2013, all companies had to establish an AC responsible for overseeing management systems,
risk management, internal controls and compliance. The AC should comprise three to five
members, with the majority being independent and possessing financial expertise (SEO, 2013).
The mission of the IA department in Iran is to provide independent and objective
assurance and consulting services to enhance company performance. Internal auditors use a
risk-based methodology to develop annual plans, subject to approval by the AC. They also
establish quality assessment programs to ensure the effectiveness of IA (Menati et al., 2018;
Atemadi et al., 2017). Since no national IA standards have been created, auditors follow
IPPF. Furthermore, the Iranian Association of Internal Auditors (IAIA) was established as a
professional organization in 2011. The association offers training and certification programs
for internal auditors and conducts evaluations of IA departments.

2.3 Lean Six Sigma, internal auditing’s effectiveness and efficiency

LSS is rooted in principles including customer focus, learning and improvement and
teamwork (Llor
ens-Montes and Molina, 2007). Auditing as a process should enhance the
effectiveness of the audited processes, and simultaneously, the IA functions should operate
effectively (Dittenhofer, 2001; Cook et al., 2016; Dobrowolski, 2021).
Effectiveness refers to the capacity to achieve results that align with the goals set by the
organization (Hafez, 2015). In the context of IA, effectiveness is achieved when internal
auditors accomplish the tasks outlined in their objectives (Dittenhofer, 2001). LSS impacts
effectiveness through Six Sigma, which focuses on process improvement, variation
reduction and defect reduction (Fonseca and Domingues, 2018; S
a et al., 2022). On the other
hand, efficiency has been defined as the extent to which an organization uses its resources to
produce measurable outputs (Dittenhofer, 2001). LSS affects efficiency through the
application of Lean methodology, which targets speed and aims to reduce waste, eliminate
non-value-added activities and enhance value for the customer (Spasojevic Brkic and Tomic,
2016; Karim and Arif-Uz-Zaman, 2013; Fonseca and Domingues, 2018).
The impact of LSS on the effectiveness and efficiency of IA can be examined from
various theoretical perspectives. According to the resource-based view, an organization is a
collection of physical, human and organizational resources. Resources that are valuable,
rare, difficult to imitate and not easily replaceable are the primary source of superior
performance (Madhani, 2010). Implementing LSS changes organizational culture,
strengthens cross-functional team working, facilitates effective communication and
enhances the training background (Aboelmaged, 2010). This linkage of LSS to business
strategy, customer relations, human resource management and suppliers provides unique
resources and capabilities that enhance effectiveness and efficiency (Gutierrez-Gutierrez and
Antony, 2020). The competency-based perspective suggests that a company should develop
a distinctive combination of resources and capabilities to achieve effectiveness and
efficiency based on possessing competencies (Huq, 2006). In this context, the competency for
LSS can be defined as the firm’s abilities and specific skills in deploying its resources and
cognitive characteristics to achieve LSS results. The successful implementation of LSS
requires a dedicated and focused human resource approach to achieve the desired goals and
objectives (Snee, 2010).
Moreover, according to dynamic capabilities (DC) theory, firms can integrate, construct
and reconfigure internal and external competencies to adapt to competitive environments
(Gutierrez-Gutierrez and Antony, 2020). The development of DC is proposed to involve
critical components such as absorptive capacity (Wang and Ahmed, 2007), knowledge
management (Paarup Nielsen, 2006) and learning mechanisms (Zollo and Winter, 2002). Lean six sigma
This has led researchers to consider the positive relationship between LSS and IA quality
(Gutierrez-Gutierrez and Antony, 2020). LSS fosters a learning and continuous improvement
culture, enabling the renewal of knowledge embedded in organizational routines
(Arumugam et al., 2016; Easton and Rosenzweig, 2012; Sin et al., 2015). Moreover, LSS
practices such as supportive leadership and the use of statistical tools like process mapping
or streamlining play a significant role in facilitating learning and knowledge creation
(Antony and Gupta, 2019; Arumugam et al., 2016; Pathiratne et al., 2018; Sin et al., 2015).
Finally, the theory of planned behavior (TPB) has been used to explain the impact of LSS
on IA quality. According to TPB, a person’s actual behavior in performing a specific action
is directly influenced by their behavioral intention, which is jointly determined by the
subjective norm (the perceived social pressure to perform or not perform the behavior) and
attitude (the degree of a person’s favorable or unfavorable evaluation or appraisal of the
behavior in question) toward the behavior. Behavioral intention is also influenced by
perceived behavior control (people’s perception of ease or difficulty performing the behavior
of interest). The widespread adoption of LSS globally is evidence of its significant role in
facilitating organizational success, as attested by many firms (Jamil et al., 2020). These
studies support the behavioral intention toward LSS implementation and its associated
benefits.
Effectiveness and efficiency need to be measured separately, as the audit can be effective
but not efficient and vice versa (Beckmerhagen et al., 2004). Previous literature has
categorized drivers of IA effectiveness into four categories:
(1) organizational characteristics, including firm size (Goodwin-Stewart and Kent,
2006), industry sector (Sarens and Abdolmohammadi, 2011), the legal requirement
to have an IA function and overall governance context (Arena et al., 2006);
(2) IA relationships, including interaction between internal and external audit and
cooperation with the AC (Arena and Azzone, 2009; Zaman and Sarens, 2013;
Ma’Ayan and Carmeli, 2016);
(3) IA resources, including personal attributes, objectivity, soft skills and personality
traits (Prawitt, 2003; Van Peursem, 2005; Mirhet et al., 2010), and the competencies
of IA (Arena and Azzone, 2009; Soh and Martinov-Bennie, 2011; PwC, 2018); and
(4) IA processes (Lenz et al., 2014), including completion of the audit plan, the degree
of acceptance and implementation of IA recommendations (Soh and Martinov-
Bennie, 2011; Turetken et al., 2020), information and communication (Karagiorgos
et al., 2011) and the existence of a follow-up process (Mihret and Wondim Yismaw,
2007; Oussii and Taktak, 2018).

