A Study on the Role and Effectiveness of Internal Audit in Public Enterprises: The Case of Nekemte City Administration

Abstract

Internal audit plays significant role to achieve organizational objectives.  Auditors need to be increasingly competent in many different areas in order to do a good job: risk and control analysis, financial analysis, computer technology, etc. An important factor in the professionalization of internal audit is to create a solid ethical climate. Without an ethical environment, laws will never be properly applied, and the legal framework will only be for show.  Failure to address key strategic and operational risks as well as compliance risk in an annual audit programs undermines the effectiveness of the Internal Audit Functions.  For effective work performance, internal auditors should have the support of top management and the board of directors. Generally, the effectiveness of internal audit function is influenced by human and capital resources available, the scope of internal audit function and the level of interaction with higher management. In most of public enterprise the objectives, authority, scope, and responsibilities of internal auditing are not spelled out due different factors. Internal auditing is handicapped by a critical shortage of appropriately trained and skilled manpower, inadequate organizational status, and a lack of professional independence. The inadequacies in further professional education and the lack of a coordinated comprehensive training program are critical obstacles to strengthening internal auditing.    Purposively six public Enterprises were selected from the total sixteen public Enterprises found in Nekemte city administration.  Both primary and secondary data were used  for Internal Audit to be effective, internal auditors need appropriate competence to achieve their work effectively, and aspects such as education, training, experience and professional qualifications of the internal auditors influence Internal Audit effectiveness.

Key words: Audit; Internal Audit; Audit effectiveness; Public enterprises

DOI: 10.7176/PPAR/10-10-04

Publication date:October 31^st 2020