Abstract
A company’s accounting control practices is widely believed to be crucial to the success of an
enterprise as it acts as a powerful brake on the possible deviations from the predetermined
objectives and policies (Kiabel, 2012). A strong relationship exists between internal audit quality
and firm performance with opportunities of high growth (Hermanson and Rittenberg, 2003;
Hutchinson and Zain, 2009). However, (Mihret, James and Mula, 2010; Kiabel, 2012; Ejoh and
Ejom, 2014) found that where internal auditing exists, does not significantly impact these
enterprises’ financial performance. Due to the inconsistencies in the extant research,
recommendation from different researchers, and because of its contribution to the Ethiopia
Growth and Transformation Plan (GTP) where creating efficient, effective, transparent and
accountable financial system is among the strategic direction being pursued during the plan period
through enhancing the capacity of internal auditing (MoFED, 2014), this study proposed to
investigate the effects of internal auditing on financial performance of Ethiopian financial
institutions. This research has adopted quantitative research approach, and questionnaires were
collected from the head offices of financial institutions. Spearman’s zero order correlation and
spearman’s partial correlation was run to test the hypotheses. The findings of the study reveal that
there is no association between the internal audit effectiveness and ROA. Moreover, no correlation
exists between the internal audit effectiveness and ROE.
Key words: Internal audit, internal audit effectiveness, management action, financial institutions,
performance
Journal of Finance, Accounting and Management, 7(2), 1-30, July 2016 2
Hutchinson and Zain (2009) explored the relationship between internal audit quality (audit
experience and accounting qualification) and firm performance in Malaysia. They found a strong
relationship between internal audit quality and firm performance with opportunities of high
growth. This finding was consistent with Hermanson and Rittenberg (2003) argument that the
existence of an effective internal audit function is associated with superior organizational
performance.
Kiabel (2012) revealed that where internal auditing exists, in a government owned companies does
not significantly influence financial performance consistent with the findings of Mihret et al.
(2010) that internal audit effectiveness does not significantly impact the enterprises’ financial
performance. Ejoh and Ejom (2014) also found that internal audit function has no significant effect
on the financial performance. The absence of a relationship might arise from possible under-
emphasis on internal auditing by these enterprises. Where the internal audit function is de-
emphasized, clearly, it cannot impact positively on financial performance consistent (Ejoh &
Ejom, 2014). These findings contradicts to the results of Hutchinson and Zain (2009) study of 60
Malaysian companies found that a strong association between internal audit quality and firm
performance.
Previous study dedicated to examining the relationship between internal audit and firm
performance is so limited in both developed countries and developing countries. There are some
Journal of Finance, Accounting and Management, 7(2), 1-30, July 2016 3
studies that have concentrated on problems concerning internal auditing in developed countries
including the U.S. and the U.K. but little evidence is found in developing counties.
In addition, Al-Matari, Al-Swidi, Faudziah, & Al-Matari (2012) investigated the relationship
between board characteristics and firm performance in Kuwait. They recommend future
researchers to examine the association between internal audit and firm performance whether
directly or through a moderator. The inconsistencies in the extant research, recommendation from
different researchers, and because of its contribution to the Ethiopia Growth and Transformation
Plan (GTP) where creating efficient, effective, transparent and accountable financial system is
among the strategic direction being pursued during the plan period through enhancing the capacity
of internal auditing (MoFED, 2014), this study intend to investigate the effects of internal auditing
on performance of Ethiopian financial institutions. This research has adopted quantitative research
approach, and Spearman’s zero order correlation and spearman’s partial correlation will run to test
the hypotheses.
Purpose Statement
The intent of this study is to examine the effects of internal audit on performance of Ethiopian
financial institutions through adopting the quantitative research approach. Further, this study
attempts to assess the internal audit effectiveness of the financial institutions.
Hypothesis
From the extant literature (Al-Matari et al., 2014; Al-Matari et al., 2012; Badara & Saidin, 2013;
Hermanson & Rittenberg, 2003; Kiabel, 2012; Mihret et al., 2010) the researcher proposed the
following tentative explanations.
H1a. Internal audit effectiveness is positively associated with Return on Assets (ROA).
H1b. Internal audit effectiveness is positively associated with Return on Equity (ROE).
H2a. Management’s action on internal audit recommendations positively moderates the
association between Internal Audit effectiveness and Return on Asset (ROA).