In this regard, the first hypothesis is developed as follows:

H1. LSS has a significant positive impact on IA effectiveness.

There is a paucity of research on IA efficiency; however, several metrics can be used to
assess IA efficiency, such as the number of audits scheduled, number of audits completed,
timeliness of performance feedback, staff utilization, completed audits per auditor, actual
hours vs. budgeted hours, audit report cycle time and number of IA reports issued vs.
planned IAs (Kenneth, 2013; Hafez, 2015). Considering this, we propose the second
hypothesis:

H2. LSS has a significant positive impact on IA efficiency.

IJLSS 2.4 Lean Six Sigma: benefits, limitations and success factors
Applying Lean and Six Sigma brings numerous benefits to the organization due to the
complementary nature of these philosophies (Salah et al., 2010). LSS offers a customer-
centric focus on value (Patel and Patel, 2021) and creates a network of champions within the
organization to guide data-driven decision-making for improvement initiatives (Antony,
2004). Furthermore, it enhances the application and effectiveness of ERM in three primary
domains, encompassing implementation tools, skilled employees and value creation (Hafez,
2015). Other benefits of LSS include improved problem-solving, enhanced internal
communication, increased productivity, a culture of continuous improvement and employee
empowerment (S
a et al., 2022; Alnadi and McLaughlin, 2021). LSS culture plays a significant
role in creating and sustaining improvements. LSS deployment in HR provides many
capabilities and enhances the strengths of HR (Madhani, 2022).
However, there are some limitations associated with using LSS in IA. These include
potential resistance to change from employees (Singh and Rathi, 2022), time-consuming
implementation, lack of employee competence (Shamsi and Alam, 2018), a risk of
overreliance on data and metrics and a lack of availability of reliable data for reporting
(Kwak and Anbari, 2006; Bhat et al., 2023).
The successful implementation of LSS in organizations is facilitated by various
leadership characteristics and team members’ attributes and behaviors (Aij and Teunissen,
2017; Laureani and Antony, 2017; Nogueira et al., 2018; Seidel et al., 2017; Tortorella et al.,
2020; Alnadi and McLaughlin, 2021). Leaders are crucial in supporting LSS operations by
identifying essential competencies such as teamwork, technical knowledge, business vision,
Lean thinking and communication skills (Toledo et al., 2019). They should foster an
environment where mistakes are viewed as opportunities for learning and encourage
employees to submit new ideas through a learning environment and employee coaching
(Goodridge et al., 2015; Loh et al., 2019). The significance of organizational culture, which
encompasses empowerment, trust-building and employee motivation, cannot be overlooked
in facilitating and supporting the successful implementation of LSS (Maijala et al., 2018). A
positive and supportive organizational culture can enhance employee engagement and
commitment to the LSS approach (Laureani and Antony, 2017).

3. Research methodology
The research methodology used in this study is derived from the study’s objectives and uses
a cross-sectional approach through a well-structured questionnaire-based survey. Cross-
sectional surveys are preferred as they provide a snapshot of information at a specific
moment (Singh et al., 2013; Saini and Singh, 2020). The main objective of this research is to
assess the impact of LSS on IA effectiveness and efficiency. The approach is exploratory,
explanatory and predictive (Cândido and Ferreira, 2022). To analyze the data, PLS-SEM is
chosen due to its greater statistical power compared to other alternative methods for
structural equation modeling, making it suitable for theory development and exploratory
analysis (Hair et al., 2017; Jeronimo et al., 2020).
In addition, PLS-SEM is advantageous when data does not follow a normal distribution
(Hair et al., 2017). Given these characteristics, PLS-SEM is an appropriate statistical method
for this research. Furthermore, the proposed hypotheses are evaluated by examining the
path and t-statistic values (Vinodh, 2020) to determine their acceptance.

