Public sector transparency increases the accountability of government officials to citizens by reducing corruption, fraud, waste, and abuse while inciting participation in political processes. Aside from cases where disclosures could be harmful to the public, transparency is viewed as the best way of holding civil servants and officials to account. Transparency has become integral to good governance and many government entities are now required by law to make documents available upon request and conduct public sector business in the open. For many, accountability without transparency is of little value.
Public sector internal auditors are inadvertently at the centre of these developments as lawmakers and the public look to the audit trail for assurance that financial and performance reporting accurately reflects the actions taken (or not taken) by those in charge and that these respect ethical and legal norms.
Adapting to new transparency laws creates challenges for internal auditors who are required to understand what compliance entails for their jurisdiction, implement appropriate transparency policies, manage internal audit reports accessibility, and learn to write clearly and comprehensibly for a wider audience. But there are also other less known and less publicized costs to the openness trend which are potentially hampering the ability of internal auditors to fulfill their oversight duties.
Without dismissing the general premise that greater public sector openness is generally a ‘good thing’, we empirically examine attitudes to transparency requirements among Canadian public sector internal auditors. More concretely, using regression analysis we investigate the factors explaining internal auditors’ levels of agreement with the following statement: “The public disclosure requirements of my organization limit my capacity to communicate findings effectively”. Informed by the literature, we test a number of explanatory variables including length of tenure in the public sector, private sector experience, attitudes to risk, engagement with data analytics, professional training and level of government (provincial vs federal).
The data is taken from a 2016 survey of 400 Canadian public sector internal auditors administrated online with the support of the Institute of Internal Auditors and the Government Internal Audit Council of Canada. Findings suggests that many internal auditors feel hampered by transparency requirements in carrying out their duties and, although causality is not established, many link these to enhanced risk aversion in their respective organization and further isolation of their profession. Managerial implications conclude the paper, highlighting the need for an open discussion on what transparency entails for public sector auditing communication and efficiency.
This study, we argue, fits in well with IRSPM Panel #41 entitled “The Administrative Burdens of Formalization, Regulations, and Red Tap” lead by Prof. Pedersen. Since it focuses on perceptions of how public disclosure requirements are affecting the way internal auditors communicate and hence carry out their duties, it uncovers a channel through which ‘red tape’ potentially hinders the quality of audit feedback and learning thereby weakening accountability-driven pressures to improve public sector performance. By examining the factors associated with these responses, we provide insights on the mechanisms by which perceptions of red tape arise.
The administrative burden of formalization, regulations and red tape
