Abstract
There is a fairly fewer number of studies focused on internal audit effectiveness, than the number of studies on the effectiveness of external audit. Our concentration in this paper is mainly on determinants of internal audit effectiveness activities in the Sudan public sectors. For this purpose, we developed and tested five hypotheses using an investigation way. The Internal Audit staff and managers across the public sector were the source of the required data to the researcher. We collected our data using a Likert-Scale type questionnaire, filled out by 41 internal auditors and 27 managers.
Descriptive analysis, correlation analysis, and multivariate regression model through Excel and SPSS estimates the relationships between the effectiveness of internal audit department and its five main determinants: (management support, management’s perception of internal audit values, organizational independence of internal auditors, placement of adequate and competent internal audit staff, and the presence of approved internal audit charter).
Our results display that internal audit effectiveness has stronger relationships with management’s support and placement of adequate and competent internal audit staff.
Keywords: Internal Audit, Internal Audit Effectiveness, Sudan Public sector; Determinants of Internal Audit Effectiveness
1- Introduction
In Every country that is administered in a democratic policy needs to be accountable in its use of public money and in providing effective, efficient and economical (3e’s) service delivery. To achieve those government objectives applying internal audit function were the major mechanism for controlling and using of all scarce resources available in the corporate organization. Even more large and complex systems require greater competitiveness, thus internal audit has had to become ever more professional (Cecilia Nordin Van Gansberghe, 2003).
In addition, the development in internal audit profession brings change in the scope and functions of internal audit customers. Previously internal auditors were seen just as an assistant of accountant’s and an external auditor but recently internal audit is certainly is considered an independent profession, which is playing a significant role in the management of organizations. Besides, independent of internal auditors have always been a sensitive issue while he/she is the employees of the organization, above all, not clearly organized structure or reporting line make the problem more complicated in such offices (Rolandas Rupsye, 2005).
Public sector offices are part of the public body which is partly or wholly financed by government budget and concerned with providing basic government services to the whole society (Ministry of Finance and Economic Development (MoFED, 2004) such as banking service, financing, education, communication service, healthcare, police, transportation, electric services, security and so on which benefit all of the society and encourage equal opportunity to benefit from those services provided (Mihret and Yismaw, 2007). The compositions of the public sectors are varied by their function and purposes, but in most cases, they are designed in order to enable the public sectors to achieve their goals.
In the recent years, internal auditing (IA) has undergone dramatic changes that have extended its area of involvement in a way that allows it to add more value to a company. Traditionally, the role of IA has focused on compliance assurance, financial control, and assets safeguarding. After the corporate financial scandals of the 2000’s, many reforms (Sarbanes-Oxley Act 2002; Combined Code 2003; OECD 2004; IFAC 2006) have reinforced the responsibilities of IA in enhancing corporate governance mechanisms. Therefore, IA has become a value creator improving the effectiveness of risk management, control and governance systems (Bou-Raad 2000; Roth 2003; Hass et al. 2006; Cohen et al. 2010).
The Institute of Internal Auditors (IIA) refers to the new approach of the function in its latest definition of internal auditing (IIA 2004):
‘Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.’
Through the extended role of IA, internal auditor has become essential monitoring mechanism in corporate governance along with the external auditor, audit committee, and executive management (Gramling et al. 2004). The aim of IA is to assist an organization in achieving its objectives (Roth 2003; Hass et al. 2006). For this purpose, IA can perform a wide variety of activities in the form of assurance or consulting services. First, it can provide assurance that the organization’s systems of control are designed properly and operate effectively. Second, it can act as a management consultant to improve risk management (Spira & Page 2003). Third, it can assist the audit committee and external auditors in monitoring the internal control system (Goodwin 2003). Fourth, it can reduce fraud, misappropriation of assets and misreport financial information (Coram et al. 2008).
Briefly, the internal audit function (IAF) is the cornerstone of the corporate governance, which contributes to improving the productivity, efficiency and performance of the company in both private and public sector (Mihret et al. 2010; Gros et al. 2016).
