Comparing the Attitudes and Activities of Internal

Auditors in Australia, Canada, and the United

States Regarding Green IT

Glen L. Gray (California State University,

Northridge)

Kyunghee Yoon (Rutgers University)

Won Gyun No (Rutgers University)

Peter Roebuck (University Of New

South Wales)

WHY GREEN IT

According to the Investor Responsibility Research

Center Institute (IRRCI), “499 companies [from the

S&P 500] made at least one sustainability‐related

disclosure.”

Green IT is a part of sustainability activities.

According to Murugesan (2008), green IT is defined

as:

“designing, manufacturing, using, and disposing of

computers, servers, and associated subsystems –

such as monitors, printers, storage devices, and

networking and communications systems –

efficiently and effectively with minimal or no impact

on the environment.”

GREEN IT & SUSTAINABILITY REPORTEXAMPLE – ADIDAS GROUP

http://www.adidas-group.com/en/sustainability/planet/green-company/#/green-it/

GREEN IT & SUSTAINABILITY REPORTEXAMPLE – DELL INC.

http://www.dell.com/learn/us/en/uscorp1/dell-environment-energy-efficiency?s=corp

WHAT IS THE ROLE OF INTERNAL AUDITORS IN GREEN IT

Environmental compliance

Organizations

• Stakeholders’ increasing demand

• Expand Economic considerations

• Expanding regulations

Increasing pressures

Increasingly obliged to have strategies and operations that consider environmental issues and impact of their activities

Need for assurance about environmental activities

Internal auditors should be widely involved in their organization’s

environmental compliance activities.

A view of internal auditors as organization’s control experts and

objective assurance provider

Normative (what ought to be) view

of the role of internal auditor in environmental compliance

activities

Organizations must:

• Identify and assess the risk associated with organizational activities

• Develop appropriate governance

• Implement appropriate controls to mitigate risks

• Confirm controls are complied with

WHAT IS THE ROLE OF INTERNAL AUDITORS IN GREEN IT

Gray, No, and Miller (2014)

Reported that internal auditors in the United States and

Canada

were only minimally involved in their organizations

sustainability

and green IT activities.

Found that any involvement was traditional internal audit

auditing roles – not facilitator or consultant roles.

Uncovered that auditors believe they should be involved

green IT actively.

Then, why is there a gap between auditor’s perceived

role and their current involvement in green IT?

RESEARCH OBJECTIVE

The objective of this current paper is to

explore whether internal auditors’

involvement in green IT is different in

Australia compared to the United States

and Canada.

We compare the attitudes and activities of

Australian internal auditors regarding the

green IT component of sustainability to

Canadian and U.S. internal auditors

reported in Gray, No, and Miller (2014).

CONTRIBUTIONS

Our findings would provide strong policy

implications for the IIA.

Several studies conducted in the IIA North America

jurisdiction consistently indicate that internal auditors

have minimal involvement in IT-related activities and that

when internal auditors are involved in IT, it was almost

executively in an assurance role.

The IIA has been encouraging their member to

proactively expand their value-added services outside of

financial assurance services, so our study indicates that

those encouragements seems to be hitting a wall and

more research is need to identify those inhibitors.

REGULATIONS ON ENVIRONMENTAL ISSUES

Each country establishes and enforces laws

and regulations differently.

This difference in enforcement mechanisms

influences the society differently (La Porta et

al., 2006).

Establishing mandatory sustainability reporting

tends to motivate management to take social

responsibility in their managerial practices

(Ioannou and Serafeim, 2014).

REGULATIONS ON ENVIRONMENTAL ISSUES

Countr

y

Generic Sector specific Thematic

U.S. N/A Dodd-Frank Act Pres. Exec. Order

13514 EPA GHG

Reporting Rule

EEO-1Survey Sarbanes-Oxley Act CAA & CWA Toxic Release

Inventory California Transp.in

Supply Chains Act

Canada

N/A Public Acc. Statements

GHG Program The National

Pollutant Release Inventory (NPRI)

Env. Rep. Guidance TSX

Australia

Corporation Act Operating

Financial Review (OFR)

ASX Listing Rules

Financial Services Reform Act (FSRA)

Clean Energy Act Nat. GHG & Energy

Rep. Energy Efficiency

Act Nat. Pollutant

Inventory

SUSTAINABILITY REPORTING POLICIES: AUSTRALIA EXAMPLE

Corporate Act requires that on an Annual Directors’

Report, firm states if its business is connected to any

substantial environmental regulations under the law

and illustrate its specific performance associated

with these environmental regulations.

Guide 247 on Operating and Financial Review (OFR),

requires listed firms to include a discussion of

environmental and other sustainability risks where

those risks could affect their financial performance.

Under ASX Listing Rules companies are required to

describe whether the entity has any substantial

exposure to environmental risk, and if it does, how it

manages those risks.

GREEN IT RESEARCH FRAME

An organization’s environmental strategies are

influenced by various environmental motivating

forces, including organizational, regulatory-market,

socio-cultural, ecological, and technological forces

(e.g., Bansal 2002; Bansal and Roth 2000).