3.1 Population and sample size

The study targeted Iranian internal auditors as its population. The questionnaire was
disseminated through IAIA to reach potential participants, inviting its members to take
part. Furthermore, we contacted various IA departments and shared the questionnaire link Lean six sigma
on popular social networks like WhatsApp and Telegram to increase participation. Data
were collected from September to November 2022 using an online questionnaire (The Google
Form link).
For a robust PLS-SEM model, specific minimum requirements need to be met. The “10
times rule” suggests that the sample size should be at least 10 times the largest number of
formative indicators used to measure a single construct (10
10 ¼ 100) (Jeronimo et al.,
2020). However, the sample size was determined using a tool based on the statistical power
of the tests for R2 (Hair et al., 2017). According to this tool, a sample size of 145 was found to
be sufficient to detect an R2 as low as 0.10 (i.e. 0.10) with a statistical significance of 1.0%
and a power of 80% (Cândido and Ferreira, 2022). Hence, we collected 384 valid
questionnaires after excluding some with incomplete answers (>145), resulting in a
response rate of 78%. A convenience sampling method was used for selecting the sample, as
Hulland et al. (2018) suggested, for testing theoretical effects within a research framework
(Samagaio and Felício, 2023). It is a non-probabilistic method used to gather data from a
portion of the population and identify the opinions of a statistically significant number of
respondents (Hair et al., 2010).

3.2 Questionnaire development and variable measurement

A structured questionnaire was developed to address the research questions, following
essential guidelines such as clear instructions, straightforward language and neutral
phrasing to prevent biased responses. The initial version of the questionnaire underwent
review by three auditing professors and five practitioners, leading to minor improvements
for better clarity and comprehension (Saini and Singh, 2020). Cronbach’s alphas were
calculated with pretest data to ensure reliable measurement scales, and all values exceeded
the recommended threshold of 0.7, indicating good reliability (Hair et al., 2014). Several
procedures were adopted to mitigate common method variance (Podsakoff et al., 2003;
Chang et al., 2010):
 A cover letter was provided explaining the study’s objectives, voluntary
participation and the anonymity of responses, along with contact information for
any queries;
 Participants were assured that there were no right or wrong answers, and they were
encouraged to respond honestly;
 A five-point Likert scale was used, with each point clearly labeled; and
 Validated measurement items from existing literature were used, and questions
related to latent variables were presented on different pages to prevent biased
responses (Cândido and Ferreira, 2022).

The final version of the questionnaire consists of four parts, totaling 38 items. The first part
focuses on the companies’ profiles and the respondents’ details, comprising 16 items. The
second part contains questions about applying LSS techniques, encompassing eight items.
The third and fourth parts assess internal auditors’ effectiveness (nine items) and efficiency
(five items) in performing their responsibilities. The questionnaire uses a five-point Likert
Scale, ranging from 0 to 4, with 0 indicating “not at all” and four meaning “full extent.” The
questionnaire items related to LSS techniques were adapted from the works of DeZoort and
Pollard (2023), Ellis (2016), Johnson (2017), Mustapha (2017), Stern (2016) and Chiarini (2011).
The items concerning IA effectiveness were derived from the studies of Turetken et al.
(2020), Karagiorgos et al. (2011), Oussii and Taktak (2018) and IPPF (2010). Lastly, the
IJLSS questionnaire items assessing IA efficiency were primarily based on the research of Kenneth
(2013), Hafez (2015) and the IPPF (2010).

3.3 Data analysis procedures

The analysis of the study includes several steps. First, a brief review of the respondents’
profiles and main descriptive statistics is conducted. Second, the measurement models are
studied, which involves analyzing the reliability of indicators (Cronbach’s a) and construct
reliability (composite reliability [CR] criterion), as well as assessing convergent validity
(average variance extracted [AVE] and indicator loadings) and discriminant validity
[Fornell and Larcker (1981) criterion] (Cândido and Ferreira, 2022). Next, the study of
structural models is performed using SmartPLS (Ringle et al., 2015). The research model is
built in this phase, and an SEM analysis is carried out. This statistical technique combines
aspects of multiple regression with factor analysis, enabling the simultaneous examination
of a series of dependency relationships (Kline, 2011). As a result, causal relationships of
influence can be verified (Hair et al., 2010). Finally, an exploratory analysis of alternative
relationships between respondents’ profiles and research variables is conducted.

4. Research findings
4.1 Sample descriptive statistics
Table 1 presents descriptive statistics. Based on the table, the survey respondents consist
mainly of CAE (32.8%) and audit staff (44.8%). Approximately half of the auditors have less
than 10 years of auditing experience (50.5%). Most of them work in large-sized
organizations (64.3%) in the service (87%) or industry sectors (13%), with a majority having
a high level of education (71.6%) (Cândido and Ferreira, 2022). Regarding the AC, all of them
have at least six meetings annually, with 34.6% meeting at least once a month. The majority
of AC members possess two financial expertises (45.6%), and the ACs consist of three
members (60.4%) and five members (39.6%).
Table 2 presents the means and standard deviations for the research indicators. It shows
that internal auditors moderately apply all LSS techniques, emphasizing eight waste tools
(mean ¼ 2.85) and relatively lower usage of the cause-and-effect diagram (mean ¼ 1.97). The
respondents have a more comprehensive range of use in eight waste tools (SD ¼ 1.49),
compared to a narrower range in the cause-and-effect diagram (SD ¼ 0.91). On average, IA
efficiency (mean ¼ 4.14) is slightly more influenced than IA effectiveness (mean ¼ 4.09)
when using LSS techniques.