In the light of the evolution of internal audit, a new concept began to have a particular attention in the audit literature; it is the effectiveness of IA. Indeed, being effective is the challenge that IAF should successfully overcome to be the key component of good governance. In this context, it is important to explain the concept of IA effectiveness and identify critical factors that contribute to the creation of “added value” of IA. Therefore, this study aims to investigate factors that may influence IA effectiveness within Sudan organizations.
2-Background and Hypotheses Development
2.1. Management Support for the Roles of IA
The support and commitment of management also have the certain impact to make sure IA is functioning effectively. The success of IA function will depend on the strength of management’s support for the auditing process. They have to accept the fact that the IA process is just as a critical and important activity as any other process within the organization. Some study found that without management approval, support, and encouragement, the IA processes are likely to face failure and worse ‘ time and money wasted. A Md Ali, A Ahmi and MH Shahdan on their study on IA in the state and local government of Malaysia found that the effectiveness of the IA function in State and Local Government appears to be directly related to the management style of organization heads and their links, relationships, and position in the social contract. Some IA function appears to be doing well, the determining factors appear to be the attitude and leadership qualities of the head of an organization and audit reports that are ignored by everyone. (Mihret and Yismaw, 2007) on their study also found that IA recommendations are not afforded enough attention. Though the audit reports are generally well prepared, they do not separately highlight the status of past audit results and they could be presented in a more consistent way. Besides, the audit evidence is attached to the reports. This provides a bulky appearance of the audit reports and reduces readability. The distribution of the audit reports is limited where copies are not provided to other senior management officers to which related to an audit report. Their study also concluded that management supports to internal audit as a determinant of internal audit effectiveness. Against this background, we can formulate the first research hypothesis:
H1: The management supports are positively related to the internal audit effectiveness in the public-sector offices.
2.2. Management’s Perception of IA’s Value
Perception is the process of attaining awareness or understanding of sensory information or it is the mental image or intuitive recognition of experience when aware of the elements of the environment (Woodard C.A, 2002). To function effectively, internal auditors and the customers of audit services should possess a similar understanding of what makes internal auditing a value-added activity. The failure to reach this understanding could result in the perception that internal audit is simply an obstacle to achieving production objectives. This can result in underutilized audit services and ignored audit recommendations which adversely influence the effectiveness of IA (Arena and Azzone, 2009). When employees at all levels perceive that the top management assigns importance to the function of IA, they will cooperate and support these processes (Cohen and Sayag, 2010). This implies that internal audit staffs are more motivated and encouraged to perform audit activities given good management’s awareness of IA values. Against this background, we can formulate the second research hypothesis:
H2: The better the management’s perceptions of internal audit values, the higher internal auditors’ ability in identifying noncompliance activities and the more added contributions.
2.3. Independence /Objectivity of Internal Auditors
During the last years, professional bodies and standard-setters have emphasized the importance of independence and objectivity of internal auditors for the internal audit quality despite their employment status in the organization. The independence and objectivity are key elements of the effectiveness of IA (Mutchler 2003; Ahmad et al. 2009; Al-Akra et al. 2016). ISPPIA (Standard 1100) requires that the internal audit department must be independent and internal auditors must be objective in achieving their work to add value to the organization. In order to ensure the appropriate level of independence and objectivity of the internal audit, professional standards and guidance of ISPPIA suggest that the CAE reports administratively to the senior management and functionally to the board. He has unrestricted access to records, personnel, and departments,
avoids any conflict of interests, must not perform non-audit work, and be an affiliate to the IIA (Goodwin & Yeo 2001; Christopher et al. 2009). The few researchers that have examined this issue have found that the greater the independence and objectivity of internal audit department, the greater the internal auditor’s effectiveness. A survey conducted by Alizadeh (2011) has shown that the organizational independence of the IAF is among the five important factors
of the effectiveness of IA in Iranian companies. Furthermore, (Cohen & Sayag 2010) found that organizational independence was positively related to the auditing quality and the auditees’ evaluations, which were the two dimensions of the effectiveness of IA in the Israeli context. Other studies supported these results indicate that there is a positive association between the effectiveness of IA and the organizational status of CAE (Hung & Han 1998; Soh & Bennie 2011; Alzeban & Gwilliam 2014). Moreover, Radzi & Islam (2011) noted that organizational independence of internal audit may reduce earnings management in Malaysian listed companies. Harrell et al. (1989), Abdol Mohammadi (2009) and Arena & Azzone (2009) revealed that IA effectiveness increases when the CAE is affiliated to the IIA. In fact, internal auditors’ members of the IIA are objective and they can manage conflicts between the loyalty of the profession and the organization’s requirements. These arguments lead to the following hypotheses:
H3: Internal auditing effectiveness is positively related to the independence/Objectivity of the internal audit.
