Internal control through the lens of institutional work: a systematic literature review
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Internal control through the lens of institutional work: a systematic literature review Oliver Henk1
© The Author(s) 2020
Abstract Despite the growing interest in research on the topic of internal control, there is confusion about the concept in both theory and practice. This study addresses this lack of clarity by systematically structuring the literature that uses the concept by investigating what we know from previous studies about the practice of internal control and how it is institutionalized. To examine the existing literature in this field, the paper utilizes the theoretical lens of ‘institutional work’. The review finds that the understanding of internal control is currently divided: one part of the literature understands the concept as internal control over financial reporting, while the other part has a more global and strategic understanding of the term. Internal control is institutionalized by different organizational actors at the micro level in an attempt to implement internal control systems that are not a simple act of compliance but present an added value for the organization. At the same time, it is noteworthy that not all categories of institutional work could be identified in the internal control literature, indicating that the actors are largely limited by their institutional embeddedness. The paper also presents an aggregated understanding of the term internal control, which can therefore significantly supplement the efforts of practitioners and regulators to implement internal control procedures that add value for the corporate governance of organizations. Keywords Internal control · Corporate governance · Institutional work · Systematic literature review JEL Classification M4 · M42 · M48
* Oliver Henk [email protected] 1
Nord University Business School, Bodø, Norway
13
Vol.:(0123456789)
O. Henk
1 Introduction Research on internal control is increasing and has focused on many different aspects of the subject, such as the design and implementation of internal controls (e.g. Dikan et al. 2014; Bogdan 2014), the determinants (e.g. Jokipii 2010), as well as the effect that internal controls (or the lack of) have on organizations (e.g. Lee et al. 2016; Brown and Lim 2012). However, continuing scandals and failures in many companies around the globe (e.g., Enron, WorldCom, Volkswagen) show that the issue of risk and how to mitigate it through internal control efforts is far from resolved. The purpose of this study is to provide a systematic literature review that investigates the different streams and meanings of internal control in the research. This review goes beyond other systematic reviews in the field by employing a theoretical framework that enables a content analysis of what internal control means in practice. The practices of internal control and management control are closely connected. While management control aims at steering organizations through the organizational environment toward the achievement of both short-term and long-term goals (Otley and Soin 2014), intern
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