Internal audit characteristics and role of enterprise risk management effectiveness with mediation and moderation effects on public listed companies in Jordan

In the contemporary landscape of high-risk business environments, public-listed companies (PLCs) are increasingly acknowledging the significance of implementing enterprise risk management (ERM) to navigate uncertainties and fortify their resilience. Despite the evident benefits and global implementation of ERM practices, its implementation in certain regions, particularly in developing countries like Jordan, remains in a formative stage, hampered by a myriad of challenges that impede its effectiveness. For instance, informal and incomplete ERM implementation, a lack of integration with company processes, and a shortage of ERM knowledge, as well as a dearth of professionally skilled risk managers and staff, contribute to these challenges. In this regard, the resource-based view (RBV) theory posits that a company's internal resources, including internal audits (IA), are valuable, rare, imperfectly imitable, and non-substitutable, constituting strong factors for achieving sustainable competitive advantage, particularly through enhanced enterprise risk management effectiveness (ERME). Therefore, the objectives of this study are to investigate the effects of internal auditors’ characteristics, internal audit department (IAD) characteristics, IA role in ERM, and internal audit effectiveness (IAE) on ERME. It also investigates the effects of internal auditors’ characteristics, IAD characteristics, and IA role in ERM on IAE. Furthermore, the study investigates the mediating effect of IAE in the relationship between IA (characteristics and role) and ERME. Additionally, it investigates the moderating roles of ownership structure concentration (OSC) and organizational culture (OC) on the relationship between IAE and ERME in Jordanian PLCs. To achieve these objectives, this study employs a quantitative cross-sectional methodology. Data was collected using a questionnaire based on seven constructs which are internal auditors’ characteristics, IAD characteristics, IA role in ERM, IAE, OSC, OC, and ERME from Jordanian PLCs. Finally, 119 questionnaires were utilized for analysis. The data was prepared through SPSS software and analyzed using structural equation modeling through SmartPLS software. The results reveal significant positive effects of internal auditors’ characteristics, IAD characteristics, and IA role in ERM on both ERME and IAE. Additionally, IAE shows a significant positive effect on ERME. Furthermore, IAE plays a significant positive mediating role between internal auditors’ characteristics, IAD characteristics, and ERME. Moreover, OC plays a significant positive moderating role in the relationship between IAE and ERME. The study contributes to the knowledge base by breaking the silence on ERM and its status in Jordanian PLCs. It strengthens the RBV theory and enriches the scarcity of research in the domain of IA and ERM integration, particularly in developing countries. Furthermore, it is one of a kind in investigating IAE mediation, as well as OSC and OC moderation. This study offers a cost-effective solution to PLC to enhance ERME through IA characteristics, roles, and effectiveness as valuable internal resources. It emphasizes the role of OC in strengthening the integration between IAE and ERME. Undeniably, the grave importance of owner support for both IA and ERM, emphasizing the necessity of their integration to safeguard the company, irrespective of ownership concentration levels or types is imperative.

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