2.4. Auditors Competency
Staff competence is an important key to the effectiveness of the internal audit activities (Al-Twaijry et al. 2003; Alzeban & Gwilliam 2014). The International Standards for the Professional Practice of Internal Auditing (ISPPIA) highlights the importance of internal audit team who possesses the knowledge, skills, and other competencies necessary to perform their responsibilities (ISPPIA, Standard 1210). Indeed, internal auditors must collectively have the necessary education, professional qualifications, experience and training to be able to add value and improve the organization’s operations (Mihret & Woldeyohannis 2008; Ali & Owais 2013).
Additionally, internal auditors require good interpersonal skills in communication, persuasion, collaboration, and critical thinking to effectively fulfill their duties (Smith 2005; Fanning & Piercey 2014). Furthermore, external auditors use competencies as a critical criterion to evaluate IA performance (Al-Twaijry et al. 2004; Abbass & Aleqab 2013).
Previous studies suggest that competence of internal auditors is a critical determinant of IA effectiveness (Albrecht et al. 1988; Van Gansberghe 2005; Al-Matarneh 2011). In the Saudi environment, Al- Twaijry et al. (2003) noted that the adequate level of competencies of internal audit staff in terms of training, experience, knowledge, and professional qualifications have a positive influence on the effectiveness of IA.
Similar results were obtained in other studies conducted in Malaysia (Ahmad et al. 2009), Iran (Alizadeh 2011) and South Africa (Staden & Steyn 2009). Furthermore, Ziegenfuss (2000) ranked the auditor education levels, the staff experience, the percent of certified staff and the training hours per internal auditor among the most important inputs of the internal audit performance. In Taiwan, Hung & Han (1998) found that the training and professional abilities of internal auditors positively and significantly affect the progress of annual auditing plan.
Moreover, Abdolmohammadi (2009) has demonstrated that certified internal auditors improve the compliance with the ISPPIA in Anglo-Saxon countries. Other studies suggest that lack of competence of internal auditors is an obstacle to the effectiveness of IA in a number of African countries as Ethiopia, Ghana, and Kenya (Mihret & Yismaw 2007; Onumah & Yao Krah 2012; Walter & Guandaru 2012). Against this background, we can formulate the fourth research hypothesis:
H4: Internal auditing effectiveness is positively related to the competence of the internal audit staff
2.5. Approved Internal Audit Charter
Internal audit charter is defined by the IIA as “a formal written document that defines the activity’s purpose, authority and responsibility. The charter should be (a) establish the internal audit activity’s position within the organization; (b) authorize access to records, personnel and physical properties relevant to the performance of management; and (c) defined the scope of internal audit activities” (IIA, 2001). Additionally, an internal audit charter typically includes the responsibilities of the IA in broad terms, the standards followed by the IA; and the relationship between the IA and the audit committee. It may also define access to the information (documents, records, systems, and personnel) necessary to perform and reach conclusions on the work, and it is a vehicle for asserting that there are no unreasonable limitations on the scope of the auditor work. The charter should clearly identify and record any limitations and alter to actual or potential changes in internal and external conditions that affect its ability to provide internal control assurance from a forward-looking perspective. Against this background, we can formulate the fifth research hypothesis:
H5: The availability of approved IA charter in the public-sector offices have a positive and significant impact on the internal audit effectiveness in the public-sector offices.
The Conceptual framework showing the interdependence between the variables is depicted below as follows:
Figure 1. The framework of Factors influencing internal audit effectiveness
Source: Adopted from Mihret and Yismaw (2007)
3- Methodology
Our methodology in this paper is a survey, in which we collected our data via distribution of questionnaires. Then two different populations are deemed in this study: the first group includes, managers, and the second group includes internal auditors from 4 public sectors.