4.2 Quality assessment of research models

4.2.1 Reliability and validity tests indicator. The analysis of the measurement model
involves evaluating the internal consistency reliability, convergent validity and
discriminant validity (Hair et al., 2017). First, the indicator reliability is assessed using
Cronbach’s alpha value, while internal consistency reliability is measured using the CR
value (Table 3). To accept the construct, both indicator and internal consistency reliability
values should be greater than 0.7 (Vinodh, 2020). In this study, all values for both indicators
are higher than 0.7 (Table 3), with averages of 0.88 and 0.90, respectively, indicating
adequate internal consistency reliability (Hair et al., 2017).
Furthermore, the study demonstrates adequate convergent validity as all latent
variables’ AVE values exceed 0.5 with an average of 0.60 (Table 3). In addition, all items’
loadings are above 0.6, with an average of 0.77 (Table 2), indicating satisfactory convergent
validity (Hair et al., 2017). Finally, the discriminant validity was assessed by examining the
correlations between each latent variable and all other constructs. The results, shown in
Demographics Frequency %
Lean six sigma
Age
< 35 176 45.8
35–45 179 46.6
>45 29 7.6
Respondents’ years of experience
<3 35 9.1
3–10 159 41.4
10–15 126 32.8
> 15 64 16.7
Educational level
Bachelor 109 28.4
MA 252 65.6
Ph.D. 23 6.0
Activity sector
Services 334 87
Industry 50 13
AC meetings number
6–8 91 23.7
9–11 160 41.7
>11 133 34.6
AC size
Three-member 232 60.4
Five-member 152 39.6
Respondent position
CAE 126 32.8
Manager 29 7.6
Senior IA 57 14.8
IA 172 44.8
No. AC financial experts
One 103 26.8
Two 175 45.6
Three 106 27.6
Employees number
<200 137 35.7
200–400 92 23.9
>400 155 40.4 Table 1.
Sample descriptive
Source: Authors’ own creation statistics

Table 3, indicate that the correlations are smaller than the square root of the latent variable’s
AVE, which suggests adequate discriminant validity (Cândido and Ferreira, 2022). Items
with low loadings (<0.4) were excluded from the subsequent data analysis to ensure both
convergent and discriminant validity, which involved removing three items related to LSS
and one item related to IA effectiveness.

4.2.2 Evaluation of the inner structural model In this regard, several indicators, such as
the coefficient of determination (R2), predictive relevance of the model (Q2), the goodness of
IJLSS Standard
Latent construct Items n Mean SD loadings

LSS Value stream or process flow map (L1) 384 2.26 1.01 0.72
Spaghetti diagram (L2) 384 2.39 1.03 0.82
Control chart (L3) 384 2.23 1.28 0.79
Cause and effect diagram (L4) 384 1.97 0.91 0.77
Poka-yoke tool (L5) 384 2.02 0.97 0.71
5-WHYs (L6) 384 2.27 1.12 0.77
Eight waste tools (L7) 384 2.85 1.49 0.79
SIPOC diagram (L8) 384 2.22 1.18 0.80
IA effectiveness Proactive role-playing (Fe1) 384 4.20 0.85 0.72
Internal control recommendations (Fe2) 384 4.12 0.94 0.75
risk management process recommendations (Fe3) 384 4.02 0.88 0.71
Communications quality (Fe4) 384 4.07 0.91 0.80
Enhancing processes documentation (Fe5) 384 4.16 0.83 0.78
Operating process improvements (Fe6) 384 4.01 0.97 0.84
The degree of recommendations’ acceptance (Fe7) 384 4.13 0.91 0.78
Findings resolutions (Fe8) 384 4.08 0.91 0.81
Customer satisfaction (Fe9) 384 4.03 0.90 0.80
IA efficiency The number of completed audits (Fi1) 384 4.06 0.91 0.70
Financial resource utilization (Fi2) 384 4.14 0.93 0.75
Staff utilization (Fi3) 384 4.14 0.84 0.82
Actual vs. budget performance (Fi4) 384 4.21 0.86 0.79
Table 2. Timeliness of performance feedback (Fi5) 384 4.16 0.88 0.75
Measurement model
statistics Source: Authors’ own creation

Latent variable Cronbach’s a CR F2 AVE LSS IA effectiveness IA efficiency

LSS 0.90 0.92 0.31 0.60 0.77

IA effectiveness 0.92 0.93 – 0.61 0.48 0.78
IA efficiency 0.83 0.87 – 0.59 0.47 0.72 0.77
Table 3. Notes: The values in the diagonal and in bold represent AVE, and values below the diagonal represent
Validity and correlations between variables
reliability statistics Source: Authors’ own creation

fit (GOF), path coefficient and t-statistic value, were used. The results of the first three
indicators are presented in the table below (Table 4).
R2 values were analyzed for all the endogenous variables to assess the extent to which the
structural model explains the behavior of the endogenous variables. The moderate-high R-squared

