Muoch Rom

FACTORS AFFECTING THE EFFECTIVENESS OF INTERNAL AUDIT IN PUBLIC SECTORS, A CASE OF GAMBELLA REGIONAL STATE OF ETHIOPIA A RESEARCH THESIS SUBMITTED TO THE DEPARTMENT OF ACCOUNTINF AND FINANCE IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE MASTER DEGREE OF SCIENCE IN ACCOUNTING AND AUDITING (MSC.) BY: MUOCH TONGYIK ROM ID.NO: Aku1007124/2017 G.C. ADVISOR: TEKLIT ATSEBHA (Ph.D.) AKSUM UNIVERSITY COLLEGE OF BUSINESS AND ECONOMIC DEPARTMENT OF ACCOUNTING AND FINANCE JUNE, 2019 G.C AKSUM, ETHIOPIA DECLARATION Statement of author I’ m hereby declare that this thesis is my original work and all its sources of materials that were used for its preparation have been fully acknowledged. So this Thesis has been submitted in partial fulfillment of the requirements for the Degree of Master Science in Accounting and Auditing at Aksum University. I strongly declare that this Thesis was not be submitted to any other academics institute for the award of any academic degree, diploma or advance certificate. Name of candidate: Muoch Tongyik Rom Signature: ---------------------Date June, 2019 I CERTIFICATION This is to certify that Muoch Tongyik has carried out this research Thesis, entitled factors affecting the effectiveness of the internal audit in public sectors, case study in Gambella Regional State of Ethiopia in partial fulfillment of the requirements for the degree of Masters of Science in Accounting and Auditing under my guidance and supervision is complied with the regulations of the Aksum University and meets the accepted standards with respect to originality and quality. I certify that this research work is original in nature and has not been presented in any means and to any award. Advisor name: Teklit Atsebha (Ph.D.) Signature: ----------------------Date: June, 2019 This is to certify that the Thesis prepared by Muoch Tongyik, entitled factors affecting the effectiveness of the internal audit in public sectors, case study in Gambella Regional State of Ethiopia in partial fulfillment of the requirements for the degree of Masters of Science in Accounting and Auditing complies with the regulations of the Aksum University College of Business and Economic and meets the accepted standards with respect to originality and quality. Approved by Board of Examiners ----------------------------------------Internal examiner ----------------------------------------External examiner ----------------------------------------Chairperson -----------------------Signature ------------------------Signature ---------------------Signature II ---------------------Date ---------------------Date -------------------Date DEDICATION This research is dedicated to my beloved wife Nyabiel Gatluak, Daughter and Sons, Brother; Chuol Biel, Luk Bidit, Tut Gony and Kak Bichiok, and sisters for their moral support throughout the entire MSc program and especially during this research Thesis. Muoch Tongyik Rom June, 2019 G.C Aksum University, Tigray Ethiopia III ACKNOWLEDGEMENT My earnest gratefulness is to God Almighty and Our Lord Jesus Christ for His unfailing Love and Grace for me. All Glory and Praises to You, Lord! I am grateful to my supervisor; Teklit Atsebha (Ph.D.) for his instrumental support and pieces of advice which have brought me this far. I am really blessed to have you as my supervisor. May the Lord Jesus Christ keep you all for His second coming! I am also grateful to all lecturers of the Aksum University, College of Business and Economic, particularly the department of Accounting and Finance. Your invaluable suggestions and criticisms at the seminar presentations have surely been helpful. I would also like to acknowledge the encouragement from all my colleagues and classmates for their remarkable devotion, assistance and dedication throughout the Thesis work. Special thanks to all my respondents whose altruistic support for me during data collection has made this work fruitful. I must confess that without you I would not have been able to do this thesis. I am equally grateful to my Christian families. Bless be the tie that binds our hearts in Christian love. We shall surely go home very soon. Last but not I am thankful to my beloved Dad and Mum; Brothers, Sisters and Friends for their financial and non-financial supports. God richly bless you. Finally, a big kiss goes to my beautiful wife Nyabiel Gatluak who inspired me. Without her great support, this Thesis would not have been possible. When our daughter and sons, are a little older, I will explain what I was doing “upstairs” when I was studying countless nights and weekends. Muoch Tongyik Rom June, 2019 G.C AKSUM, ETHIOPIA IV ABSTRACT The main objective of this study is to identify the key factors influencing the internal audit effectiveness in the selected public sectors of Gambella state. The study is apparently up to now, have been not examined in Gambella region specifically and but examined in Ethiopia generally. The research focused on 10 purposively selected public sectors/offices with an 81 respondents that are expected to represent all other sectors. The internal auditors, accountants, audit directors and finance directors of the selected public sectors/ offices are the source for the required data to the researcher through the questionnaires administered. The researcher adopted quantitative research method due to it is use of answering questions on relationships within measurable variables and with an intention to explain, predict and control a phenomenon. The finding of this research proved that the formal mandate and standard for professional practice; competence, independence, organizational independence and objectivity, management support, active cooperation among internal and external auditors, and risk management and internal control efficiency were statistically significant and positively contributed to the IAE in the public sector offices, Gambella region. Thus, the public sector office should support more for the internal audit functions by maintaining these variables in the internal audit works. Internal auditor should recognize maintaining effective cooperation with external auditor. The Ethiopian Institute of Internal Auditor should contribute for the IAE by working in collaboration with the MoFED by supplying the adequate and competent internal audit staffs and also to give short term trainings to upgrade the existing IA staffs proficiency in line with the institute of IA standards. This research contributes for the demonstration of the internal auditors’ effectiveness by determining the factors which affect the public sectors internal audit effectiveness. Key words: Internal audit effectiveness, Gambella public sectors, factors affecting internal audit effectiveness. V TABLE OF CONTENTS Table of Contents DECLARATION ........................................................................................................................................... I CERTIFICATION ........................................................................................................................................ II DEDICATION ............................................................................................................................................. III ACKNOWLEDGEMENT ........................................................................................................................... IV ABSTRACT.................................................................................................................................................. V TABLE OF CONTENTS ............................................................................................................................. VI LISTS OF TABLE ....................................................................................................................................... IX LISTS OF FIGURE ..................................................................................................................................... XI LISTS OF ABBREBIATIONS AND ACRONMYS .................................................................................. XII CHAPTER ONE ........................................................................................................................................... 1 1. INTRODUCTION ................................................................................................................................ 1 1.1. BACKGROUND OF THE STUDY ............................................................................................. 1 1.2. STATEMENT OF PROBLEM ..................................................................................................... 3 1.3. OBJECTIVE OF THE STUDY .................................................................................................... 4 1.3.1. GENERAL OBJECTIVE ...................................................................................................... 4 1.3.2. SPECIFIC OBJECTIVE ....................................................................................................... 4 1.4. RESEARCH HYPOTHESES ....................................................................................................... 4 1.5. SCOPE OF THE STUDY .................................................................................................................... 5 1.6. SIGNIFICANCE OF THE STUDY .............................................................................................. 5 1.7. ORGANIZATION OF THE STUDY ........................................................................................... 6 1.8. LIMITATION OF THE STUDY .................................................................................................. 6 CHAPTER TWO .......................................................................................................................................... 8 2. RELATED LITERATURE REVIEW ...................................................................................................... 8 2.1. THEORETICAL REVIEW................................................................................................................ 8 2.1.1. INTERNAL AUDITING ...................................................................................................... 8 2.1.2. THE PUBLIC SECTOR INTERNAL AUDITING ............................................................ 11 2.1.3. INTERNAL AUDIT EFFECTIVENESS ........................................................................... 12 2.2. EMPIRICAL REVIEW............................................................................................................... 14 VI 2.2.1. FACTORS AFFECTING THE INTERNAL AUDIT EFFECTIVENESS ......................... 15 CHAPTER THREE .................................................................................................................................... 19 3. RESEARCH METHODOLOGY ........................................................................................................ 19 3.1. DESCRIPTION OF THE STUDY AREA.................................................................................. 19 3.2. RESEARCH DESIGN ................................................................................................................ 19 3.3. RESEARCH METHODS ........................................................................................................... 20 3.4. TARGET POPULATION AND SOURCE DATA .................................................................... 21 3.5. DATA COLLECTION TECHNIQUE ........................................................................................ 21 3.5.2. SAMPLING DESIGN......................................................................................................... 22 3.5.3. SAMPLE SIZE ................................................................................................................... 23 3.5.4. SAMPLING PROCEDURE ............................................................................................... 25 3.6. DATA ANALYSIS ..................................................................................................................... 26 3.6.1. RESEARCH VARIABLES ................................................................................................ 26 3.6.2. MODEL DESIGN ............................................................................................................... 27 CHAPTER FOUR ....................................................................................................................................... 