After required data was releaseded from questionnaires, we tested and analyzed our hypotheses. Our both questionnaires had similar forms, with a list of answers arranged on Likert’s 5-point scale. Our questions were in the form of closed-answers, in which a number of potential answers were provided to respondents to choose from. In other words, our answers were based on the 5-point Likert scale, in which number 5 represented absolutely agreed with an opinion, and absolutely disagreed was shown by number 1.
Managers’ questionnaire included 15 questions. Total of numbers assigned to these 15 questions represents our measure of overall effectiveness (dependent variable). Accordingly, questions are used to measure each of independent variables. Internal audit questionnaire included factors of interest considering the relationship between internal audit effectiveness and independent variables.
4- Research Methodology
Based on the theoretical framework and in agreement with the study’s problem, questions and objectives, the research hypotheses are stated as:
H1: The management supports are positively related to the internal audit effectiveness in the public- sector offices.
H2: The better the management’s perceptions of internal audit values, the higher internal auditors’ ability in identifying noncompliance activities and the more added contributions.
H3: The organizational independence for internal auditors positively related to the internal audit effectiveness in the public offices.
H4: The presence of adequate and competent IA staff in the public-sector offices are positively related to the internal audit effectiveness.
H5: The availability of approved IA charter in the public-sector offices have a positive and significant impact on the internal audit effectiveness in the public-sector offices.
We examine the influence of five independent variables on one dependent variable the internal audit effectiveness. Our strategy is collecting data via questionnaire and archival data of 4 public sectors. As our study is a qualitative one, questionnaires are more appropriate for obtaining quantitative information of how many people hold a certain opinion (Kitzinger, 1995).
A stratified random sampling for a representative sample from different sectors and different positions (employees and senior managers) is found relevant to be adopted in the study.
Our sample includes 26 IA and 26 managers out of 41 and 27 in population respectively. This analysis enables the study to capture the incremental effects of independent variables on internal audit effectiveness under five hypotheses.
Multiple regression was performed to estimate the magnitude of the effect of the five factors identified above (the independent variables) on internal audit effectiveness (the dependent variable), with responses from internal auditors on 4 selected public-sector offices. The basic model of multiple regressions was
IAE = ” +”1MS+ ”2MP+ ”3 OIN + ”4 ACIAS + ”5AIAC+ei (1)
Where:
IAE’ The effectiveness of internal auditors’ in identifying non-compliance activities and the added contributions of IA to the public sector offices,
MS ‘ The Management Support,
MP ‘ The management’s perception of IA’s value,
OIN’ The organizational independence,
ACIAS’ The adequate and competent internal audit staff,
AIAC’ The existence of approved internal audit charter.
”’ is a constant, represents the effectiveness of IA when every independent variable is zero.
”1-5′ is the coefficient, in which every marginal change in variables on internal auditor’s effectiveness affects correspondingly.
ei’ the error term
5- Population and Sample
The target populations for this research were the federal public-sector offices in Khartoum capital city of the Sudan federal government. Due to the difficulty of covering all the total existing public sector, the researcher obliged to minimize its study area by focusing only on 4 purposively selected public-sector offices that are expected to be used as a representative of other sectors and their frequencies and percentages are summarized in as follow:
The descriptive statistics for the survey respondents shows the majority of the ages of respondents of the managers are falling under the age of 40-49 (11, 42.3%),50’59 (11, 42.3%), and the rest falls in the age interval of 30 to 39 (3, 11.5%) and above 60 (1, 3.8%); and in the internal auditors category the majority are fall in the age of 50’59 (10, 38.5%) and 40-49 (9, 34.6%) and the rest falls in the age of 30 to 39 (2, 7.7%) and above 60(5, 19.2%) respondents.
In terms of the level of educational background, most managers and internal auditors have bachelor’s degree (14, 53.8%) and (12, 46.2%) respectively followed by master’s degree (9, 34.6%) for managers and (8, 30.8%) for internal auditors. followed by diploma (1, 3.8%) for managers and (2, 7.7%) internal auditors. followed by Ph.D. (1, 3.8%) for managers and (2, 7.7%) internal auditors. from internal auditors categories, there were (3, 11.5%) who had other levels of educations. These shows the majorities of the respondents were educated/or professional and can contribute more to the effectiveness of their intended work.