Description Model R2 Q2 GOF

LSS ! IA effectiveness Model 1 0.24 0.13 0.37

Table 4. LSS ! IA efficiency Model 2 0.23 0.12
Inner structural
model’s assessment Source: Authors’ own creation
values of 0.24 for the effect of LSS application on IA effectiveness and 0.23 for IA efficiency suggest Lean six sigma
a considerable impact of LSS application. These R2 values are commonly found in social sciences
(Cândido and Ferreira, 2022; Hair et al., 2017). The R2 values indicate that the structural model
significantly contributes to explaining the behavior of the endogenous variables.
The Q2 criterion evaluates the model’s predictive relevance and should be greater than
zero to indicate sufficient explanatory power (Hair et al., 2017). In this research, the Q2
values for IA effectiveness and efficiency were found to be 0.13 and 0.23, respectively,
demonstrating that the conceptual model adequately explains the endogenous latent
constructs. The Q2 values indicate that the structural model exhibits out-of-sample
predictive power or relevance (Hair et al., 2017).
Moreover, the GOF index assesses the model’s accuracy in representing empirical data.
GOF values of 0.01, 0.25 and 0.36 are considered weak, medium and strong fits, respectively
(Tenenhaus et al., 2004). In this study, the GOF was 0.37, indicating that the model
adequately represents the observed data.
Finally, the effect size criteria (F2) were also assessed. This examination involves
evaluating the magnitude of the effects of the exogenous variables on the endogenous
variables (Moradi et al., 2022). The results indicate one moderate total effect (0.31, Table 3).

5. Structural model analysis

After performing validity and reliability tests, the stated hypotheses are tested to determine
if the developed structural model fits the data collected from Iranian internal auditors. This
is achieved by calculating the t-values for the paths of the hypotheses. According to the
standard statistical table, the observed t-values must be greater than 2 to accept a
hypothesis (Ben Ruben et al., 2020) (Table 5).
The study showed a positive path coefficient (¼ 0.48) between LSS and IA effectiveness,
with a t-values greater than 2 (P-value ¼ 0.000). This confirms the first hypothesis that the
LSS application positively impacts IA effectiveness. This is consistent with previous
research, which suggests that shifting from traditional approaches to focusing on processes
through LSS enhances IA effectiveness (Islamova and Volkova, 2017; Kaziliunas, 2008; Ni
and Karapetrovic, 2003). Furthermore, the findings revealed a positive relationship between
the LSS application and IA efficiency, with a coefficient of 0.47 and a t-values within the
standard range (P-value ¼ 0.000). This confirms the second hypothesis, and LSS, as a novel
organizational improvement method, particularly cost reduction, assists organizations in
enhancing business performance and overall efficiency (Antony et al., 2017). Figure 1
presents the t-values for the research model.

6. Exploratory analysis
Several studies have highlighted that internal auditors’ attributes play a crucial role in the
successful implementation of LSS initiatives (Aij and Teunissen, 2017; Laureani and
Antony, 2017; Nogueira et al., 2018; Seidel et al., 2017; Tortorella et al., 2020). Our research

Hypothesis Expected effect Standardized loadings t-value Results

LSS ! IA effectiveness þ 0.48 8.46***

Supported
LSS ! IA efficiency þ 0.47 7.94*** Supported
Table 5.
Notes: ***Significant at the 1% level; n ¼ 384 Results of the
Source: Authors’ own creation structural model
IJLSS Fe1 Fe2 Fe3 Fe4 Fe5 Fe6 Fe7 Fe8 Fe9

L1

L2 IA effecveness

L3

LSS
21.83
L4 Fi1

Fi2
L5

IA efficiency 32.30
Fi3
L6

Fi4
L7

Figure 1. Fi5
L8
Developed
measurement model
Source: Authors’ own creation

investigates the impact of four attributes: education, experience, age and position, on the
effectiveness and efficiency of IA processes.

