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Introduction
The last decade has seen increased attention paid to internal audit as an integral component of corporate governance mechanisms, which are designed to strengthen risk management systems of organizations and enhance financial reporting quality. Internal audit serves as a crucial resource in corporate governance by providing services to boards of directors, management and external auditors ([12] DeZoort et al. , 2002; [21] Gramling et al. , 2004; [26] Mat Zain and Subramaniam, 2007). Internal audit has also transformed from a predominantly appraisal function to a consulting paradigm over the last several decades ([32] Mihret et al. , 2010; [41] Yee et al. , 2008; [33] Mihret and Woldeyohannis, 2008; [27] Mat Zain, 2005; [1] Ahlawat and Lowe, 2004; [9] Bou-Raad, 2000). Nevertheless, the process by which this resource gets institutionalized and develops as a result of institutional changes remains to be theorized. Institutional theory provides a useful perspective to understand this process. The theory explains how practices of various organizations become similar through isomorphism, which is the process that engenders the similarity ([10] Dacin, 1997; [14] DiMaggio and Powell, 1983).
Institutional theory enables understanding of how regulatory requirements, diffusion of practices among organizations and the impact of professions generate isomorphic pressures on organizations. New practices that develop to a status of institutional norms also originate from collaborations among organizations ([11] Dacin et al. , 2002); within organizations through innovation; and as exogenous inputs from other external sources ([10] Dacin, 1997; [11] Dacin et al. , 2002; [14] DiMaggio and Powell, 1983). The recent institutional theory literature employs an institutional change perspective to explain how institutions develop through deinstitutionalization of old practices and institutionalization of new ones ([11] Dacin et al. , 2002; [13] Dillar et al. , 2004). This institutional change perspective can provide a useful analytical framework to explain how internal audit practices develop overtime as a product of institutional change dynamics.
A limited but growing body of internal audit literature has examined internal audit from an institutional theory perspective both empirically ([2] Al-Twaijry et al. , 2003; [4] Arena and Azzone, 2007) and conceptually ([32] Mihret et al. , 2010) mainly focusing on explaining internal audit adoption and characteristics. Similar to other activities of organizations, widely-accepted internal audit practices exist as...