6- Results
Table1: Internal Auditors Response
‘ Frequency Valid Percent
audit committee valid YES 20 76.9
NO 6 23.1
Total 26 100.0
Professional certification valid Certified Internal Auditor (CIA) 21 80.8
Certified Public Accountant (CPA) 1 3.8
OTHER 4 15.4
Total 26 100.0
experience valid less than 5 13 50
5 to 9 9 34.6
10 to 14 4 15.4
Total 26 100
Table 2: Activities carried out by IA
Frequency valid percent
NO YES NO YES
Valid Compliance audit 7 19 26.9 73.1
Financial audit 19 7 73.1 26.9
Operational/performance audit 9 17 34.6 65.4
Internal control system evaluation 13 13 50 50
Risk assessment (analysis) audit 14 12 53.8 46.2
Total 62 68
Table 3 shows the correlation between the independent variables and also with the dependent variables. The result shows the acceptable reliability of the research variables in which, the correlation among predictors were not high indicates there are no Multicollinearity problems among variables.
Table 3: Validity Test Result
Correlations
IAE MS MP OI ACIA AIAC
IAE Pearson Correlation 1 0.630** -0.044 0.071 0.410* -0.169
Sig. (2-tailed) 0.0005 0.833 0.729 0.037 0.408
N 26 26 26 26 26 26
MS Pearson Correlation 0.63 1 0.206 0.0212 0.314 0.224
Sig. (2-tailed) 0.0005 0.314 0.918 0.119 0.27
N 26 26 26 26 26 26
MP Pearson Correlation -0.044 0.206 1 0.352 0.566** 0.575**
Sig. (2-tailed) 0.833 0.314 0.0781 0.003 0.002
N 26 26 26 26 26 26
OI Pearson Correlation 0.071 0.0212 0.352 1 0.061 -0.182
Sig. (2-tailed) 0.729 0.918 0.0781 0.768 0.375
N 26 26 26 26 26 26
ACIA Pearson Correlation 0.410* 0.314 0.566** 0.061 1 0.21
Sig. (2-tailed) 0.037 0.119 0.003 0.768 0.302
N 26 26 26 26 26 26
AIAC Pearson Correlation -0.169 0.224 0.575** -0.182 0.21 1
Sig. (2-tailed) 0.408 0.27 0.002 0.375 0.302
N 26 26 26 26 26 26
Table 4 shows the reliability test result. This test is carried out by analyzing the value of Cronbach’s Alpha. The value of Cronbach’s Alpha should be more than0,6. It means that the data used in the research has no problem with the reliability.
Table 4: Reliability Test Result
No. Variable Reliability
1 internal audit effectiveness IAE 0.799
2 The management supports MS 0.698
3 management’s perceptions MP 0.722
4 The organizational independence for internal auditors OI 0.758
5 The presence of adequate and competent IA ACIA 0.756
6 availability of approved IA charter AIAC 0.727
Total 0.884
The result showed that the value of all questionnaire items is more than 0,6. It indicates that the data used in this research are consistent and has no problem with the reliability.
After doing quality data test that consists of validity and reliability test, the next one is classic assumption test. Table 5 shows the result of the first classic assumption test, normality test. The aim of this test is to analyze whether the data used in this research are normally distributed or not. The data classified as normal if the p-value of Kolmogorof-Smirnov is more than 0,05. From table 5 below, we knew that the p-value is more than 0,05 which means that the data used in this research are normally distributed.
Table 5: Normality Test One-Sample Kolmogorov-Smirnov Test
IAE MS MP OI ACIA AIAC
N 26 26 26 26 26 26
Normal Parametersa Mean 58.04 21.35 20.81 20.38 18.92 15.12
Std. Deviation 9.489 2.607 2.593 3.287 3.752 3.963
Most Extreme Differences Absolute 0.194 0.16 0.145 0.15 0.179 0.165
Positive 0.104 0.093 0.13 0.097 0.139 0.118
Negative -0.194 -0.16 -0.145 -0.15 -0.179 -0.165
Kolmogorov-Smirnov Z 0.99 0.817 0.739 0.765 0.91 0.843
Asymp. Sig. (2-tailed) 0.281 0.517 0.646 0.602 0.378 0.477
Another classic assumption done in this research is a multicollinearity test. The aim of this test is to analyze whether the independent variables are correlated each other. This test is done by analyzing the value of tolerance and variance inflation factor (VIF).