30 4. RESULT AND DICUSSION.............................................................................................................. 30 4.1. MEASSURES OF RELIABILITY AND RESPONSE RATE ................................................... 30 4.1.1. RELIABILITY .................................................................................................................... 30 4.1.2. RESPONSE RATE ............................................................................................................. 30 4.1.3. RESPONDENTS PROFILE ............................................................................................... 31 4.2. DESCRIPTIVE STATISTIC OF THE QUESTIONNAIES....................................................... 33 4.3. FACTORS AFFECTING THE EFFECTIVENESS OF INTERNAL AUDIT ........................... 54 4.3.1. EFFECT OF PROFESSIONAL PRACTICE AND COMPITENCE ON IAE ................... 55 4.3.2. EFFECT OF THE INDEPENDENCY OF INTERNAL AUDITORS ON IAE ................. 57 4.3.3. EFFECT OF ORGANIZATIONAL INDEPENDENCY AND ONJECTIVITY ON IAE . 58 4.3.4. EFFECT OF MANAGEMENT SUPPORT ON IAE ......................................................... 60 4.3.5. IAE EFFECT OF COOPERATION BETWEEN INTEERNAL AND EXTERNAL AUDIT ON 62 4.3.6. IAE ON RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM .................... 63 4.4. DISCUSSION ............................................................................................................................. 65 CHAPTER FIVE ........................................................................................................................................ 70 5. CONCLUSION AND RECCOMANDATION .................................................................................. 70 VII 5.1. CONCLUSION ........................................................................................................................... 70 5.2. RECOMMENDATION .............................................................................................................. 71 REFERRENCE ........................................................................................................................................... 73 APPENDIX A: QUESTIONNAIRES ........................................................................................................ 79 APPENDIX B: RELIABILITY TEST FOR VARIABLES........................................................................ 86 APPENDIX C: EFFECT OF INDEPENDENT VARIABLES ON IAE .................................................... 86 APPENDIX D: TIME and BUDGET ......................................................................................................... 89 VIII LISTS OF TABLE TABLE 3. 1 SAMPLE SIZE PROPORTIONATE TO EACH SELECTED PUBLIC SECTOR ............................. 24 TABLE 3. 2 SAMPLE SIZE PROPORTIONATE TO EACH SELECTED PUBLIC SECTOR ............................ 25 TABLE 4. 1 CRONBACH’S ALPHA RESULTS ..................................................................................... 30 TABLE 4.2. SEX OF THE RESPONDENTS ........................................................................................... 31 TABLE 4. 3. AGE OF THE RESPONDENTS ......................................................................................... 31 TABLE 4. 4 FIELD OF STUDY OF THE RESPONDENTS ........................................................................ 32 TABLE 4. 5 EDUCATIONAL LEVEL OF THE RESPONDENTS ............................................................... 32 TABLE 4. 6 POSITION OF THE RESPONDENTS .................................................................................. 33 TABLE 4. 7 WORK EXPERIENCE ON THE SERVICE............................................................................ 33 TABLE 4. 8 THE EFFECTIVENESS OF INTERNAL AUDITORS .............................................................. 36 TABLE 4. 9 FORMAL MANDATE AND PROFICIENCY OF INTERNAL AUDITORS .................................. 40 TABLE 4. 10 COMPETENCY OF INTERNAL AUDITORS ..................................................................... 42 TABLE 4. 11 INDEPENDENCY OF INTERNAL AUDITORS ................................................................... 44 TABLE 4. 12 ORGANIZATIONAL INDEPENDENCY AND OBJECTIVITY OF INTERNAL AUDITORS......... 46 TABLE 4. 13 MANAGEMENT SUPPORT TO INTERNAL AUDITORS ..................................................... 48 TABLE 4. 14 COOPERATION BETWEEN INTERNAL AUDITORS AND EXTERNAL AUDITORS ............... 51 TABLE 4. 15 RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM OF INTERNAL AUDITORS ....... 53 TABLE 4. 16 MODEL FITTING INFORMATION ................................................................................. 55 TABLE 4. 17 GOODNESS-OF-FIT ..................................................................................................... 55 TABLE 4. 18 PSEUDO R-SQUARE ................................................................................................... 55 TABLE 4. 19 PARAMETER ESTIMATES ............................................................................................ 56 TABLE 4. 20 MODEL FITTING INFORMATION ................................................................................. 57 TABLE 4. 21 GOODNESS-OF-FIT .................................................................................................... 57 TABLE 4. 22 PSEUDO R-SQUARE ................................................................................................... 57 TABLE 4. 23 PARAMETER ESTIMATES ........................................................................................... 58 TABLE 4. 24 MODEL FITTING INFORMATION ................................................................................. 58 TABLE 4. 25 GOODNESS-OF-FIT .................................................................................................... 58 TABLE 4. 26 PSEUDO R-SQUARE ................................................................................................... 59 TABLE 4. 27 PARAMETER ESTIMATES ........................................................................................... 59 TABLE 4. 28 MODEL FITTING INFORMATION ................................................................................. 60 IX TABLE 4. 29 GOODNESS-OF-FIT .................................................................................................... 60 TABLE 4. 30 PSEUDO R-SQUARE ................................................................................................... 60 TABLE 4. 31 PARAMETER ESTIMATES ............................................................................................ 61 TABLE 4. 32 MODEL FITTING INFORMATION ................................................................................. 62 TABLE 4. 33 GOODNESS-OF-FIT .................................................................................................... 62 TABLE 4. 34 PSEUDO R-SQUARE .................................................................................................... 62 TABLE 4. 35 PARAMETER ESTIMATES ............................................................................................ 63 TABLE 4. 36 MODEL FITTING INFORMATION ................................................................................. 63 TABLE 4. 37 GOODNESS-OF-FIT .................................................................................................... 64 TABLE 4. 38 PSEUDO R-SQUARE ................................................................................................... 64 TABLE 4. 39 PARAMETER ESTIMATES ........................................................................................... 64 X LISTS OF FIGURE FIGURE 3. 1 CONCEPTUAL FRAMEWORK. ....................................................................................... 27 FIGURE 4. 1 INTERNAL AUDIT EFFECTIVENESS 38 FIGURE 4. 2 FORMAL MANDATE AND PROFICIENCY OF INTERNAL AUDITORS 41 FIGURE 4. 3 COMPETENCY OF INTERNAL AUDITORS 43 FIGURE 4. 4 INDEPENDENCY OF INTERNAL AUDITORS 45 FIGURE 4. 5 .ORGANIZATIONAL INDEPENDENCY AND OBJECTIVITY OF INTERNAL AUDITORS 47 FIGURE 4. 6 MANAGEMENT SUPPORT TO INTERNAL AUDITORS 50 FIGURE 4. 7 COOPERATION BETWEEN INTERNAL AUDITORS AND EXTERNAL AUDITORS 52 FIGURE 4. 8 RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM OF INTERNAL AUDITORS 54 XI LISTS OF ABBREBIATIONS AND ACRONMYS 3E’s Effective, Efficient and Economical CEO Chief Executive Officer EA External Auditor GPNNRS Gambella People’s Nation Nationalities Regional State IA Internal Auditor IAE Internal Audit Effectiveness IIA Institute of Internal Auditor EIIA Ethiopian Institute of Internal Auditor IIAM Institute of Internal Auditor Malaysia MoFED Ministry of Finance and Economic Development OAG Office of Auditor General OLS Ordinary Linear Square SAI Supreme audit Institution SNNPRS Southern People’s, Nations and Nationalities Regional States SPSS Statistical Package for Social Science XII CHAPTER ONE 1. INTRODUCTION 1.1. BACKGROUND OF THE STUDY Every state, which is administered in a democratic policy, needs to be accountable in its use of public money and in providing effective, efficient and economical (3e’s) service delivery. One of the major ways of achieving those government objectives is the institution of internal audit (IA) for controlling and using of all scarce resources available in the corporate organization. In addition, internal auditing is considered as a cornerstone of good public sector governance (Supplemental Guidance, 2012). By providing unbiased, objective assessments of whether public resources are managed responsibly and effectively to achieve intended results, and helping public sector organizations achieve accountability and integrity, improve operations, and build confidence among citizens and stakeholders (Supplemental Guidance, 2012). The public sector auditor has an importance role to supports the government responsibilities of oversight, insight, and foresight. Oversight addresses whether public sector entities are doing what they are supposed to do and serves to detect and deter public corruption. Insight assists decision-makers by providing an independent assessment of public sector programs, policies, operations, and results. Foresight identifies trends and emerging challenges. In the absence of effective internal audit, individuals with questionable character may misuse government resources. In the public sector organizations also known as government, all the activities will be monitored easier by the internal audit function. Therefore, internal audit effectiveness (IAE) has become the best choice for achieving governmental goals. Government can protect themselves by improving the IA procedures that will provide some level of assurance that local governments are not misapplying the nation’s resources (George, Edward, & Sampson, 2016). However, this choice is now at the center of ineffectiveness. The current study for effectiveness of internal auditors (IAs) working in public sector assured that IAs have relatively still lack of qualified, skill and experience of the auditors (Zulkifli, Alagan, and Mohd, 2014) and the internal audit is facing a risk of lack of expertise, lack of management respect, lack of opportunity for 1 professional development and domination by dishonest management (Guruswamy, 2012). Although, Ministry of Finance and Economic Development (MOFED, 2004), in the internal audit manual, identified the challenges of lack of management respect, lack of independence, assigned of internal auditors to many tasks and being ignored (conflict of interest) and lack of professional development. Agumas (2015) found that the lower existence of organizational independence, competent staff and sufficient funding results in internal auditors activities facing big challenges for the risk management role of internal audit function in the sector. Further, the main reason for the presence of financial errors and irregularities were the lack of cooperation between internal and external audit teams (Adhista, 2015). Tesema (2018) found that risk management and control of internal audit was insignificant and have negative sign of beta values. In response to the above drawback of effectiveness of internal audit, Agumas (2015) suggest that the control function of internal audit becomes better with improved existence of competent staff, compliance with professional audit standards and sufficient funding in the public sector. The cooperation and coordination between internal audit (IA) and external audit (EA) increases the efficiency, effectiveness and economy of audits and could help management to provide a high quality public service (Adhista, 2015). Moreover, Tesema (2018) assured that formal mandate and standards for the professional practice of internal audit, competent staff of internal auditors and organizational independences and objectivity of internal auditors were the major elements of internal audit that play an important role to promote good governance. Therefore, government should consider internal audit function as a first line defense against inadequate corporate governance and financial reporting (Guruswamy, 2012). Internal auditors, as custodian of public trust, and being independent professional, are expected to help the nation spend wisely (Supplemental Guidance, 2012). In view of the concept of internal audit effectiveness, researcher wants to know how effective it is in the public sector domain in Gambella region. Are the public sectors well embraced to accept the IAE concept? The above issues shall be the concern of this study. 