Beyond Traditional Assurance: Internal Audit, Green Auditing Capability and the Pursuit of Environmental Performance

Abstract

The increasing environmental and sustainability challenges faced by organisations have expanded the role of internal audit beyond traditional financial controls, compliance, and operational assurance towards environmental governance and risk management. However, existing literature provides limited understanding of how internal audit effectiveness can be translated into improved environmental performance, particularly through specialised green auditing capability. This study aims to develop a conceptual framework explaining the relationships among internal audit effectiveness, green auditing capability, and environmental performance. A structured narrative literature review was conducted using the Scopus database to identify and synthesise relevant literature across internal auditing, environmental auditing, sustainability, governance, and environmental performance. Integrative thematic analysis was employed to identify recurring concepts, relationships, and theoretical perspectives. The findings indicate that internal audit effectiveness provides an important organisational foundation through independence, professional competence, adequate resources, risk-based methodologies, governance access, and organisational support. However, these capabilities alone may not be sufficient to generate meaningful environmental improvements. Green auditing capability emerges as a key mechanism that enables organisations to apply specialised environmental knowledge, resources, methodologies, and audit processes to environmental risks, controls, compliance, and performance. Accordingly, the study proposes that green auditing capability mediates the relationship between internal audit effectiveness and environmental performance. Theoretically, the study extends Institutional Theory by explaining how organisations develop specialised internal audit capabilities in response to increasing environmental expectations. Practically, the framework highlights the importance of developing environmental competencies, appropriate resources, specialised audit methodologies, and organisational support to strengthen internal audit's contribution to environmental sustainability. The proposed framework provides a foundation for future empirical research to validate the relationships and examine how green auditing capability contributes to environmental performance across different organisational and institutional contexts.