Table 6: Multicollinearity Test
Variables Collinearity Statistics
Tolerance VIF
Management Support 0.861 1.162
Management Perceptions 0.546 1.832
Organizational independence 0.283 3.537
Adequate and Competent IA Staff 0.587 1.704
Approved IA Charter 0.435 2.297
The value of tolerance from all independent variables is more than 0,1. While the values of VIF are less than 10. It means that all independent variables are nor correlated each other and free from multicollinearity.
The next table presents regression results. Table 7 shows that p-value for the factors that affect the effectiveness of internal audit are statistically significant at (p< 0.05) which support internal auditors’ ability in identifying non-compliance activities and the added contribution by internal audit to the sector.
Table 7: Regression Result
Coefficients(a)
Unstandardized Coefficients Standardized Coefficients Collinearity Statistics
Model B Std. Error Beta t Sig. Tolerance VIF
1 (Constant) 16.541 14.68 1.127 0.273
MS 2.162 0.541 0.594 3.999 0.001 0.861 1.162
MP -1.461 0.949 -0.399 -1.541 0.139 0.283 3.537
OI 0.415 0.519 0.144 0.8 0.433 0.587 1.704
AIAC -0.35 0.5 -0.146 -0.701 0.491 0.435 2.297
ACIA 1.194 0.472 0.472 2.531 0.02 0.546 1.832
a. Dependent Variable: IAE
Table 8 shows that the R2 value is 0,62. It means that the ability of independent variables to explain the dependent variable is 62,0 %. While 38,0 % is affected by other factors beyond this research
Table 8: Coefficient Determination
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .788a 0.62 0.525 6.537
a. Predictors: (Constant), MP, OI, MS, ACIA, AIAC
7- Discussion
H1: The management supports are positively related to the internal audit effectiveness in the public-sector offices.
The first hypothesis of this research posted that there is a direct relation between effectiveness of the internal audit and the extent of the management support it receives. Showing the strongly correlated relationship between the IAE and the management support, the positive beta sign and a statistically significant result of management support related with the internal audit effectiveness (” = 2.162, t = 3.999, P<0.05) support the proposed hypothesis acceptable. The management support in terms of providing resources, giving training, introducing with new technologies, providing enough facilities and encourages the internal audit process with commitments to promote and communicate their added value for the effectiveness of internal audit work in their office contributes for the IAE.
The result were consistent with the previous auditing research works of (Mihret and Yismaw, 2007; Cohen and Sayag, 2010) they find that the top management support was the critical determinants of internal audit effectiveness in audit finding and the commitment to strength internal audit through hiring proficient internal audit staff, developing career channels for internal audit staff, and providing internal audit work independence. Similarly, in this research finding the management support in terms of training, resources and through other necessary facilities to the internal auditors the top management can contribute to the effectiveness of internal audit works for their office.
Therefore, the management support can contribute for the effective result of the internal auditors through their support in terms of continuous training for their IA staff, fulfilling the necessary materials and facilities that the IA staff needs; and this in turn strongly supports the first proposed hypothesis (H1).
H2: The better the management perceptions of internal audit values, the higher internal auditors’ ability in identifying noncompliance activities and the more added contributions.
The second hypothesis of this research revealed that there was no direct relationship between the management’s perception and the effectiveness of IA in the way of identifying noncompliance activities and the ability of IA to add value to the IAE.
This hypothesis was not supported by the regression result as of the regression results insignificant related with the IAE at (P<0.05). As shown in table 4.7 above the coefficient of MP (” = -1.461) were negatively related and statistically (t= -1.541, ”>0.05) not significantly related with the internal auditor’s effectiveness by identifying noncompliance activities and in adding more values to the IA works of the public sector offices.