Jenkin, Webster, and McShane (2011)

HYPOTHESIS

H1: Internal auditors’ current involvement in green

IT

activities are greater in Australia than in U.S.

and Canada.

H2: Internal auditors’ perceived roles what they

should be involved

in green IT activities are greater in Australia

than in U.S. and Canada.

H3: Internal auditors’ current involvement is aligned

with their

perceived roles what they should be involved in

green IT activities.

H4: The magnitude of alignment between internal

auditors’ current

involvement and their perceived roles what they

should be

involved in green IT activities are greater

in Australia

than in U.S. and Canada.

RESEARCH METHOD

Web-based survey

38 questions were designed.

Questions about internal auditors’ current

involvement, their perceived roles in green IT

activities, organizations’ green IT strategies and

activitiesParticipants 771 (3.1%

response rate)

Incomplete data 224

Invalid participants (i.e. not from targeted countries)

95

Redundant organizations

30

Total 422

MEASURES

DEMOGRAPHICS

MOTIVATING FORCES FOR GREEN IT

GREEN IT & INTERNAL CONTROLDESIGNING/DEVELOPING SPECIFICATIONS

Current Involvement in Green IT

Perceived Role in Green IT

GREEN IT & INTERNAL CONTROLDESIGNING/DEVELOPING CONTROLS

Current Involvement in Green IT

Perceived Role in Green IT

GREEN IT & INTERNAL CONTROLMONITORING CONTROLS

Current Involvement in Green IT

Perceived Role in Green IT

GREEN IT & INTERNAL CONTROLPROVIDING ASSURANCE

Current Involvement in Green IT

Perceived Role in Green IT

TESTING HYPOTHESIS

H1: Internal auditors’ current involvement in green IT activities are greater in Australia than in U.S. and Canada.

TESTING HYPOTHESIS

H2: Internal auditors’ perceived roles what they should be involved in green IT activities are greater in Australia than in U.S. and Canada.

TESTING HYPOTHESIS

H3: Internal auditors’ current involvement is aligned with their perceived roles what they should be involved in green IT activities.

TESTING HYPOTHESIS

H4: The magnitude of alignment between internal auditors’ current involvement and their perceived roles what they should be involved in green IT activities are greater in Australia than in U.S. and Canada.

CONCLUSION AND LIMITATIONS

Although Australia, Canada, and the United States have a similar English-speaking, Anglo-Saxon, common law history, these countries would develop different attitudes about the environmental issues, which in turn would influence the evolution of government regulations.

However, only with a few exceptions, we generally found that the attitudes and activities were not statistically significant between the three countries. In those cases where there were statistical differences the differences were not very material.

Specifically, the internal auditors’ current involvements in green IT were very low and not statistically different between the three countries.

Response rate from all three countries was low, and there is always a concern about the non-response bias.

In terms of future research, it would be particularly interesting to conduct similar surveys in non-Anglo-Saxon countries and civil law (vs. common law) countries.

QUESTIONS AND SUGGESTIONS

WHAT IS THE ROLE OF INTERNAL AUDITORS IN GREEN IT

“Internal auditors provide the third line of defense in

assessing and reporting on internal control and

recommending corrective actions or enhancements for

management consideration and implementation; their

position and compensation are separate and distinct of

the business areas they review.” (COSO 2013, p124)

According to the Institute of Internal Auditors (IIA

2010), internal auditors need to play three broad roles

to support environmental compliance activities

Auditor role (evaluate an organization’s

environmental activities)

Facilitator role (facilitate environmental control

self-assessments), and

Consultant role (consult on designing and

implementing an organization’s environmental

activities and controls).

PROACTIVE, VALUE-ADDED SERVICES BY INTERNAL AUDITORS

Internal auditors claimed that management would

place a higher value on improving efficiency of

operational activities because the economic benefits

were more visible than for financial reporting

compliance activities.

Gray (2004; 2008) indicated that the status and

importance of internal auditors in U.S. increased

significantly after the implementation of SOX.

Although IIARF have been producing publications

encouraging value-added, proactive activities,

studies of the members of IIA U.S. jurisdiction have

been discouraging.

The environmental strategies of the respondents’

organizations. Overall, 153 respondents (36.3%) stated that

their organizations did not have a formal written statement

covering environmental sustainability strategies.

Overall, 305 organizations (85.4%) at least sometimes

configured desktops to automatically enter sleep mode

when inactive.

INTERNAL AUDITOR’S ROLE IN GREEN IT ACTIVITIES ACROSS COUNTRIES

Jenkin et al. (2011) argue that the success of green

IT practices largely determined by the degree to

which its organizations and employees have adopted

and implemented its green IT strategies and

practices.

Internal auditors’ current involvement in green IT

activities is not aligned with their perceived

potential roles in green IT activities (Gray et al.,

2014).

We argue that the nationality of companies results

in differences among companies in terms of

environmental and social strategies and activities