The Effectiveness of Internal Audit in the Public Sector: The Case of Addis Ababa No. 2 Medium Taxpayers Branch Office.

Abstract

The overall objective of this study is to assess the effectiveness of the internal audit in the public sector, in the case of Addis Ababa no.2 medium taxpayers branch office. Its emphasis is on the capability and independence of internal auditor, the contribution of the IA charter to the effectiveness of the team, and the contribution of the IA team to make sure the employees compliance with rules and regulations, and the effectiveness of the internal control of the organization. The population of the study is the 113 employees (13 teams) including the branch managers who work in the branch office plus 16 employees who work in the headquarters’ internal audit team. The researcher used both primary and secondary data collection methods to achieve the research objectives. 132 self-administrated structured questionnaires were distributed to the parties mentioned above and 123 questionnaires were filled and returned. In addition to that, open ended questions interview was conducted with the branch manager, the branch’s internal audit team head, and the head quarter internal audit team head. In order to analyze both the qualitative and quantitative data, mixed descriptive design was used. According to the results of the study, it showed that the respondents agreed with moderate presence of competency, low level of independence of IA team from management, moderate to high level of success on the effectiveness of the internal audit charter in improving the IA team’s effectiveness, and moderate to very low level for the IA team contribution to increasing compliance of the employees to rules and regulations and improvement of the internal control system. Furthermore, the interview that was conducted also supported these points. Accordingly, the study recommended the following measures to be taken by the organization. Since the study indicated there is a significant influence by the management, the concerned parties should make sure appropriate mechanisms are in place. On the other hand, to improve the competency of the IA team, continuous trainings and sufficient human resource and budget should be allocated. In addition, the concerned party must put a mechanism like training in which all the teams have good understanding of the internal audit charter. Finally, since it is observed from the study that the proportion of the audit type and the department in which the audit is done is not as comprehensive as stated in the charter, the audit team should include in its plan more departments and more types of audits in order to insure the teams’ compliance with rules and regulations and the internal control effectiveness.