But this hypothesis needs a caution; in that insignificance of the management’s perception in determining the IA, effectiveness didn’t mean that it doesn’t completely contribute to the effectiveness of IA. This result may be happened due to the management’s support and the availability of adequate and competent IA staff highly contributed to the IAE in the public sector offices. This makes the contribution of the MP to the IAE insignificance.
Therefore, the spirit of good perception of the management to the effectiveness of internal audit function in identifying the noncompliance activities and their ability to add value to their office was nothing without the appropriate management support to the internal audit functions and without the existence of adequate and approved IA staffs in the office. Furthermore, the support from the management and the availability of the adequate and competent IA staff may overshadow in the determinants of the management’s perception of the internal auditor’s value.
The results were consistent with the previous auditing research works of (Flesher and Zanzig, 2000) they find that to function effectively, internal auditors and the customers of audit services should possess a similar understanding of what makes internal auditing a value-added activity. The failure to reach this understanding could result in the perception that internal audit is simply an obstacle to achieving production objectives. This can result in underutilized audit services and ignored audit recommendations which adversely influence the effectiveness of IA (Arena and Azzone, 2009).
When employees at all levels perceive that the top management assigns importance to the function of IA, they will cooperate and support these processes (Cohen and Sayag, 2010). This implies that internal audit staffs are more motivated and encouraged to perform audit activities given good management’s awareness of IA values. Sarens and Beelde (2006) used a case study approach of five Belgian firms to explore the expectations and perception of both senior management and internal auditors with respect to the relationship between these two parties. They find that, when internal audit operates primarily in a management support role, there is a lack of perceived objectivity and the relationship with the audit committee is week. However, senior management’s expectations significantly influence internal audit and that the perception of senior management is critical to the acceptance and appreciation, to promote value-added and to the maturity of internal audit function with the organization.
H3: The organizational independence for internal auditors positively related to the internal audit effectiveness in the public offices.
The third hypothesis of this research which is assumed to be the determinants of IA effectiveness is the independence of the organization in which internal audit work was conducted.
As shown in the table above the coefficient of OIN (” = 0.415, t= 0.8) were positively related to the effectiveness of IA. But, because of its statistical result (P>0.05), the regression output result hasn’t a statistically significant relationship between the organizational independence and the IA effectiveness reveals not to support the third hypothesis.
Whereas, it is consistent with the previous studies conducted by (Cohen, and Sayag, 2010; Van Peursem, 2005) they find that, the more organizational independence to the internal auditors plays the vital role in assurance of internal audit effectiveness by freely access of necessary documents, information and data about the organization for audit work, and can provide audit finding /report/ freely and directly to the responsible body, and this all supports the IA effectiveness in their sector.
Stewart and Subramaniam (2010) review under organizational status the IAF should be given the appropriate status in the organization to enable the function to exercise organizational independence and individual internal auditors to act objectively since internal auditors found in a unique position as employees of an organization with responsibility to assess and monitor decisions made by management.
This, in turn, leads to make the result of OIN for the IAE insignificant contribution and not to support the proposed hypothesis (H3).
H4: The presence of adequate and competent IA staff in the public-sector offices are positively related to the internal audit effectiveness.
The fourth hypothesis of this research posted that the effectiveness of the internal audit is directly related to the presence of adequate and competent IA staff in the public-sector offices. Showing the strongly correlated relationship between the IAE and the ACIA, the positive beta sign and a statistically significant result of ACIA related with the internal audit effectiveness (” = 1.194, t = 2.531, P<0.05) support the proposed hypothesis acceptable But, this result was inconsistency with some previous auditing researches (Arena and Azzone, 2009; Cohen and Sayag, 2010) they argued that there were no correlation between professional proficiency and adequacy with the IA effectiveness.. The previous research was conducted in terms of the number of internal auditors, professional certification and level of education, whereas this research was conducted the effects of IA by considering the overall abilities of the internal auditor staffs and the availability of adequate and certified internal auditors in terms of their performance to proceed the required auditing activities by matching with the audit standards and organizational objectives by using modern technologies when compared to those previous studies.
