The Effect of Internal Audit on Organizational Performance: An Empirical Exploration of Selected Jordanian Banks

Abstract

Internal audit is a systematic and independent examination of data, financial statements, accounts records, operations and performances of an enterprise for the purpose of verifying their authenticity and fairness. It is a broad term which means a number of checks and controls exercised in a business to ensure efficient working in the organization. It is regarded as indicating the whole system of controls through vigilance and direction established by the management in the conduct of business.  It has become an indispensable management tool for achieving effective control by detecting the weaknesses in management operations in all industry especially banking industry. Taking this into cognizance, this study examines the effect of internal auditing on the organizational performance of major Jordanian banks. A sample of 364 employees has been selected for the study. Data have been collected through self administered questionnaires and analyzed with the help of multiple regression. Internal audit is used as the independent variable whereas organizational performance is the dependent variable. The analysis of data revealed that there is a significant impact of internal audit on the organizational performance in all banks except Arab Bank.

Keywords: internal auditing, organization, performance, banks, multiple regression.