H2b. Management’s action on internal audit recommendations positively moderates the
association between Internal Audit effectiveness and Return on Equity (ROE).
Journal of Finance, Accounting and Management, 7(2), 1-30, July 2016 4
Review of literature
Internal Audit
Internal audit is a long standing function and an effective tool of management in many
organizations. It has been a recognized component of organizations in both the public and private
sectors and in most industries for many years. Internal auditing is often seen as an overall
monitoring activity with responsibility to management for assessing the effectiveness of control
procedures which are the responsibility of other functional managers. The internal audit function
is not limited to the operation of any particular function within an organization. Rather, it is all-
embracing and structured in the organization as a separate entity responsible only to a high level
of management (Kiabel, 2012).
Internal auditing is an independent, objective, assurance and consulting activity designed to add
value and improve an organization’s operations. The literature suggests that internal audit is
expected to add value in contemporary organizations (Mihret et al., 2010; Yee, Sujan, James, &
Leung, 2008) and assist organizations to accomplish their objectives.
Internal audit is considered as a value adding activity in contemporary organizations and when
internal audit adds value to organizations, it is effective (Yee et al., 2008). Therefore, identifying
dynamics that influence internal audit effectiveness arguably enhances understanding of internal
audit‘s value adding demeanor in respect of the context in which the function is practiced. The
following section provides a review of the literature on internal audit effectiveness and its possible
association with company’s performance.
objectivity, internal auditor proficiency, quality of internal audit planning and execution, and
quality of internal audit reporting and follow-up are the indicators of internal audit effectiveness
(Mihret et al., 2010).
The independence and objectivity of internal auditing is with respect to both assurance services
and consulting for the organization. The audit activity should have sufficient independence from
those it is required to audit so that it can both conduct its work without interference and be seen to
be able to do so. This will make the auditors provide the objective report and reliable professional
judgment on the auditing work to achieve the mandate given to them with integrity. Thus, there
exist significant positive relationships among auditors’ independence and objectivity to the
effectiveness of internal audit (Baharud-din, Shokiyah, & Ibrahim, 2014).
Internal auditors must possess the knowledge, skills, and other competencies that are needed to
achieve their individual responsibilities and the only way for internal auditors to continue this
professional conduct is by undergoing proper training and development programs (Endaya &
Hanefah, 2013). Technical competence and continuous training are considered essential for
effective internal audit. Mihret and Yismaw (2007) revealed that internal audit office constantly
Journal of Finance, Accounting and Management, 7(2), 1-30, July 2016 6
face the problem of low technical staff proficiency and high staff turnover, which would limit its
capacity to provide effective service to management. Competency of auditors determines the
quality of the audit work performed in an organization. Badara and Saidin (2013); Baharud-din et
al. (2014) argued that competency can be relate to the ability of an individual to perform a job or
task properly base on the educational level, professional experience (Al-Matari et al., 2014) and
the effort of the staffs for continuing professional development.
According to Baharud-din et al. (2014), Mihret and Yismaw (2007), auditors’ competency
determines the effective auditing in the organization. Thus, the ability of the auditors to perform
the systematic and disciplined audit approaches improve the effectiveness of internal audit.
internal audit‘s contribution to achievement of organizational objectives could be viewed from the
perspective of improving return on asset (ROA henceforth). Internal audit possibly contributes to
organizational performance by assisting management to protect or improve ROA (Bryer, 2006b as
cited in Mihret et al., 2010). This could be achieved by internal audit‘s consulting role on efficient
and effective use of resources as well as its assistance in the management of risk. It also assists the
management in the mitigation of wastage and devaluation of capital from fraud (Coram, Ferguson
& Moroney, 2008; Yee et al., 2008).
Journal of Finance, Accounting and Management, 7(2), 1-30, July 2016 7
Conceptual model
The study is designed in a flexible manner to enable using multiple approaches, data types and
sources, and theories. Based on the research of Mihret et al. (2010) done on the same area, Marx‘s
theory of the circuit of industrial capital was employed in the present research.
Marx‘s theory of the circuit of industrial capital was used to explain the contribution that effective
internal audit could make to organizational goal achievement, taking ROA and ROE as a proxy.
This theory indicates that value is created in the production process. Thus, the notion of value
adding internal audit is considered to fit in this framework (Yee et al., 2008; Mihret et al., 2010).