2 1.2. STATEMENT OF PROBLEM Internal audit functions play a significant role in organizations by adding value and improving their efforts to achieve set objectives through a systematic and disciplined approach to control and evaluate operations (Helianti, 2016). The internal audit is one of the important units for management to confirm and verify the compliance of administrative units in the financial and administrative policies, legislatures, financial and administrative systems and the adopted public policies. Asmamaw, Mohammed, and Abraham (2014) assured that the internal audit plays a valuable role by providing both assurance and consulting service. However, internal audit effectiveness (IAE) depends to auditors’ competency and management support (Zulkifli, Alagan, and Mohd, 2014). There are various studies conducted on internal audit effectiveness in Ethiopian public sectors, the general opinion according to literature is that most of the public sector internal audit have lack of formal mandate, lack of top management support and lack of unrestricted access, lack of independence to discharge audit findings regarding the weakness of the organization and lack of qualification to perform their duties, lack of expertise, lack of management respect, lack of opportunity for professional development and domination by dishonest management, assigned of internal auditors to many tasks and being ignored (Agumas, 2015; Guruswamy, 2012, and MOFED, 2004). Therefore, taking into account the above mentioned studies, a need rises to know how well the public sectors embraced to accept the IAE concept in Gambella region. The main reason for this study is despite the fact that many studies were conducted in various part of the country, but to the degree of the researcher’s knowledge no prior study was conducted on the factors affecting IAE in Gambella state. This study aimed to examine the factors affecting the internal audit effectiveness in the public sector in Gambella region, Ethiopia. Moreover, factors such as formal mandate and standards for the professional practice of internal auditors, competency of internal auditors, independence of internal auditors, organizational independence and objectivity of internal auditors, the support of internal audit from the top management, cooperation between internal and external auditors, and 3 risk management and control of internal auditors were used as factors to examine how they influences the effectiveness of internal auditors in public sectors. 1.3. OBJECTIVE OF THE STUDY 1.3.1. GENERAL OBJECTIVE The main objective of this study is to identify the factors influencing the internal audit effectiveness in public sectors of Gambella state, Ethiopia. 1.3.2. SPECIFIC OBJECTIVE Specifically, the research also aimed to achieve the following specific objectives:  To examine the phenomenon of formal mandate and proficiency on internal audit effectiveness.  To identify the effect of management support on internal audit effectiveness.  To examine the effect of organizational independence and objectivity on internal audit effectiveness.  To examine the independence and contribution of the competence of internal auditors on internal audit effectiveness.  To determine the effect of the cooperation between internal audit and external audit on internal audit effectiveness.  To investigate the contribution of internal audit effectiveness on risk management and internal control. 1.4. RESEARCH HYPOTHESES In line with the objectives of the study, the researcher used the following seven hypotheses:  H1: There is a positive relationship between formal mandate and standards for professional practice of internal audit and internal audit effectiveness.  H2: There is a positive relationship between competent staff of internal auditors and internal audit effectiveness.  H3: There is a positive relationship between independence of internal audit and internal audit effectiveness. 4  H4: There is a positive relationship between organizational independences and objectivity of internal auditors and internal audit effectiveness.  H5: There is a positive relationship between management support and internal audit effectiveness.  H6: There is a positive relationship between cooperation between internal auditors and external auditors and internal audit effectiveness.  H7: There is a positive relationship between risk management and internal control and internal audit effectiveness. 1.5. SCOPE OF THE STUDY This study is delimited to the evaluation of the factors affecting the effectiveness of internal audit in the Gambella regional public sector in ten of the public sector offices located in Gambella state of Ethiopia. Gambella state is basically a civil servant state with four zones. 1.6. SIGNIFICANCE OF THE STUDY There are three identified stalk-holders that will be benefited from the result of this study, namely the internal auditors of the selected public sectors, Gambella regional government and Ethiopian Institute of Internal Auditor (EIIA). However, internal auditors have significance approach to identify failure of complying with the governments’ established policies, plans, procedures, laws and regulations, which could have a fundamental impact on the organization’s operations. The internal auditors are also necessary to add value to the organizations, to avoid failure and to save the operating and administration costs in accordance with the organization’s policies and procedures. Thus, this research would be very important to demonstrate the effectiveness of the internal auditors by determining the factors which affect the public sectors internal audit effectiveness. Furthermore, this study would have an importance of enhancing internal audit effectiveness in the public sector with the intent to achieving effective and efficient public institution and powering the financial accountability in public sectors of the state. Lastly, the outcome of this research would be essential for the empirical evidences for the public sectors, government, policy makers and it will be important for future researchers to develop a conceptual literature. 5 1.7. ORGANIZATION OF THE STUDY This study has tried to examine the factors affecting the effectiveness of internal audit in the public sectors in the Gambella regional state. This study was organized into five chapters; chapter one is the introduction part which contains background of the study, statement of the problem, research objective, research hypotheses, scope of the study, significance of the study, organization of the study and limitations of the study. In chapter two the literature reviews, presents theoretical review related to internal audit such as IA development, the process of IA, internal audit in public sectors and Effectiveness of IAs and the empirical review. Generally, this part has outlined how effectiveness of internal audit is practiced in the real world condition in public organizations modern to induce sound internal audit effective. Chapter three outlined the methodology followed in the study. This chapter embraces the research strategies used through justification; include description of study area, research deign, research method, target population and source of data, data collection techniques, survey instruments, sampling design, sampling size, sampling procedure, data analysis, research variables and conceptual framework and model design.. Chapter four tries to report the results and a discussion thereon with concurrent triangulation of research strategies. In the final chapter conclusions and recommendations are forwarded and suggestions for further research given. 1.8. LIMITATION OF THE STUDY This study examines and attempts to evaluate the factors affecting the effectiveness of internal audit in public sector in its entire effect focusing on public sectors of Gambella Regional State, Ethiopia. The target groups of the population are the internal auditors, accountants, audit directors and finance directors of auditee’s. In spite of the researcher’s efforts to gather the necessary information as objective as possible, the analysis of this study was based on the opinion of respondents and purposive sampling procedure, so the respondent may not provide all the necessary data as the study is questionnairebased, and a measurement of the variables, both the dependent and independent variable, is established according to the perceptions of the internal auditors, accountants, audit directors and 6 finance directors.. This may in turn limit the ability to make generalizability of findings and this study might not be generalizable to all areas. Besides that, the study didn’t use secondary data which could have its own contribution in strengthening the outcome of the overall research; this may need further study to include secondary data. 7 CHAPTER TWO 2. RELATED LITERATURE REVIEW 2.1. THEORETICAL REVIEW This section presents theoretical review related to internal audit such as IA development, the process of IA, internal audit in public sectors and Effectiveness of IAs. 2.1.1. INTERNAL AUDITING The historical development of auditing started as man’s awareness of the need to safeguard estate and personal property that has been inferred from the records of a Mesopotamian civilization going back as early as 3500 BC (Nordin, 2003 and Dumitrescu, 2004). These records, involving financial transactions showed various markings, which may be construed as a system of verification, internal controls and separation of duties (Nordin, 2003). For the past few decades, the business environment has faced a rapid and revolutionary change with a significant impact to organizations all over the world. Due to that change, management needed some means of evaluating not only the efficiency of work performed for the business but also the honesty of its employees. Around the turn of the 20th century, the establishment of a formal internal audit function to which these responsibilities could be delegated was seen as the logical answer (Sridhar, 2003). According to Institute of Internal Auditors (IIA) (2009), internal auditing can be defined as a self-governing, objective and consulting activity that is designed in order to add value and develop the operations of an organization. It helps an organization to carry out its objectives by bringing an organized, disciplined approach in order to assess and develop the effectiveness of risk management, control and governance processes (Morgan, 2009). Thus, internal auditing is accomplished by professionals with a thorough understanding of the business culture, systems and processes. The internal audit function is expected to offer guarantee that internal controls in place are sufficient to alleviate the risks, governance processes are helpful and competent, and organizational goals and objectives are being met (IIA, 2004 and Protivi Knowledge leader, 2005). The internal audit activity offers guarantees that internal controls in place are sufficient in to improve the risks, governance processes and competent and organizational goals and 8 objectives are being met (Internal auditors Expert, 2013). Internal auditing is an independent, objective assurance and consulting activity intended to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes (Internal auditors Expert, 2013). The definition of internal auditing is designed to accommodate the profession’s expanding role and responsibilities: “Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.” This new definition of internal auditing presents a new image of the profession in six significant ways, explained by (Chapman & Anderson, 2002): 1. As an objective activity, not necessarily established within the organization, the revised definition permits internal auditing services to be provided by “outsiders,” in effect acknowledging that quality internal audit services can now be obtained through outsourcing. 