FACTORS AFFECTING INTERNAL AUDIT EFFECTIVENESS: IN THE CASE OF ETHIOPIAN PRIVATE COMMERCIAL BANKS

Abstract

In recent years, there has been an increasing interest in internal auditing. This study has examined the factors affecting internal audit effectiveness in the Ethiopian private commercial banks. Five hypotheses were formulated based on a comprehensive review of past literature. The study used primary sources of data through questionnaires. A cross-sectional survey design was employed, purposive sampling method was used and data were collected using structured questionnaires, with total of 168 questionnaires were distributed to internal auditors of all Private commercial banks, and 147 (a 87.5% response rate) had collected. The data were run with SPSS version 20 and standard regression analyses were carried out to examine the attributes of internal audit effectiveness. All of these five independent variables are making 60% explained internal audit effectiveness. The study found that there existed significant positive relationships between the factors (Independence and objectivity of internal auditors, Competency of internal audit staffs, Existence of audit committees) and internal audit effectiveness. However, Organizational Setting and Management support have no significant effect on internal audit effectiveness. But, private commercial banks should understand that the contributions of these variables were collectively significant to identify any noncompliance activities in their office and to add values for the internal audit effectiveness. This study provides useful information to practitioners and academics who are interested in identifying the determinants of internal auditing effectiveness.