Journal of Finance, Accounting and Management, 7(2), 1-30, July 2016 8
Management action
on Internal Audit
Recommendations
Figure 1. Conceptual Model of the Study adopted from Mihret et al. (2010)
Definition of Measures
Internal Audit Effectiveness
The conceptual model pools together the major concepts discussed in the literature and portrays
their possible relationships. Internal audit effectiveness is represented by four indicators: internal
auditor objectivity, internal auditor proficiency, quality of internal audit planning and execution,
and quality of internal audit reporting and follow-up (Al-Twaijry et al., 2004; Mihret et al., 2010).
Firm Performance
Firm performance refers to the extent to which an organization achieves its goals. The firm
performance will be measured using ROA and ROE, i.e., income after tax divided by total assets
and total equity, will be employed as a proxy to measure financial institutions performance. ROA
and ROE will be computed using financial statement figures. ROA as measurement of firm
performance was used by Mihret et al. (2010). Kiabel (2012), Hitchinson and Zain (2009) were
adopted both ROA and ROE as proxies to measure firm performance. Further, Bryer (2006) as
cited in Mihret et al. (2010) suggest ROE as a measure of companies ‘value added.
Journal of Finance, Accounting and Management, 7(2), 1-30, July 2016 9
Research Hypothesis
Internal audit is expected to contribute positively to accomplishment of organizational goals
(Hermanson & Rittenberg, 2003). In this study, a positive association between internal audit
effectiveness and performance of financial institutions is predicted. ROA and ROE will be used as
a proxy for performance. Thus, the following hypotheses are driven from the literature;
H1a. Internal audit effectiveness is positively associated with ROA.
H1b. Internal audit effectiveness is positively associated with ROE.
Methodology
This section outlines the methodology employed to deal with the research objective and test the
research hypotheses formulated in the literature. It starts by explaining the use of quantitative
approach that was used in the study. Measurement and instrumentation procedures as well as the
related issues are then outlined. This is followed by a discussion of data collection procedures.
Data analysis techniques and procedures are then discussed.
Journal of Finance, Accounting and Management, 7(2), 1-30, July 2016 10
The uses of quantitative methods help to make statistical inferences about the relationships
between variables. Quantitative data can be productive for descriptive, reconnoitering,
exploratory, inductive, and opening purposes. And can be productive for explanatory,
confirmatory, hypothesis testing purposes (Creswell, 2009).
Internal audit effectiveness was measured on a 5-point Likert-type scale that ranges from ‘Strongly
Agree‘(coded as 5) to ‘Strongly Disagree‘(coded as 1). Internal audit directors and staff were asked
to indicate their opinions about internal audit in their financial institutions. As indicated in the
literature, internal audit effectiveness is measured by the extent of internal audit objectivity,
internal audit proficiency, quality of audit planning and execution and quality of reporting and
follow-up in the firms using internal audit practitioners’ views through specific items.
Although internal audit practitioners’ views are also a proxy rather than direct measure, this is
considered as the best practical measure. This is because practitioners are expected to have intimate
knowledge of the concepts of interest to the study. The validity of the measures is considered to
be acceptable for the following reasons. First, most items relate to statements of fact, as compared
to mere opinion. This is because auditors possess firsthand experience of the concepts of interest.
Second, the literature indicates that constructs (i.e., variables measured using respondents
opinions) could be used to measure research phenomena about individuals and organizations so
long as appropriate steps are taken to ensure validity and reliability (Kwok & Sharp, 1998 as cited
in Mihret et al., 2010). As a step to ensuring validity, the items in the questionnaire in this study
were basically derived from prior research instruments and/or the literature.
Journal of Finance, Accounting and Management, 7(2), 1-30, July 2016 11
As internal audit objectivity, proficiency, planning, and reporting are abstract concepts, further
operationalisation was made to make them measurable. This operationalisation is undertaken by
identifying specific constructs on which internal audit practitioners were asked to express their
views. These constructs are specific aspects of internal audit department‘s organization, staffing,
and work performance.
Furthermore, appropriate items were identified for internal audit scope, audit planning and
execution, and internal audit reporting, follow-up and quality review. Most phenomena of interest
are latent variables that cannot be measured directly. As a result, participants’ views were
considered as a proxy for the latent variables.