2. By emphasizing that the scope of internal auditing encompasses assurance and consulting activities, the new definition projects internal auditing as proactive and customer-focused, and concerned with key issues in control, risk management, and governance. 3. By explicitly stating that internal auditing is designed to add value and improve an organization’s operations, the new definition underscores the significant contribution that internal auditing makes for any organization. 4. By considering the whole organization, the new definition perceives internal auditing’s mandate much more broadly, charging it with helping the organization accomplish overall objectives. 5. The new definition assumes that controls only exist to help the organization manage its risk and promote effective governance. Such a perspective considerably broadens the horizons of internal auditing and expands its working domain to include risk management, control, and governance processes. 9 6. The new definition accepts that the internal auditing profession’s legacy, consisting of its unique franchise in being a standards-based profession, may well be its most enduring and valuable asset. Rigorous standards provide the basis for crafting a documented, disciplined, and systematic process that assures quality performance on internal audit engagements. Over the last decade, internal auditing has gained a significant role within organizations whether in industry, government, or the nonprofit sector. Alongside this development, the internal auditing function today accepts a broader responsibility toward the organization itself and its stakeholders (Sridhar, 2003). Internal auditing is a catalyst for improving an organization's governance, risk management and management controls by providing insight and recommendations based on analyses and assessments of data and business processes (Wood, 2012). With pledge to integrity and accountability, internal auditing provides value to governing bodies and senior management as an objective source of independent advice. Professionals called internal auditors are employed by organizations to perform the internal auditing activity. By providing expanded assurance and consulting services to the organization, which is to the audit committee of the board of directors as well as to executive management, the internal audit function effectively contributes to improved organizational governance. Furthermore, information assured by internal auditors enhances both internal and external decision-making, thereby improving the deployment, and the effective and efficient use of scarce organizational and economic resources (Sridhar, 2003). In addition, internal auditor must possess the following necessary personal attributes or technical and professional qualifications (Moeller & Witt, 1999); basic fairness and integrity; dedication to the organization’s interests; reasonable humility; professional poise; empathy; role consistency; curiosity; critical attitude; alertness; persistence; energy; self-confidence; courage; and ability to make sound judgments. One of the key premises today in any organization is that the presence of an effective internal audit function can go a long way in supporting and promoting effective organizational governance. Much of organizational governance has to do with effective monitoring and oversight of risk management, and internal auditors, if perceived as “risk management experts,” can expect to play an immensely significant and high-profile role within organizations in the coming decades. 10 Similarly internal auditing may analyze strengths and weaknesses of an organization’s internal control, considering its governance, organizational culture, and related threats and opportunities for improvement which can affect whether the organization is able to achieve its goals (Sisay, 2018). The analysis assesses whether risk management identifies the risks and puts controls in place to manage public funds in an effective and efficient manner (Sisay, 2018). To conclude this momentum of internal auditing, once IA function gains the trust and confidence of those charged with governance, it can proceed to deliver consulting and value added service using the combined wealth of knowledge and experience possessed by its personnel in control best practices, risk monitoring and management, and governance structures and processes. 2.1.2. THE PUBLIC SECTOR INTERNAL AUDITING Every public sector entity needs a group of one or more individuals that is explicitly responsible for providing strategic direction and oversight. Internal audit function is significance for entity’s management control, governance and risk management. It helps the organization through analysis and recommendation regarding processes of the respective business and as such it notably a cornerstone for improvement of effective risk management, control processes and governance process which in turn help an organization to achieve its statutory objectives (Ezra, 2017).Public sector audit activities must be setup correctly to allow public sector organizations to satisfy their obligation to be accountable and transparent to the public, while achieving their objectives effectively, efficiently, economically, and ethically. The internal audit becomes a true profession with major potential to influence the management of public finances (Cecilia, 2005). In similar vein, the need for local government audit is actually based on the demands of public accountability to the government by the public entity in order to realize the creation of good governance (good government governance) (Elvira, 2018). This mean the role internal audit at the government is an important function both at central and local government. Also Government internal audit is very important, because the internal audit quality will improve the financial accountability that will produced reliable financial reports as a basis for decision making by the stakeholder's. 11 2.1.3. INTERNAL AUDIT EFFECTIVENESS According to the Institute of Internal Auditor (2004) internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. Thus, internal auditors are required to provide assurance and consulting services to the organization. Internal audit effectiveness means the extent to which an internal audit office meets its purposes (Mihret & Yismaw, 2011; Cohen and Sayag, 2010). Audit effectiveness is an outcome of auditors’ activities, duties, professional practices and responsibilities delivered with commitment and with audit standards, goals, objectives, policies and procedures (Cohen and Sayag, 2010). Hence the overall design of the internal audit function should be geared towards the specific priorities and objectives of each country and in instances where the main challenges are governance, and then the internal audit function should be focused on ensuring compliance with financial laws and regulations (Diamond, 2002). Institute of internal auditors (IIA) (2012) indicates that effective public sector internal audit focuses on achieving good governance. Internal auditors play a critical role in promoting governance that is critical in the organization for the promotion accountability and transparency in financial management, reduction of risk and minimizing corruption. In this respect, it is important for the internal audit functions and structure to be effective to achieve the intended objectives and internal auditors should be empowered to take action with integrity and offer reliable information for action to be assumed (IIA, 2011). In addition, internal audit is an important internal control system that contributes to the success of an organization by enhancing the quality of corporate governance through its oversight role (Helianti, 2016). It also improves the control and monitoring environment of an organization and mitigates fraud risk. Internal audit functions play a significant role in organizations by adding value and improving their efforts to achieve set objectives through a systematic and disciplined approach to control and evaluate operations (Helianti, 2016). Internal audit effectiveness is the measurement to evaluate whether the internal audit function is able to achieve the goal of that function (Adhista, 2015). 12 Effectiveness is the measurement to evaluate whether the goals of the organization have been achieved or not (Adhista, 2015). Effectiveness becomes the main aspect that affects the goal achievement of an organization (Adhista, 2015). The value proposition of the internal audit function also needs to become one of a positive, forward looking contribution to the management of risks in the organization. Internal audit must add value to management, while at the same time not becoming its servant, but faithfully report on the status to the board or other equivalent governing body. An internal audit function is considered to be effective in enhancing and protecting organizational value when it demonstrates achievement of the Core Principles for the Professional Practice of Internal Auditing (Core Principles). The Internal Audit Function must enhance and protect organizational value by providing risk-based and objective assurance, advice, and insight (The Institute of Internal Auditor -Malaysia, 2017). For an internal audit function to be considered as effective, all Principles should be present and operating effectively. How an internal auditor, as well as an internal audit activity, demonstrates achievement of the Core Principles may be quite different from organization to organization, but failure to achieve any of the Principles would imply that an internal audit activity was not as effective as it could be in achieving internal audit’s mission (The Institute of Internal Auditor Malaysia, 2017). Internal audit is an independent, objective assurance activity and can give valuable insight in providing assurance that major business risks are being managed appropriately and the risk management and internal control framework is operating effectively (Dumitrescu, 2004). It is a part of the repetitive monitoring of the internal control systems of the bank and its procedures for evaluating internal capital (Dumitrescu, 2004 and IIA, 2009). Intrinsically, it assists management and the board of directors in the effective performance of their responsibility. According to Wood (2009 and 2013), the scope of internal auditing within an organization is broad and may involve topics such as an organization's governance, risk management and management controls over: efficiency/effectiveness of operations (including safeguarding of assets), the reliability of financial and management reporting, and compliance with laws and regulations. Internal auditing may also involve conducting proactive fraud audits to identify potentially fraudulent acts; participating in fraud investigations under the direction of fraud 13 investigation professionals, and conducting post investigation fraud audits to identify control breakdowns and establish financial loss. The internal audit’s role in corporate governance is to evaluate whether the company’s processes, plans and standards are best suited to achieve its objectives and serve its stakeholders in a legal and ethical manner. It generally takes on an advisory role, informing the leadership group of control issues. Particularly in companies or industries that have had governance issues in the past, an internal audit might take on a more formal oversight role. For example, if a business has gotten into legal trouble for financial improprieties, this violation of corporate ethical standards likely would require a formal response from internal audit (Grambling, 2004). Internal auditing activity as it relates to corporate governance has in the past been generally informal, accomplished primarily through participation in meetings and discussions with members of the Board of Directors. According to COSO's ERM framework, governance is the policies, processes and structures used by the organization’s leadership to direct activities, achieve objectives, and protect the interests of diverse stakeholder groups in a manner consistent with ethical standards (www.coso.org). The internal auditor is often considered one of the "four pillars" of corporate governance, the other pillars being the Board of Directors, management, and the external auditor (www.wikipedia.org). A primary focus area of internal auditing as it relates to corporate governance is helping the Audit Committee of the Board of Directors (or equivalent) perform its responsibilities effectively (www.wikipedia.org ). This may include reporting critical management control issues, suggesting questions or topics for the Audit Committee's meeting agendas, and coordinating with the external auditor and management to ensure the Committee receives effective information. In recent years, the IIA has advocated more formal evaluation of corporate governance, particularly in the areas of board oversight of enterprise risk, corporate ethics, and fraud (IIA, 2009; 2012). 