Therefore, the existence of adequate and competent IA staff in the public-sector office results with a positive relationship with IAE and with a high contribution for the IAE by performing their activities on time, cover the planned scope of auditing activities by using the computerized data tools and specific IA software. This results in the overall contribution of internal audit effectiveness and its positive relationship with IAE leads to highly support the proposed hypothesis (H4).
H5: The availability of approved IA charter in the public-sector offices have a positive and significant impact on the internal audit effectiveness in the public-sector offices.
The last hypothesis which is proposed to support the effectiveness of internal audit is the existence of approved internal audit charter in the public-sector office. A well-drafted IA charter is a crucial ingredient for the successful internal auditing functions.
This hypothesis was not supported by the regression result as of the regression results insignificant related with the IAE at (P<0.05). As shown in table 4.7above the coefficient of AIAC (” = -0.35) were negatively related and statistically (t= –0.701, ”>0.05) not significantly related with the internal auditor’s effectiveness by identifying noncompliance activities and in adding more values to the IA works of the public sector offices.
In addition, the result of this hypothesis was consistent with the prior audit researches conducted by (Van Peursem, 2005; O’Regan, 2002). According to the authors, a well-drafted IA charter helps the internal audit function to perform its roles of management influence objectively and used as a way of getting access to the information (documents, records, systems, and personnel) that are necessary to perform and reach conclusions on the work. The MoFED (2004) also directs all the public sectors to have approved IA charters that are used as a working manual.
Therefore, the existence of approved internal audit charter in the public-sector office contributes for the effectiveness of internal audit works by facilitating the activities of internal auditors and to make their purpose and authority in line with the standards for the professional practices formulated by the institute of internal auditors in accordance to the rules and regulations of the organization. This strongly supports the proposed hypothesis of the positively related relationship between the availability of AIAC and its significant impact on the internal audit effectiveness (H5).
Conclusion
From this study, we can conclude that:
1- All predictors; the composite measure of management support, management perception of IA values, organizational independence of internal auditors, the existence of adequate and competent IA staff, and the availability of approved internal audit charter were positively contributed for the effectiveness of internal audit functions in SUDAN public sector offices. Therefore, the public-sector office should give emphasis to use these determinant variables to make their service delivery effective, efficient and economical throughout their offices.
2- The evidence from the study indicates that the internal auditors of the public sector are focusing their activities on compliance with laws and regulations as shown in Table (2), but regarding the Financial audit, internal audit system evaluation and risk assessment Little attention was paid. Risk management is now the modern trend of internal audit and if internal audit unit does not pay much attention to it, it is difficult for the sector to improve organizational performance.
3- The internal auditors lack experience and expertise to provide quality work as shown in Table (1).
Recommendation
After watching the research findings and achieved results with regard to the main objective of this study to identify the major determinants of IAE in the public-sector offices and also to prove the hypotheses, the researcher provides the following recommendations to the public-sector offices and to the internal auditors.
‘ the public-sector office should support more for the internal audit functions by facilitating the IA works, should recruited more adequate and competent IA staff and give sufficient training and professional certification for the existing IA staffs, and should maintain the approved IA charter and workable manuals for their office because it directs the overall activities of the internal auditors in line with IIA standards and the office policies and guidelines.
‘ The internal auditors of the public-sector office should recommended to maintain and improve their effective contribution for the IAE in their office, by using the support from their offices management team appropriately, by improving their professional certification in line with the Institute of internal audit standards and organizational guidelines and by introducing themselves with modern technologies that improve their IA function for their office.
‘ The internal audit staffs of the public sector also recommended to work in accordance with the available internal audit charters, it helps the internal auditors to provide the appropriate reports and to know the extent of their relationships with the management, briefly describes their rights and duties IA and the employers.
‘ The researcher also recommends that internal auditors should have to follow the modern definition of internal au”dit which means, they have to concern on risk assessment and management.
‘ Further, the data are limited to the perceptions of internal auditors and are not as comprehensive as they would have otherwise been if we had included other stakeholders, such as external auditors. For this reason, maybe, a future study could be undertaken to explore the perception of other parties such as external auditors on the internal audit’s effectiveness. Also, other independent variables could be modeled.
‘ Finally, further alternative methods such as interviews may help to further explain factors affecting internal audit effectiveness.
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