Financial institutions performance were measured using ROA and ROE, i.e., income after tax
divided by total assets and income after tax divided by total equity, were used as a proxy to measure
financial institutions performance. ROA and ROE were computed using financial statement
figures. ROA as measurement of firm performance was used by Mihret et al. (2010). Kiabel
(2012), Hitchinson and Zain (2009) were adopted both ROA and ROE as proxies to measure firm
performance. Further, Bryer (2006) as cited in Mihret et al. (2010) suggest ROE as a measure of
companies‘value-added.
The first Instrument was a questionnaire for internal audit practitioners (i.e., internal audit directors
and staff). Items were grouped under sub-headings to help respondents gain easy grasp of the
questions asked (Zikmund, 2003). In this questionnaire, respondents were asked about internal
audit organization and operation under five sections, i.e., internal audit proficiency, independence
and objectivity, scope of work, planning and execution, and reporting, follow-up and quality
review.
Journal of Finance, Accounting and Management, 7(2), 1-30, July 2016 12
In the questionnaire, a 5-point Likert-type scale with response options ranging from ‘Strongly
Agree‘ (codes as 5) to ‘Strongly Disagree‘ (coded as 1) were employed. This type of scale was
used in similar areas (see Kiabel, 2012; Mihret & Woldeyohannes, 2008; Mihret et al., 2010;
Mihret & Admassu, 2010). The descriptors ‘Strongly Agree‘ (5), ‘Agree‘ (4), ‘Neutral‘ (3),
‘Disagree‘ (2), and ‘Strongly Disagree‘ (1) were provided.
In such type of scales, it is necessary to clearly indicate the attitude object about which opinions
are sought (Bradburn, Sudman & Wansink, 2004 as cited in Mihret et al., 2010). Thus, instructions
were given that clearly state that respondents are expected to provide opinions on statements as
applied to their organization.
The second Instrument is a secondary data that was used to guide the gathering of documentary
sources (financial statements report).
Pre-testing of Instruments
The data collection instruments of this study was subjected to pre-test at several stages before the
actual data collection begin by the research teams in the research to refine questions, instruments,
or procedures (Cooper & Schindler, 2014). Based on the comments and suggestions from the pre-
testing, the data collection instruments were revised before data collection commenced. These
procedures are considered to have enhanced the reliability of measurement, which in turn possibly
helped enhance statistical power (DeVellis, 2003 as cited in Mihret et al., 2010).
statistical generalizations about a population (Oppenheim, 1992 as cited in Mihret et al., 2010).
Moreover, Cooper and Schindler (2014) noted that if the differences in sampling costs or variances
among strata are large, then disproportionate sampling (stratified purposive sampling) is desirable.
The limitation of this sampling approach, i.e., not enabling statistical generalizations on a
population remains. However, the technique is considered the most appropriate in view of the
purpose of the present study. Studies that employed a similar research design (Mihret et al., 2010)
to the quantitative component of this study have employed purposive sampling.
Mainly, financial institutions are the units of analyses in the study; thus, sample financial
institutions were selected in the first stage. Financial institutions, i.e. banks, insurances and micro
finances were included. Institutions in the study were limited to banking, insurance, and micro
finances sub-sectors. This is because most other private companies in Ethiopia have not adopted
internal audit (Mihret et al., 2010).
Number of financial institutions obtained from the register of financial institutions that the
National Bank of Ethiopia maintains. All internal audit directors and staff in the financial
institutions include in the sample will be considered as potential participants. There were 18 private
and 3 government-owned banks, 14 private and 1 government-owned insurance companies, and
31 Micro Finance Institutions as of May, 2012.
This study was undertaken on financial institutions of Ethiopia which have 2013 fiscal year
financial statements. Questionnaires were collected from the head offices of the financial
institutions. Further, due to the budget constraint the researchers were collected data from micro
finances located in Addis Ababa, Mekelle, and Hawassa.
Data Analysis
This section outlines the detailed data analysis techniques and procedures were employed for the
quantitative data.
Before hypothesis testing was conducted, quantitative data were explored for missing values,
outliers, and distributional characteristics. The reliability of the measures were assessed using
Cronbach‘s alpha for Likert-type data.
Journal of Finance, Accounting and Management, 7(2), 1-30, July 2016 14
Spearman‘s zero order correlation was employed to test H1. This test is chosen because internal
audit effectiveness is generated as ordinal data. This test has been employed in internal auditing
area having similar design (Mihret et al., 2010). Because independence and objectivity,
proficiency, and work performance are interrelated (Krishnamoorthy 2002 as cited in Mihret et al.,
2010), the data for each construct could be correlated. Thus, to arrive at valid results, it is necessary
to take a single value representing the variables (Field, 2005 as cited in Mihret et al., 2010).