2.2. EMPIRICAL REVIEW The main purpose of this research is to identify the key factors affecting the effectiveness of internal audit in the public sectors; previous studies regarding the related topic of internal audit effectiveness were reviewed. 14 Internal auditors are charged with a responsibility of ensuring that management spends organizations funds in a transparency and accountability manner. Effective internal auditors lead to reduction in errors and fraud, minimizes chances of misappropriations of organization assets and also results to credible financial reporting. There have been several studies which have been conducted on factors affecting internal audit effectiveness in Africa and other parts of the world. 2.2.1. FACTORS AFFECTING THE INTERNAL AUDIT EFFECTIVENESS This study aimed to identify the key factors influencing effectiveness of IA in Public sectors of Gambella regional, Ethiopia as follows below: Drogalas, Karagiorgos and Arampatzis (2015) investigate the specific factors associated with internal audit effectiveness in the Greek business environment. Factor Analysis and regression analysis are used in order to illustrate the gathered information. The findings indicate that the main factors affecting internal audit effectiveness are; quality of internal audit, competence of internal audit team, independence of internal audit and management support. The results also reveal that independence of internal audit is the foundation of internal audit effectiveness, as it is the most crucial factor in our model. They suggest that internal audit effectiveness is of major importance for Greek businesses. Also, Adhista (2015) tests the factors that influence the internal audit effectiveness in Java Province, Indonesia. Multiple regressions was used and results show a positive and significant association between the relationship between internal and external auditors with internal audit effectiveness, suggesting that higher internal audit effectiveness is associated with the nice relationship between internal and external auditors. In addition, Hussein A (2013) investigated the relationship between internal auditing practices and internal control system in Somali remittance firms. Descriptive and correlation analysis was used and finding show that internal auditing practices of remittance firms is effective but there is some limitation about separation of duties. The study also suggests that there is a positive correlation between internal auditing and internal control system. It also contributes to the effectiveness of internal audit in the Malaysian public sector (Zulkifli etal, 2014). Similarly, Kennedy (2015) conducted an analysis on the role of internal audit in promoting good Governance in Public Institutions in Kenya, using descriptive and correlation research in order to be successful and found that internal audit had the greatest effect on good governance within 15 Kenyan Public institutions. The researcher recommended that for the public institution to be effectively mitigating risk they should institute internal auditing in its operation. The public institutions have to accept internal auditing as a tool for effective internal control so as to realize their objectives set with ease and in other word, for the government to be effective in its operation and service delivery they should recognize more contribution of internal auditing. In addition, Mihret and Yismaw (2007) examine the factors impacting the effectiveness of internal audit services, based upon a case study of a large public sector higher educational institution in Ethiopia. The findings of the study highlight that internal audit effectiveness is strongly influenced by internal audit quality and management support. The findings of the study reveal that the internal audit office of the organization studied needs to enhance the technical proficiency of the internal audit staff and minimize staff turnover so as to foster audit effectiveness. Similarly, Tadiwos (2016) conducted a study on factors determining the effectiveness of internal audit in Ethiopian commercial banks. The study adopted mixed research method by employing quantitative and qualitative research methods. The finding revealed that independence of internal audit, competence of internal audit teams and management supports were the factors determining effectiveness of internal audit in Ethiopian commercial banks. The researcher mainly recommended; give attention on the development of certified personnel, top management and IA team work collaboratively in changing audit culture, and to work in using IA software. In similar vein, Agumas (2015) examines the role of internal audit function in public sector governance and challenges that have an effect on this function in the case of Amhara National Regional State public sector, Ethiopia. Structured questionnaire survey was used and Ordinary Linear Square (OLS) multiple regression statistical method was employed for data analysis. The study found the potential challenges of risk management role of internal auditor were low level of organizational independence, low level of competent staff and low level of sufficient funding. For governance process role, low level of formal mandates, low level of top management support and low level of unrestricted access were the major challenges. The researcher recommended top managements should support and appreciate internal auditors through accepting the value adding role of their functions and through timely implementation of audit findings and recommendations. Wahid (2012) also found that there is dissatisfaction regarding top 16 management support to internal audit departments and the extent of top management support to internal audit is considered inadequate in Libyan public enterprises. Similarly, Hawa (2016) investigate factors that affect the effectiveness of internal audit in Oromia Special Zone, Ethiopia. A cross-sectional design is employed for a data collection and analysis purpose. Findings indicate that the four factors such as; independence, management support, competence and organization setting do have an impact on the effectives of internal audit. Recommended that the Finance and Economic Development Offices found in the study areas, other concerned government body and stake holders should work to make effective independence/objective, the management support, the competence, and the organizational setting of internal audit to help them to perform their professional obligations and duties. Also, Firehiwet (2017) examine the effectiveness of internal auditing performance of selected branches of Dashen bank in Mekelle. Both qualitative and quantitative approaches are employed, it is confirmed that career and advancement, professional competency, quality of audit work, and top management support towards the internal auditing are variables that are affecting effectiveness of internal audit activity in the study area. Recommended that auditors should be free from management interference, bias, well equipped both academically and materially, maintain professionalism of internal auditors through continuing training and education, follow up the rectification of discrepancies, harmonious relationship with all staff members regardless of their positions and prepare well organized audit work as per the procedure of the bank. Consistently, Shewamene (2014) investigate the determinants of internal audit effectiveness in the selected Ethiopian public sector offices. Purposive sampling method and the finding indicated that the management support, the existence of adequate and competent IA staff, and the availability of approved IA charter were contributed for the internal audit effectiveness in the public sector significantly and positively and recommended the public sector offices 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 IAE in the public sector offices. Moreover, Tesema (2018) examine the role of internal audit practice in promoting good governance in public institution of Ethiopia a case of Jimma zone. Purposive sampling method was used and finding reveals that the Formal mandate and Standards for the Professional Practice, Competent staffs, Organizational independences and objectivity were contributed for the promotion of good governance in the public sectors significantly and positively. The 17 researcher recommended the internal auditors of Jimma zone to act in line with the purpose, authority and responsibility of internal audit defined formally in their charter. Finally, Lukas (2008) identified the challenges faced by Ethiopian Federal Government Auditors, the Case of the Office of the Federal Auditor General. A mixed type of data having both qualitative and quantitative methods was used. The study found that one of the problems (challenges) encountering auditors of OFAG have been the lack of an opportunity to pursue education. Most of the auditors also responded that there is lack of training on technologies and regulations related to their profession. The findings also indicated that the government system and lack of effective mandate where lead to problems of independence. A researcher suggested that in order to minimize the challenges related to pursuing education, its better if OFAG tries to work in harmony with educational institutions, like universities and colleges from within and foreign countries. In addition to providing educational opportunities, these educational institutions can help OFAG by considering their curriculum in relation to audit needs and giving short term trainings. 18 CHAPTER THREE 3. 3.1. RESEARCH METHODOLOGY DESCRIPTION OF THE STUDY AREA Gambella People’s National Regional State of Ethiopia (Gambella region) is a lowland (rift valley) promontory territory in the southwest of the country bordering on south Sudan and Ethiopia’s Oromiya and Southern People’s, Nations and Nationalities Regional States (SNNPR) zones. There are five ethnic groups that belong to indigenous group of the Gambella region: Anuak, Nuer, Majenger, Opo, and Komo. The Nuer and the Anuak are the largest groups in the region. The third-largest population group consists of people of Tigrayan, Oromo, Kambata, Amhara and other ethnicities, found throughout Ethiopia, who are loosely defined as “Highlanders.” Gambella region has an estimated population of 393,495. This figure is based on vaccination statistics from completed rounds of polio and measles vaccination completed in Gambella during 2005 (UNICEF / Regional Health Bureau Gambella). The Gambella region today has five Anyuak woredas (Abol, Gog, Jior, Dimma and Gilo); five Nuer woredas (Lare, Jekow, Makuey, Wanthoar and Akobo); and one Majenger woreda (Godere). Woredas are further subdivided into towns, while the “Kebele” is the smallest administrative unit, comparable to a village or sub-sections of a larger town; Gambella town, for example, is subdivided into Kebele 01, 02, 03, 04, and 05. Most Woreda capitals below the zone capital level exist under similar or worse conditions. In Gambella region there are more than 18 public sectors which provide services such as banking service, financing, education, communication service, healthcare, police, transportation, electric services, security and so on, which benefit all of the society and encourage equal opportunity to benefit from those services provided. 