6.1 Competency effect

This factor pertains to the expertise and proficiency of internal auditors (Turetken et al.,
2020). According to the IIA, internal auditors must possess the necessary knowledge, skills
and competencies to perform their roles effectively. The competence of internal auditors
plays a crucial role in ensuring the effectiveness and efficiency of IA activities (Turetken
et al., 2020). In addition, employees’ skills and experience are integral to the LSS
methodology (Mustapha, 2017). LSS requires a dedicated and focused human resource
approach to achieve desired goals and objectives (Snee, 2010). Various studies have linked
competencies to factors such as the experience of staff members, their professional
qualifications, the percentage of certified staff, training hours and education level (Tackie
et al., 2016; Halimah et al., 2012; Mihret and Wondim Yismaw, 2007).
It is crucial to recognize the role of training in enhancing IA competency. Training allows
employees to acquire new knowledge and skills, leading to improved performance and the
ability to handle job-related challenges effectively (Dermol and Cater, 2013; Hale, 2002;
Armstrong, 2012). Winterton (2008) also reports that firms’ training policies are linked to
employee job-related skills and flexibility improvements. The mediating effects of education
and experience on IA effectiveness and efficiency are presented in Table 6.
According to the results presented in Table 6, lower experience has a negative impact on the
relationship between LSS and IA effectiveness (t-values ¼ 2.01) and efficiency (t-values ¼
3.09), with a significant p-value (<0.05). From this, it can be concluded that lower experience
reverses the positive effect of LSS application on IA function quality. However, the education
level did not significantly affect the relationship between LSS and IA effectiveness and
efficiency. This result aligns with previous studies that emphasize the importance of
competencies in ensuring the quality of auditors’ functions (Turetken et al., 2020; Snee, 2010).
Further discussion on this topic will be presented in the following section:
Relationship Variable Standardized loadings t-value
Lean six sigma
LSS ! IA effectiveness Education
Bachelor 0.1 0.33
Master 0.07 0.58
Ph.D. 0.01 0.04
Experience
<3 0.71** 2.01
3–10 0.22 1.40
10–15 0.02 0.11
> 15 0.09 0.38
LSS ! IA efficiency Education
Bachelor 0.16 0.55
Master 0.13 1.02
Ph.D. 0.28 0.78
Experience
<3 0.74*** 3.09
3–10 0.23 1.54
10–15 0.16 0.82
> 15 0.06 0.28
Table 6.
Notes: ***, **Significant at 1 and 5%, respectively; n ¼ 384 Mediating effect of
Source: Authors’ own creation IA competency

6.2 Motivation effect

Motivation is critical in successfully deploying LSS methodology (Alnadi and
McLaughlin, 2021). It is a process in which individuals strive to satisfy specific needs that
influence their actions. Various factors, such as gender, age, position and job category,
can significantly impact the level of motivation (Hitka et al., 2018). According to the socio-
emotional selectivity theory (Carstensen, 2006), individuals may adapt their goal
orientation to manage changing opportunities and constraints. As people age, their goals
related to acquiring knowledge and psychological well-being tend to shift. When
individuals perceive time as open-ended, they prioritize preparatory goals focused on
future investments, gathering information, experiencing novelty and expanding skills
and knowledge.
On the other hand, when time is perceived as constrained, emotion-related goals linked to
immediate satisfaction become more prominent, emphasizing feelings and regulating
emotions to optimize mental well-being (Hitka et al., 2018; Hertel et al., 2013). This theory
also applies to employee positions. Employees in lower positions appear to place more
significance on advancement opportunities than those in higher positions, as these
opportunities tend to decrease with positions in most organizations (Boumans et al., 2011).
However, other theories predict specific conditions that can negatively affect motivation
toward efficiency, such as toxic workplace environments and workplace stress (Rasool et al.,
2019; Patro and Kumar, 2019). A toxic workplace can lead to high absenteeism, depression
and job burnout, ultimately reducing organizational efficiency (Anjum and Ming, 2018).
Lack of clarity regarding career growth and advancement opportunities can also contribute
to work-related stress (Cameron, 2012). Similarly, an imbalance between personal efforts put
into a job and the rewards received regarding remuneration, promotion and career
progression can lead to employee stress and dissatisfaction (Cooper et al., 2012). The
mediating effects of age and positions on IA effectiveness and efficiency are presented in
Table 7.
IJLSS Relationship Variable Standardized loadings t-value

LSS ! IA effectiveness Age

< 35 0.07 0.53
35–45 0.21 1.16
> 45 0.33 1.16
Position
CAE 0.04 0.25
Manager 0.08 0.36
Senior IA 0.002 0.01
IA 0.06 0.17
LSS ! IA efficiency Age
<35 0.01 0.092
35–45 0.24 1.28
>45 0.13 0.57
Position
CAE 0.06 0.36
Manager 0.04 0.18
Senior IA 0.14 0.74
IA 0.13 0.31
Table 7.
Mediating effect of Notes: ***Significant at the 1% level; n ¼ 384
IA motivation Source: Authors’ own creation

According to the results presented in Table 7, age and position were found to have no
mediating effects on the relationship between LSS and IA effectiveness and efficiency.
Therefore, employee motivation, influenced by age and position, does not impact the
benefits of LSS for IA function quality. This result contradicts studies that have shown the
role of motivation in IA effectiveness and efficiency (Hitka et al., 2018; Carstensen, 2006) and
aligns with those studies that demonstrate factors reducing the role of employees’
motivation (Rasool et al., 2019; Patro and Kumar, 2019). Further discussion on this topic will
be presented in the following section.