Therefore, a single value is derived by taking median values.
Hypotheses 2 aims at testing the moderating impact of management action on internal audit
findings on the relationship claimed in H1. Thus, spearman’s partial correlation was run controlling
for management’s action on internal audit recommendations.
The survey result shows that 75.7% questionnaires were collected from banks and 13.5% and
10.8% were collected from Insurance and Microfinance respectively from the valid percentage.
Thus, more than two-third of questionnaire were collected from banks.
The number of employees employed by the institutions shows that 53.7% financial institutions
have more than 15 internal auditors, and 35.9% have less than 10 internal auditors. National bank
of Ethiopia issued new directives that attempts to strengthen the financial institutions
accountability and transparency through structuring their internal audit, but they are struggling to
do so, especially the microfinance institutions.
Mgt take action on IA report & recommendation 94 1.00 5.00 3.6809 1.05965
Valid N (listwise) 78
IA department is large to carry out its duties 93 1.00 5.00 3.6237 1.16015
Valid N (listwise) 87
Proficiency relates to the ability of an individual and setting of the department to perform a job or
task properly based on the educational level, professional experience, budget of the department,
training and hiring policies, capacity of the department, internal audit manual and the effort of the
staffs for continuing professional development that improves the effectiveness of internal audit.
The results of the questionnaire regarding proficiency of internal audit function in the financial
institutions demonstrates strong proficiencies in relation to having of complete internal audit
manual, capacity of internal audit, budget, experience, and skills and knowledge of the internal
auditor. However, it shows weak proficiencies regarding to the policies on hiring and training of
internal auditors, and the continuous professional development that affects the effectiveness of
internal audit negatively since technical competence and continuous training are considered
Journal of Finance, Accounting and Management, 7(2), 1-30, July 2016 19
essential for effective internal audit (Mihret and Yismaw, 2007; Badara and Saidin, 2013; Al-
Matari et al., 2014; Baharud-din et al., 2014).
Fraud risk considered in setting audit priorities 89 1.00 5.00 3.7528 .96861
Senior mgt input is well planned in setting IA 88 1.00 5.00 3.6932 .96321
Audit work documented and maintained in a file 93 1.00 5.00 4.4409 .78660
Potential risks relevant to audit are identified 94 1.00 5.00 3.8511 .99415
Prior audit reports are reviewed constantly 93 1.00 5.00 4.1398 .85455
Prior audit working paper are reviewed 93 1.00 5.00 3.9032 .97874
Written audit programs are always established 91 1.00 5.00 4.1209 1.03102
Valid N (listwise) 70
The mean results indicate that the internal audit planning and execution practices of financial
institutions is above 3.6 except the questions concerning to risk assessment as part of audit
planning, preliminary survey before an audit, and using of analytical audit procedures in
examination. These results signifies that the internal audit function planning and execution
performs well that contribute to the effectiveness of IA works (Al-Twaijry et al., 2004; Mihret and
Woldeyohannes, 2008; Mihret et al., 2010) though there exists high deviation of results of
respondents from the average respondents result like the other responses. Audit quality is arguably
a function of reasonableness of the scope of service; and effective planning, execution and
communication of internal audits and audit quality significantly influence audit effectiveness
(Mihret and Yismaw, 2007).
Journal of Finance, Accounting and Management, 7(2), 1-30, July 2016 22
Audit finding discuss with auditees before report 94 1.00 5.00 4.3936 .79268
Valid N (listwise) 88
The office's ability to properly plan, perform and communicate the results of audits is a proxy for
audit quality and this in turn significantly influence audit effectiveness (Mihret and Yismaw,
2007). The questionnaire result shows that (mean of above 3.78) internal audit reporting and
Journal of Finance, Accounting and Management, 7(2), 1-30, July 2016 23
follow-up of the institutions performs well that contributes positively to audit effectiveness (Mihret
and Yismaw, 2007).
Reliability analysis
Reliability analysis is undertaken for internal audit effectiveness indicators using Cronbach‘s
alpha. This statistic is appropriate because Likert-type scale is considered to be able to generate
data that approximates interval data (Bohrnstedt and Knoke 1994, cited in Mihret et al. 2010). This
measure has also been employed in prior auditing research (e.g., Mihret eat al. 2010) using a
Likert-type scale. The results of reliability analysis are reported in Table 4.3.