3.2. RESEARCH DESIGN Research design helps researcher to provide data that can answer the research questions or achieve the research objectives. There are many types of research design, depending on the types of data that the researcher needs to collect and analyze, such as explanatory, descriptive, 19 exploratory and so on. In addition, research design is the Glue that holds all of the elements in a research project together; in short it is a plan of the proposed research work (Inaam, 2016).McNabb (2010) research design stands for advance planning of the methods to be adopted for collecting the relevant data and the techniques to be used in the analysis. It is the method of building decisions before a situation arises in which the decision has to be carried out (Sharma, 2003). However, this study used explanatory research design because the purpose of explanatory study is to explore a new universe, one that has not been studied earlier (Inaam A, 2016). In addition this research is mainly concerned with causes or why factors relationship about some phenomenon’s effect. It is also important to gain familiarity in unknown areas (Inaam, 2016). Explanatory research explains a situation or problem usually in the form of casual relationships (Rahi, 2017). This type of research helps one to get fresh insight into a situation in order to build, elaborate, extend or test a theory (Rahi, 2017). The prime objective of explanatory research is to identify issues and key variable in a given research problem (Rahi, 2017). Therefore, in this study the aim is to investigate factors affecting IAE as response (dependent) variable and explanatory (independent) variables mention in the hypothesis section in the context of the region. 3.3. RESEARCH METHODS There are three main methods to conduct a research project in the area of business and social science; these include quantitative, qualitative and mixed research methods. Among these approaches, this study used quantitative research method due to it is use to answer questions on relationships within measurable variables with an intention to explain, predict and control a phenomenon (Leedy, 1993). Quantitative research methods are research methods dealing with numbers and anything that is measurable in a systematic way of investigation of phenomena and their relationships (Leedy, 1993). Therefore, in order to achieve the objectives of this study and thereby to give answer for its problems, the use of quantitative research method is imperative. 20 3.4. TARGET POPULATION AND SOURCE DATA The target population who participated in this research are; Office of Regional Auditor General, Bureau of Finance and Economic Development, Bureau of Agriculture and Natural Resource, Bureau of Labor and Social Affair, Health Bureau, Transport and Road Development Bureau, Water Resource and Irrigation Bureau, Revenue Bureau, Educational Bureau, and Urban and Construction Bureau totally 10 public sector offices found in Gambella Regional State. The total population for this research was 105. Therefore, the researcher focused on these public sectors which have enough internal audit staffs, very popular in nature and have greater impact to influence the state of Gambella region’s overall social, political and economic issues. Primarily source of data was employed in this research. Primary sources are considered as firsthand and not interpreted by anyone else, they offer a personal point of view, and are created by a witnesses of, or participants in, an event (Oluwatosin, 2017). The survey questionnaires helped us to collect a primary source of data. This helps the researcher to have more insights about factors that affecting the effectiveness of IA at the study area. 3.5. DATA COLLECTION TECHNIQUE In connection to the strategy, the study is associated with deduction approaches; quantitative method was adopted in the study. The quantitative research makes use of questionnaires, surveys and experiments to gather data that is revised and tabulated in numbers, which allows the data to be characterized by the use of statistical analysis (Hittleman and Simon, 1997).Quantitative researchers measure variables on a sample of subjects and express the relationship between variables using effect statistics such as correlations and graph (Grinnell, 2010). In this research strategy information is collected by standardized questionnaire. It also helps to identify factors of IAE in public of Gambella region, Ethiopia and the relationship of variables in the research. A questionnaire was considered as a key tool in collecting data and it is the most widely used tool in social research such as this study. A questionnaire is a research instrument consisting of a set of questions (items) intended to capture responses from respondents in a standardized manner (Bhattacherjee, 2012). It contains standardized questions whereby all respondents may 21 understand these questions in the same way. Data from the concerned study areas were collected using self-administered questionnaires which were hand-delivered and hand-collected. 3.5.1. SURVEY INSTRUMENT A self-administered questionnaire was used to describe what is happening within a study area. The questionnaires were adopted and modified from the prior author and literature review (Shewamene, 2014; Sisay, 2017; and Tadiwos, 2016) and those questionnaires are prepared in the form of Likert-Scale type (showing respondents agreement or disagreement) by constructing into five point scale where the lowest scale represent strongly disagree and the highest scale represent strongly agree. Likert Scale is the most common rating scale widely used in questionnaires (Carrie, 2007). The questionnaire is related with the research question and objective of the study. The questionnaires for the audit and finance directors deal about the effectiveness of the offices internal auditing process, while the questionnaires for the internal auditors and accountants are about the independent variables which determine the effectiveness of internal auditors. The questionnaires were prepared in two parts; the first part comprises the demographic question regarding the respondents, and the second part contains items relating to the effectiveness of IA and its factors. The questionnaires made for internal auditors and accountants holds 35 Likert scale questions those are targeted to analyze research hypothesis in manageable, uniform and objective way. The questionnaire made for audit and finance directors also holds 10 five point scale questions those are targeted the effectiveness of IA’s in their sectors. The pre-test was also conducted in all selected public sector offices so as to test for the significance of the items in the questionnaires and also to determine the reliability of the rating scales used for the study. 3.5.2. SAMPLING DESIGN Sampling is the system of selecting a correct sample for the purpose of determining parameters or characteristics of the whole population. The design of a sampling technique is an important issue for a research study and it can be a powerful tool for accurately. Sampling frame is a complete list of the study population. For this study, the sampling frame will include all internal auditors, audit directors, accountants and finance directors, excluding others office such as 22 human resource officials and other staffs in public sectors office of Gambella region, Ethiopia. Since it is difficult to study the entire populations and because of feasibility and cost constraints, hence, the researcher must select a representative sample from the population of interest for observation and analysis (Bhattacherjee, 2012). 3.5.3. SAMPLE SIZE Sample size determination is the technique of selecting the number of observations to be included in a sample. In Gambella region there are more than 18 public sectors, while most of them have internal audit staffs, audit directors, accountants and finance directors but some public sectors haven’t internal audit staffs, (Sisay, 2018, cited in Ethiopian legal Brief, 2013). The researcher used both probability and non-probability. The researcher has classified the target population based on their strata (probability) and then purposive or judgment (non-probability). The use of purposive sampling enables the researcher to generate meaningful insights that help to gain a deeper understanding of the research phenomena by selecting the most informative participants that is satisfactory to its specific needs (Hailemariam, 2014).The researcher determined and selected only 10 public sectors first by classified them in to strata and then purposively out of 18 public sectors as minimum by taking into consideration their higher budget allocation, resources mobilization and risk area relative to other sectors. Finally, the sample size for this study was eighty one respondents selected using (Yamane, 1967; Kothari, 2004) formula and then census sampling was applied for internal auditors, audit directors, accountants and finance directors in each ten public sector, and that are expected to be used as a representative of other sectors. 23 Table 3. 1 Sample size proportionate to each selected public sector S/N Name of Public sectors 3 Professional categories Audit Accountants Finance Total director director s s 2 5 2 12 5 2 8 3 18 2 1 5 2 10 1 1 5 2 9 1 2 1 1 4 3 2 2 8 8 2 2 3 2 9 3 2 2 2 1 1 6 3 5 2 2 2 13 8 10 105 Internal Auditors 1 2 3 4 5 6 7 Office Of Regional Auditor General Bureau of Finance and Economic Development Bureau of Agriculture and Natural Resource Bureau of Labor and Social Affair Health Bureau Transport and Road Development Bureau Water Resource and Irrigation Bureau Revenue Bureau Educational Bureau Urban and Construction Bureau 8 9 10 Tot al Source: Own survey, 2019. The total population as illustrated from the above table is 105 from each selected public sectors. Therefore the researcher used (Yamane, 1967) to determine sample size of internal auditors and accountants, audit directors and finance directors, which is a simplified formula for proportions. This formula determines the sample size at a 95% confidence level and assumes the level of precision at a 5%. n= Where n is the sample size, N is the population size, and e is the level of precision. Therefore, the sample size of the study is calculated below n . 81 Next to the determined sample size distributed to each public sectors on the basis of probability proportional to size (PPS). This technique is the quotient between the size of the population and 24 the size of sample (MaMaEuSch, 2001). Once the sizes of the samples are different strata then the method proportional allocation should be applicable and are kept proportional to the sizes of the strata (Kothari, 2004). Probability proportional allocation formula adopted according to (Kothari, 2004). n1 = Where = n = determined sample size N= target population N1= total number of population in each public sectors n1= number of sample in each public sectors Adopting proportional allocation, the sample sizes as under the different strata is below the table: Table 3. 2 Sample size proportionate to each selected public sector S/N 1 2 3 4 5 6 7 8 9 10 Name of public sectors Office Of Regional Auditor General Bureau of Finance and Economic Development Bureau of Agriculture and Natural Resource Bureau of Labor and Social Affair Health Bureau Transport and Road Development Bureau Water Resource and Irrigation Bureau Revenue Bureau Educational Bureau Urban and Construction Bureau Total Source: Own survey, 2019. Total population of each public sectors Probability proportional size for each public sectors 12 18 9 14 10 9 8 8 9 13 8 10 105 8 7 6 6 7 10 6 8 81 3.5.4. SAMPLING PROCEDURE The samples are selected using strata and purposive sampling method from public sectors of Gambella region which have greater impact on the region’s overall social, political and economic issues. These public sectors are selected purposively, because the use of purposive sampling enables the researcher to produce important idea that help to gain a deeper understanding of the 25 research phenomena by selecting the most informative participants that is satisfactory to its specific needs(Hailemariam, 2014). Thus, this research Thesis used purposive sampling method to draw the sample from the population. 3.6. DATA ANALYSIS In order to achieve the objective of the study, the data collected from primarily sources were recorded, edited, analyzed, interpreted and presented in line with the research questions with help of descriptive statistics and tools such as tables, figures, frequency, percentages, and so forth for data gathered via questionnaires. The researcher used Cronbach’s alpha or the split half reliability measures, to test data for goodness of fit. The hypotheses testing was also undertaken to determine whether the hypotheses are substantiating. Finally, the data have presented and analyzing by using statistical package for social science (SPSS version 20) and MS-excel. 