7. Discussion
This study examines the impact of LSS application on the effectiveness and efficiency of IA.
The findings indicate that LSS techniques positively influence the function quality of
internal auditors, which aligns with previous research showing that LSS can be integrated
into current audit methodologies, enabling auditors to identify weaknesses in business
systems more effectively (Abuazza et al., 2020; Gupta, 2004; Hrgarek and Bowers, 2009).
Moving away from traditional approaches and focusing on processes in IA is believed to
enhance audit effectiveness and efficiency (Lenning and Gremyr, 2022; Islamova and
Volkova, 2017; Kaziliunas, 2008; Ni and Karapetrovic, 2003). LSS tools have gained
popularity, especially after the Sarbanes-Oxley Act (SOX, 2002) issuance, as they help
companies meet COSO – ERM requirements (Ramamoorti et al., 2008). These tools can be
effectively deployed in various components specified in COSO’s ERM framework, such as
internal environment, objective setting, risk assessment, control activities and more (Hafez,
2015). The key advantages of LSS implementation include productivity improvement,
greater efficiency, quicker production and increased customer and stakeholder satisfaction
(de Freitas and Costa, 2017).
 During the IA process, internal auditors follow a systematic approach. Firstly, they Lean six sigma
identify prospective projects, carefully selecting highly advantageous ones and create a
project charter that finalizes the scope, objectives, quantifiable problem statement, team
members and financial justification (Johnson, 2017; Basu, 2004; Pyzdek, 2014; Garza-Reyes,
2015). Communication about the project is essential to ensure transparency and
collaboration. In the subsequent phase, internal auditors develop a comprehensive plan to
implement suitable methods, ensuring data consistency, accuracy and reliability. They
meticulously document processes, measure process capability and present the collected data
graphically (Basu, 2004; Pyzdek, 2014; Veena and Prabhushankar, 2020). Afterward, they
thoroughly analyze variations and wastage sources, using past and current data. During
this process, they perform value analysis of the processes, identify bottleneck points,
investigate the reasons for process variations and formulate hypotheses (Garza-Reyes et al.,
2014; Sin et al., 2015). Internal auditors play a crucial role in improving by selecting,
evaluating and optimizing the best solutions to address the identified issues (Johnson, 2017;
Sin et al., 2015; Sahno et al., 2015). Once the solutions are established, they are implemented
by the auditors. Furthermore, auditors sustain the performance metrics, generate process
control plans and closely monitor the implementation activities (Garza-Reyes, 2015; Veena
and Prabhushankar, 2020; Sahno et al., 2015).
The application of LSS offers internal auditors a more accurate and quantitative
approach to continuous improvement and problem-solving (Ptacek et al., 2015; Hafez, 2015).
With LSS tools, auditors can quickly identify and eliminate waste and improve
communication and the speed of services and information at all levels of the organization
(Ptacek et al., 2015). These tools include Pareto diagrams, control charts, process mapping
and analysis of variance, which help analyze data and identify trends or unusual results,
providing transparency and facilitating prompt actions when required (Ghaleb et al., 2014;
Zu et al., 2008). Moreover, Lean tools like VSM, Kanban, kaizens, poka-yoke and
standardization further improve workflow, efficiency and waste elimination (Ghaleb et al.,
2014; Johnson, 2017; Spasojevic Brkic and Tomic, 2016). Internal auditors can use
brainstorming techniques to generate a comprehensive list of factors affecting process
performance. They can then use the 5-WHYs analysis to identify the root cause(s) of process
inefficiency and use a cause-and-effect diagram (also known as a fishbone diagram) to
display all potential causes of process inefficiency visually (Ellis, 2016). This approach has
been found to enhance the effectiveness and efficiency of IA (Turetken et al., 2020; Johnson,
2017; Mustapha, 2017).
While studies have demonstrated that LSS can improve the IA function quality
(Barlow, 2013; Coleman, 2015), it is essential to acknowledge that there are also
limitations to this integration (Smoth, 2016). These limitations include an
understanding of LSS tools, cultural change and the effectiveness of IA resources
(Abuazza et al., 2020; Albliwi et al., 2015; Ellis, 2016). Several studies have highlighted
these limitations as influential factors affecting the effectiveness and efficiency
achieved through LSS (Turetken et al., 2020).
Our findings suggest auditors with less than three years of experience exhibit lower
competence in applying LSS tools to improve IA function quality. However, this is not
the case for auditors with higher levels of expertise. Interestingly, we observed that
auditors with different levels of education showed no significant difference in their
competence to apply LSS to enhance IA effectiveness and efficiency. Therefore,
education does not seem to mediate the relationship between LSS application and IA
function quality. This result contradicts Kanfer and Ackerman’s (2004) study, which
showed that higher-education auditors perform better with the same effort as their
IJLSS colleagues. However, this finding is consistent with previous studies that emphasized
the significance of training in enhancing IA skills and efficiency (Dermol and Cater,
2013; Hale, 2002; Armstrong, 2012). In Iran, most internal auditors come from
accounting and management backgrounds, highlighting the importance of on-the-job
training in LSS. While education level can facilitate the learning of new knowledge, it
may not directly correlate with LSS application and the quality of IA functions (Ellis,
2016; Ben Ruben et al., 2020). According to Arnheiter and Maleyeff (2005), successful
implementation of LSS requires significant investment in education and training,
particularly in statistics, RCA and other problem-solving methodologies.
Furthermore, our study indicates that neither age nor position play a mediating role
in the effect of LSS application on IA effectiveness and efficiency. These findings
contrast with those of Eskildsen and Nussler (2000) and Carstensen (2006), who
observed that high work motivation could prompt employees to take on more
challenging tasks. In addition, our findings do not support the socio-emotional
selectivity theory, which suggests that the interest in acquiring new knowledge tends
to decrease with age (Hitka et al., 2018), and higher positions may lead to reduced
motivation for demonstrating mastery (Stamov-Roßnagel and Hertel, 2010). According
to Rasool et al. (2019) and Patro and Kumar (2019), some factors, including toxic
workplace and workplace stress, can deteriorate employees’ motivation to enhance
their performance, which may be consistent with the workplace environment in Iran
and could explain these results. The presence of contextual factors such as narcissistic
behavior, humiliation and bullying among employees (creating a toxic workplace)
(Anjum and Ming, 2018), lack of clarity regarding career growth (Cameron, 2012) and
imbalance between personal efforts and rewards (Cooper et al., 2012) (resulting in work
stress) may have influenced the outcomes.

