The contingent relationship between the controller and internal audit functions in large organizations

The research literature on organizational control in large business firms does not address the inter-relationship between the controller and internal audit functions. Yet these functions are commonly used to effect control within large, diversified corporations having hierarchical management. This research uses principal-agent theory to hypothesize the need for complementary control systems for monitoring and verifying inter-manager relationships in large U.S. firms. The research findings suggest that the primary duties and responsibilities assigned to the internal audit function are related to the organization, centralization vs decentralization, of the controller function so that effective organizational control can be achieved.