3.6.1. RESEARCH VARIABLES The dependent variable for this research is the internal audit effectiveness. In here the internal audit effectiveness are measured in terms of construct for instance, the construct “IAE” can be measured using five -items likert scale. An IAE scale was constructed to represent five attributes strongly disagree, disagree, neutral agree, strongly agree and values attributes is quantitative or numerical. This study was focused on seven independent variables that might have an impact on the internal audit effectiveness in the public sector offices. Those predicted variables investigated in this research are: formal mandate and standard for professional practice; competence, independence, organizational independence and objectivity, management support, cooperation among internal and external auditors, and risk management and internal control. As indicated in the survey instrument, the data for the independent variables were collected from the internal auditors and accountants of the selected public sector offices. Therefore, the independent variables represent the perceptions of the internal auditors and accountants regarding these concepts. In similar vein with the dependent variable items, all of the independent variables items were measured on a five point Likert-scale where the lowest scale represent strongly disagree and the highest scale represent strongly agree. 26 Figure 3. 1 Conceptual framework. Formal mandate and standard for Professional of IA Competence of IA Independence of IA Internal Audit Activities Organizational independence and objectivity of IA Managements’ support to IA Internal Audit Eff i Cooperation between IA and EA Risk management and internal control of IA Source: Researcher’s adopted and modified from different sources of literature 3.6.2. MODEL DESIGN a) Ordinal Logistic Regression In statistics, the ordered logit model (also ordered logistic regression or proportional odds model), is an ordinal regression model that is, a regression model for ordinal dependent variables first considered by (Peter, 1980). For example, if one question on a survey is to be answered by a choice among "strongly agree", "agree", "neutral", and "disagree", ”strongly disagree” and the purpose of the analysis is to see how well that response can be predicted by the responses to other questions, some of which may be quantitative, then ordered logistic regression may be used. It can be thought of as an extension of the logistic regression model that applies to dichotomous dependent variables, allowing for more than two (ordered) response categories. b) The model and the proportional odds assumption The model only applies to data that meet the proportional odds assumption, the meaning of which can be exemplified as follows. Suppose the proportions of members of the statistical population who would answer "strongly agree", "agree", "neutral", "disagree", and "strongly 27 disagree" are respectively p2, p3, p4, p5. Then the logarithms of the odds (not the logarithms of the probabilities) of answering in certain ways are: For P2= log P3= log P4= log P5= log The proportional odds assumption is that the number added to each of these logarithms to get the next is the same in every case. In other words, these logarithms form an arithmetic sequence (Greene, 2012). The model states that the number in the last column of the table the number of times that logarithm must be added are some linear combination of the other observed variables. The coefficients in the linear combination cannot be consistently estimated using ordinary least squares. They are usually estimated using maximum likelihood. The maximum-likelihood estimates are computed by using iteratively reweighted least squares. Examples of multiple ordered response categories include bond ratings, opinion surveys with responses ranging from "strongly agree" to "strongly disagree," levels of state spending on government programs (high, medium, or low), the level of insurance coverage chosen (none, partial, or full), and employment status (not employed, employed part-time, or fully employed)(Greene, 2012). Suppose the underlying process to be characterized is where is the exact but unobserved dependent variable (perhaps the exact level of agreement with the statement proposed by the pollster); is the vector of independent variables, is the error term, and is the vector of regression coefficients which we wish to estimate. Further suppose that while we cannot observe , we instead can only observe the categories of response where the parameters are the externally imposed endpoints of the observable categories. Then the ordered logit technique was used. Therefore, when the events are equally likely to occur we say the ratio of their odds is equal to 1 (or equally likely). The odds ratio (eβ) can be expressed as follows: 28 P( )    X   X ...  q X q =e 0 1 1 2 2 P (1   ) Log (IAE) 7RMIC . = 0 1FMSFPP 2COMP 3IND 4OIBJ 5MSIA 6CIAEA Where 0, 1FMSFPP, 2COMP, 3IND, 4OIBJ, 5MSIA, 6CIAEA, estimation in the model and is the residual value.         7RMIC is functional IAE --------------------Internal audit effectiveness; FMSFPP --------------Formal mandate and standard for professional practice; COMPIA ----------------Competence of internal audit; INIA -------------------Independence of internal audit; OIOIA ------------------Organizational independence and objectivity of internal auditor; MSIA -----------------management support for internal audit; CIAEA ---------------Cooperation between internal auditor and external auditor RMIC -----------------Risk management and internal control This ought to look somewhat similar to the log odds equation. The odds ratio for a particular predictor variable is defined as eβ, where β is the logit coefficient estimate for the predictor and e is the natural log. If β is zero, the odds ratio will equal 1 (i.e., since any number to the 0 power is 1), which leaves the odds unchanged. If β is positive, the odds ratio will be greater than 1, which means the odds are increased. If β is negative, the coefficient will be less than 1, which means the odds are decreased. 29 CHAPTER FOUR 4. RESULT AND DICUSSION 4.1. MEASSURES OF RELIABILITY AND RESPONSE RATE 4.1.1. RELIABILITY At the beginning the reliability of the questionnaire should be checked and this helps to go for further analysis. To check the reliability of the questionnaire the Cronbach’s alpha was used. These results of the table are displayed in the table below. Table 4. 1 Cronbach’s Alpha results Variables Cronbach’s alpha Effectiveness 0.85 Formal mandate and proficiency 0.86 Competency of internal auditors 0.86 Independency of internal auditors 0.89 Organizational independency and objectivity of internal auditors 0.90 Management support to internal auditors 0.91 Cooperation between internal auditors and external auditors 0.92 Risk management and internal control system of internal auditors 0.93 Source: Own survey, 2019. As can be seen from the above table all the values of the Cronbach’s alpha are greater than zero and less than one. In other word this is to indicate all the questions in these different categories’ were more reliable and stable. This is a good sign to say the questionnaire is more informative and can bring independent information. 4.1.2. RESPONSE RATE From the all the questionnaires, 81, distributed to the respondents only 75 questionnaires were properly filled and returned. Therefore, here the response rate is 92.2% and this is a good response rate as it is more than 80%. 30 4.1.3. RESPONDENTS PROFILE The tables given below describes the general findings regarding the respondents age, sex, field of study, level of education, position and experience for all the internal auditors, audit directors, accountants and finance directors. The table 4.2, respondents from all categories 53(70.7%) were males and 22(29.3%) were females. This indicates that, there was large number of males’ participation but women were less due to less education background, which disclosed low knowledge. The reasons that make the women lower than men in many public sector bureaus is/are that early married of girls/women is one of the main reason that ruin the girls’ education plus girls or women are so busy for households’ activities especially in rural areas. For instance, for preparing food for the whole family and the like that is what makes women participation low. This large number of men does not define gender equality gap but it showed the women have low participation of women and less number encounter in the main targeted bureau. Table 4.2. Sex of the respondents Frequency Female 22 Valid Male 53 Total 75 Source: Own survey, 2019. Percent Valid Percent 29.3 29.3 70.7 70.7 100.0 100.0 Cumulative Percent 29.3 100.0 The table 4.3. below shown that the majority ages of respondents felt under the age of 30-39 (40, 53.3%) and the other falls in the age interval of 20-29 (16, 21.3% and 40-49 (12, 16.0%) and the rest fall in age of 50-59 (6, 8%) and one respondent is from age 60 and above. This showed that, most of the respondents were young and mid adult followed by age from 40 – 49 years old. This age’s group has energy and skill to elaborate any occurred problems. Table 4. 3. Age of the respondents Frequency 20-29 30-39 40-49 Valid 50-59 60 &> Total Source: Own survey, 2019. Percent 16 40 12 6 1 75 21.3 53.3 16.0 8.0 1.3 100.0 31 Valid Percent 21.3 53.3 16.0 8.0 1.3 100.0 Cumulative Percent 21.3 74.7 90.7 98.7 100.0 In the case of field of study Table 4.4 below, the respondents were composed of from Accounting (27, 36%), Management (25, 33.3%), Economics (11, 14.7%), and others fields (12, 16%) Here, the majority of respondents were studied management and accounting fields respectively which shows the good assignment of professionals for their appropriate job. Table 4. 4 Field of study of the respondents Frequency Accounting Management Valid Economics Other Total Source: Own survey, 2019. Percent 27 25 11 12 75 Valid Percent 36.0 33.3 14.7 16.0 100.0 36.0 33.3 14.7 16.0 100.0 Cumulative Percent 36.0 69.3 84.0 100.0 In the below table 4.5, show the level of educational background, most respondents have bachelor’s degree (44, 58.7%) and (26, 34.7%) respectively followed by diploma. The lowest proportionate (5, 6.7%) respondent were from master degree. Therefore, the highest proportion of respondents were bachelor Degree followed by Diploma holders program and the lowest proportion of respondents were master degree. This shows that most of the respondents were educated. Table 4. 5 Educational level of the respondents Frequency Diploma 26 Degree 44 Valid Master 5 Total 75 Source: Own survey, 2019. Percent Valid Percent 34.7 58.7 6.7 100.0 34.7 58.7 6.7 100.0 Cumulative Percent 34.7 93.3 100.0 Regarding the occupation of the respondents (31, 41.3%) were internal auditors and (7, 9.3%) were audit directors and finally (27, 36%) and (10, 13.3%) are accountants and finance directors. 32 Therefore, the majority of the respondents were internal auditors which mean these respondents are knowledgeable about public sectors internal audit effectiveness. Table 4. 6 Position of the respondents Frequenc y Internal auditor 31 Audit director 7 Valid Accountant 27 Finance director 10 Total 75 Source: Own survey, 2019. Percent Valid Percent 41.3 9.3 36.0 13.3 100.0 41.3 9.3 36.0 13.3 100.0 Cumulative Percent 41.3 50.7 86.7 100.0 In table 4.7 below, is the case of respondents’ experience, the majority were fall in 3-5 years of service within the sector (28, 37.3%), whereas (4, 5.3%) of the respondents are above 10 year of services within the public sector/office. This indicates that, the respondents are more experienced in their service which disclosed better knowledge on the work. Table 4. 7 Work experience on the service Frequenc y 1-2 years 16 3-5 years 28 6-8 years 13 Valid 9-10 years 14 > 10 years 4 Total 75 Source: Own survey, 2019. 