Journal of Finance, Accounting and Management, 7(2), 1-30, July 2016 24
Most researchers use 0.70 as a minimum acceptable level of coefficient alpha, while, in some cases
0.6 and 0.5 are also considered satisfactory (Kerlinger & Lee 2000, cited in Mihret eat al. 2010).
In this study, Cronbach's alpha is 0.720 and above. The level of alpha was considered to be reliable
enough to proceed with the data analysis.
Journal of Finance, Accounting and Management, 7(2), 1-30, July 2016 25
Hypotheses Testing
Table: Inferential statistics results for hypothesis 1 and 2
Spearman correlation of internal audit effectiveness with ROA and ROE
The hypothesis for the effects of internal audit effectiveness on the performance of financial
institutions was tested. The first two hypotheses were tested without the moderating variable.
H1a. Internal Audit effectiveness is positively associated with ROA.
H1b. Internal Audit effectiveness is positively associated with ROE.
Individuals are units of response for internal audit effectiveness and financial institutions are units
of analysis for these hypotheses. Thus, responses of individuals from the same institutions were
Journal of Finance, Accounting and Management, 7(2), 1-30, July 2016 26
combined (Mihret et al. 2010) for the purpose of testing the above hypotheses. These hypotheses
are tested using Spearman’s correlation coefficient because internal audit effectiveness is ordinal.
In contrast, since ROA and ROE are metric data it is converted into rank order data to make it
suitable for use in Spearman’s rank order correlation (Mihret et al. 2010). The conversion was
undertaken by assigning 1 for ROA and ROE less than 10 per cent, 2 for ROA and ROE of 11 to
20 per cent, 3 for ROA and ROE of 21 to 30 per cent, 4 for ROA and ROE of 31 to 40 per cent,
and 5 when ROA and ROE are over 40 per cent. As shown in the above table, the results show that
Spearman’s coefficient of correlation between internal audit effectiveness and ROA is not
statistically significant (rs = -0.190; p = 0.352). This indicates that statistically the association
between these two variables for the sample is not different from zero. Thus, hypothesis 1a, internal
audit effectiveness is positively associated with ROA is not supported. Likewise, the correlation
between internal audit effectiveness and ROE is statistically insignificant (rs = -0.253; p = 0.213).
Statistically, the association between these two variables for the sample is not different from zero.
Therefore, hypothesis 1b, internal audit effectiveness is positively associated with ROE is not
supported.
The result of the partial correlation shows that the relationship of internal audit effectiveness with
ROA (rs = -0.209; p = 0.315) and ROE (rs = -0.255; p = 0.219) is statistically insignificant. Hence,
management action on internal audit findings does not appear to make a significance difference in
the correlation of ROA and ROE with internal audit effectiveness in the financial institutions
studied. As a result, hypothesis 2a, management’s action on internal audit recommendations
positively moderates the association between internal audit effectiveness and ROA, is not
supported. Similarly, hypothesis 2b, management’s action on internal audit recommendations
Journal of Finance, Accounting and Management, 7(2), 1-30, July 2016 27
positively moderates the association between internal audit effectiveness and ROE, is not
supported. The current study findings are consistent with previous results (Mihret et al. 2010;
Kiabel, 2012; Ejoh and Ejom, 2014) that internal audit effectiveness has no significant effect on
the financial performance.
Hutchinson and Zain (2009) study of 60 Malaysian companies found a strong association between
internal audit quality and firm performance. This result supports the theory of internal audit
function contribution Hermanson and Rittenberg (2003) that the existence of an effective internal
audit function is associated with superior organizational performance. However, the present study
results reveal that internal audit effectiveness has no significant effect on the financial performance
consistent with previous results (Mihret et al. 2010; Kiabel, 2012; Ejoh and Ejom, 2014) that
statistically there is no association between internal audit effectiveness and financial performance.
The conclusions seem to demonstrate practical value and the findings appear to pave the way for
further research. The internal audit functions concerning independence and objectivity, proficiency
of internal auditor, and internal audit planning and execution needs to execute by internal auditors
and the management as of the manual issued by MoFED that might help the effectiveness of
internal audit effectiveness.
Journal of Finance, Accounting and Management, 7(2), 1-30, July 2016 28
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