8. Conclusion
There is a consensus that internal audits should be transformed beyond mere
compliance and focus on supporting value creation. Previous research has suggested
shifting from auditing specific organizational units to continuous improvement and
processes to achieve this (Ramly et al., 2018; Lenning and Gremyr, 2022). However, the
actual value that internal audits bring to an organization largely depends on how
effectively they are managed (Dittenhofer, 2001; Mihret and Wondim Yismaw, 2007;
Turetken et al., 2020). LSS-related tools offer opportunities to enhance various aspects
of the IA process, including planning, implementation, corrective and preventive
actions and follow-up activities (Smoth, 2016; Jamil et al., 2020). This study’s results
further support that LSS tools can effectively improve IA practices and provide
valuable insights for organizations.

8.1 Research implications

The implications of this study are threefold. First, this paper contributes to the research on
IA effectiveness and efficiency. While the application of LSS in various industries is well
documented, there is a dearth of studies exploring its application and benefits in IA. This
study is pioneering in examining the impact of LSS tools on IA function quality. The
findings reveal that LSS tools significantly improve the effectiveness and efficiency of audit
activities, providing auditors with new insights to use more efficient methods in conducting
their audit responsibilities. This research fills a gap in the literature by shedding light on the
benefits of applying LSS in IA, which has been less explored compared to its application in
the service sector (Sehwail and Deyong, 2003; Antony, 2006; Chakrabarty and Chuan Tan, Lean six sigma
2007).
Second, this study delves into the influence of auditors’ attributes on the
performance of LSS tools. It examines how factors such as competency and motivation
play a pivotal role in facilitating the use of LSS tools (Aij and Teunissen, 2017; Laureani
and Antony, 2017; Nogueira et al., 2018; Seidel et al., 2017; Tortorella et al., 2020). This
investigation is the first of its kind, shedding light on the relationship between IA
attributes, LSS applications and IA function quality. In line with the emphasis of The
International Standards for the Professional Practice of Internal Auditing on IA
knowledge and competencies (Dellai and Omri, 2016), our research findings provide
evidence that insufficient experience as a part of IA competency hinders the ability of
IA to deliver value to customers.
Third, this research significantly contributes to improving IA management
departments by using LSS techniques to enhance the quality of their functions. In
addition, it offers valuable insights into operationalizing a quality management system
(QMS) following ISO 9001 in IA departments, which emphasizes a process-based
approach integrating DMAIC and risk-based thinking to achieve desired outcomes and
enhance customer satisfaction. Due to the lack of specific guidance on completing these
requirements in the standard (Chinvigai et al., 2010; Doiro et al., 2020; Marques et al.,
2018; Santos and Barbosa, 2006), this study contributes to the knowledge of QMS in the
context of ISO 9001 implementation by examining the effects of LSS tools on the quality
of IA functions.

8.2 Study limitations and directions for future research

This study has some limitations that open up opportunities for future research. First,
the research was conducted in Iran, a developing Asian country. As a result, the
generalizability of the research findings to other countries may be limited (Marimon
et al., 2009). More implementations in different countries are recommended to enhance
the methodologies’ applicability. This will help validate and extend this study’s
findings to a broader context. Another limitation of this research is the researchers’
inability to maintain complete control over the research respondents due to the online
data collection method used.
Based on the findings, several potential directions for future research are suggested.
First, qualitative studies, such as case studies, could explore auditors’ challenges in
implementing LSS tools and their strategies to overcome them. This would provide deeper
insights into the practical aspects of LSS application in IA. Second, further research on
cultural characteristics that could influence the focus of IA departments and enhance the
implementation of LSS would be valuable. In addition, exploring the impact of other factors,
such as leadership style, organizational structure and ownership type, on LSS and its
benefits would provide a more comprehensive understanding of its effects. Lastly, future
studies could focus on examining the impact of LSS tools on various phases of auditing,
such as planning, execution and reporting, emphasizing the DMAIC methodology. This
comprehensive approach would offer a broader perspective on the advantages of using LSS
in IA and further enhance our understanding of its potential benefits.

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Corresponding author
Hamideh Asnaashari can be contacted at: h_asnaashari@sbu.ac.ir

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