4.2. Percent Valid Percent 21.3 37.3 17.3 18.7 5.3 100.0 21.3 37.3 17.3 18.7 5.3 100.0 Cumulative Percent 21.3 58.7 76.0 94.7 100.0 DESCRIPTIVE STATISTIC OF THE QUESTIONNAIES According to the first part of the questionnaire which examines the effectiveness of internal audit, the table 4.8 below, shows the results of the questions related to trust. As can be seen in the first question the respondents were asked if the internal audit ensures the economical, effective and efficient use of resources in the office/sector and most of the respondents agreed with the idea. Specifically, 21(28) of the respondents strongly agreed and 22(29.3) of the respondents agreed. However, the 12(16) of the respondents neither agreed nor disagreed with the idea the internal audit is ensures the economical, effective and efficient use of resources in 33 the office/sector. In addition the respondents were asked if the internal audit ensures activity performed is compliance with established policies, procedures, laws and regulations and most of the respondents agreed with the idea. Specifically, 17(22.7%) of the respondents strongly agreed and 29(38.7%) of the respondents agreed. However, the 13(17.3%) of the respondents neither agreed nor disagreed with the idea that the internal audit ensures activity performed is compliance with established policies, procedures, laws and regulations. In contrast, 13(17.3%) of the respondents disagreed with the idea that the internal audit ensures activity performed is compliance with established policies, procedures, laws and regulations. Similarly, the respondents were asked if the internal audit department provide practical, costbenefit solutions for correcting the problems that were found and most of the respondents agreed with the idea. Specifically, 28(37.3%) of the respondents agreed and 17(22.7%) of the respondents strongly agreed. However, the 16(21.3%) of the respondents neither agreed nor disagreed with the idea that the internal audit department provide practical, cost-benefit solutions for correcting the problems that were found. In contrast, 8(10.77%) of the respondents strongly disagreed with the idea that the internal audit department provide practical, cost-benefit solutions for correcting the problems that were found. In addition, the respondents were asked if internal auditors have the experience and expertise to address corporate risk management problems within the organization and most of the respondents agreed with the idea. Specifically, 24(32%) of the respondents strongly agreed and 20(26.7%) of the respondents agreed. However, the 7(9.3%) of the respondents neither agreed nor disagreed with the idea that the internal auditors have the experience and expertise to address corporate risk management problems within the organization. In contrast, 15(20%) of the respondents disagreed and 9(12%) of the respondents strongly disagreed with the idea that the internal auditors have the experience and expertise to address corporate risk management problems within the organization. Similarly, the respondents were asked if the internal audit is playing sufficient enough to address the very purpose for which it is established and most of the respondents agreed with the idea. Specifically, 24(32%) of the respondents strongly agreed and 26(34.6%) of the respondents agreed. However, the 9(12%) of the respondents neither agreed nor disagreed with the idea that the internal audit is playing sufficient enough to address the very purpose for which it is 34 established. In contrast, 10(13.3%) of the respondents disagreed and 6(8%) of the respondents strongly disagreed with the idea that the internal audit is playing sufficient enough to address the very purpose for which it is established. Furthermore, the respondents were asked if internal auditors are capable of carrying out internal control function under current corporate governance rules and most of the respondents agreed with the idea. Specifically, 18(24%) of the respondents strongly agreed and 24(32%) of the respondents agreed. However, the 7(9.3%) of the respondents neither agreed nor disagreed with the idea that internal auditors are capable of carrying out internal control function under current corporate governance rules. In contrast, 12(16%) of the respondents strongly disagreed and 14(18.7%) disagree with the idea that internal auditors are capable of carrying out internal control function under current corporate governance rules. Similarly, the respondents were asked if internal auditors are accorded with on-job skills that suit their work in the internal audit unit and most of the respondents agreed with the idea. Specifically, 20(26.7%) of the respondents strongly agreed and 18(24%) of the respondents agreed. However, the 9(12%) of the respondents neither agreed nor disagreed with the idea that internal auditors are accorded with on-job skills that suit their work in the internal audit unit. In contrast, 17(22.7%) of the respondents strongly disagreed and 11(14.7%) disagree with the idea that internal auditors are accorded with on-job skills that suit their work in the internal audit unit. In addition, the respondents were asked if internal auditors are provided with formal audit training courses and most of the respondents agreed with the idea. Specifically, 20(26.7%) of the respondents strongly agreed and 28(37.3%) of the respondents agreed. However, the 14(18.7%) of the respondents neither agreed nor disagreed with the idea that internal auditors are provided with formal audit training courses. In contrast, 4(5.3%) of the respondents strongly disagreed and 9(12%) disagree with the idea that internal auditors are provided with formal audit training courses. Moreover, the respondents were asked if internal auditors evaluate and contribute to the improvement of governance and risk management and most of the respondents agreed with the idea. Specifically, 31(41.3%) of the respondents strongly agreed and 20(26.7%) of the respondents agreed. However, the 8(10.7%) of the respondents neither agreed nor disagreed with the idea that the internal auditors evaluate and contribute to the improvement of governance and 35 risk management. In contrast 5(6.7%) of the respondents strongly disagreed and 11(14.7%) disagree with the idea that the internal auditors evaluate and contribute to the improvement of governance and risk management. Finally, the respondents were asked if the organization’s culture, code of conduct, human resource policies and performance reward systems support the business objectives, risk management and the internal control system and most of the respondents agreed with the idea. Specifically, 29(38.7%) of the respondents strongly agreed and 24(32%) of the respondents agreed. However, the 10(13.3%) of the respondents neither agreed nor disagreed with the idea that the organization’s culture, code of conduct, human resource policies and performance reward systems support the business objectives, risk management and the internal control system. In contrast 7(9.3%) of the respondents strongly disagreed and 5(6.7%) with the idea that the organization’s culture, code of conduct, human resource policies and performance reward systems support the business objectives, risk management and the internal control system. Table 4. 8 The effectiveness of internal auditors S/N The effectiveness of internal auditors in helping an organization achieves its goals and value The Scales 1 2 3 4 5 13(17. 12(16) 22(29.3 21(28) added contributions to the organizations. 1 Internal audit ensures the economical, effective 7(9.3) and efficient use of resources. 2 3) Internal audit ensures activity performed comply 3(4) with policies, procedures, laws and regulations. 3 Internal audit department provide practical, cost- 8(10. benefit solutions for correcting the problems that 77) ) 13(17. 13(17.3 29(38.7 17(22. 3) ) ) 7) 6(8) 16(21.3 28(37.3 17(22. ) ) 7) 7(9.3) 20(26.7 24(32) were found. 4 Internal auditors have expertise to address 9(12) 15(20) corporate risk management problems within the ) organization 5 The internal audit meets the very purpose for which it is established. 6(8) 10(13. 3) 36 9(12) 26(34.6 ) 24(32) 6 Internal auditors are capable of carrying out 12(16 internal control function under current corporate ) 14(18. 7(9.3) 24(32) 18(24) 9(12) 18(24) 20(26. 7) governance rules. 7 Internal auditors are accorded with on-job skills 17(22 that suit their work in the internal audit unit. 8 .7) Internal auditors are provided with formal audit 4(5.3) 11(14. 7) 9(12) training courses. 9 Internal auditor contributes to the improvement 5(6.7) of governance and risk management. 10 11(14. 7) 14(18.7 28(37.3 20(26. ) ) 7) 8(10.7) 20(26.7 31(41. ) 3) 24(32) 29(38. 7) The public sector’s codes of conduct support the 7(9.3) business objectives, risk management and the 5(6.7) 10(113. 3) 7) internal control system. Source: Own survey, 2019. Based on the information from the above table, the perceptions of the respondents regarding effectiveness of internal audit were justified and here below is Figure 4.1 which explains effectiveness of internal audit. The graph indicated that the majority of the respondents (61.33%) agree with idea that IAE can add to sector/office whereas (22.67%) are just silence. 37 Figure 4. 1 Internal Audit Effectiveness The second part of the questionnaire which examines the effectiveness of internal audit, based on the perception of internal auditors and accountants. Below the table 4.9, the first section of the questionnaire contain (Q1-Q5) which examines the formal mandate and standard for professional practice of IAs, the were asked if internal auditors have formal mandate and audit training courses and most of the participants were agree with the idea. Specifically, 18(24%) of the respondents strongly agreed and 25(33.3%)) of the respondents agreed. However, the 4(5.3%) of the respondents neither agreed nor disagreed with the idea the internal auditors have formal mandate and audit training courses. In contrast, 20(26.7%) strongly disagree and 8(10.7%) disagree with that the internal auditors have formal mandate and audit training courses In addition the respondents were asked if the internal audit internal auditors have ability to promote the value of the internal audit activity within the organization and most of the 38 respondents agreed with the idea. Specifically, 30(40%) of the respondents strongly agreed and 18(24%) of the respondents agreed. However, the 10(13.3%) of the respondents neither agreed nor disagreed with the idea that the internal auditors have ability to promote the value of the internal audit activity within the organization. In contrast, 9(12%) of the respondents disagreed with the idea that the internal auditors have ability to promote the value of the internal audit activity within the organization. Similarly, the respondents were asked if the internal audit is strengthened within the organization when the internal audit activity is required by a legal mandate and most of the respondents agreed with the idea. Specifically, 28(37.3%) of the respondents strongly agreed and 24(32%) of the respondents agreed. However, 10(13.3%) of the respondents neither agreed nor disagreed with the idea that the internal audit is strengthened within the organization when the internal audit activity is required by a legal mandate. In contrast, 7(9.3%) of the respondents disagreed with the idea that the internal audit is strengthened within the organization when the internal audit activity is required by a legal mandate. Moreover, the respondents were asked if the sector/office has a professional staff that collectively has the necessary qualifications and competencies to conduct the full range of audits required by the mandate. In this question 21(28%) of the respondents strongly disagree with the idea and 19(25.3) of the respondents neither agreed nor disagreed with the idea. Finally, the respondents were asked if the internal auditors are complying with minimum education requirements established by their relevant professional organizations and standards. Under the last question with regard to formal mandate and standard for professional practice of IAs, 23(30.7) of the respondents agree and 6(8) were strongly disagree with statement. 39 Table 4. 9 Formal mandate and proficiency of internal auditors S/ N Formal mandate and proficiency of internal 1 Internal auditors have formal mandate and audit 1 auditors training courses. 2 Internal auditors have ability to promote the value of the internal audit activity within the 2 The Scales 3 4 5 20(26. 7) 8(10. 4(5.3 7) ) 8(10.7 ) 9(12 ) 10(1 3.3) 25( 33. 3) 18( 24) 18(24) 6(8) 7(9.3 ) 10(1 3.3) 24( 32) 28(37.3) 21(28) 14(1 8.7) 19(2 5.3) 7(9. 3) 14(18.9) 6(8) 13(1 7.3) 13(1 7.3) 23( 30. 7) 20(26.7) 30(40) organization. 3 A formal mandate of an internal audit activity is strengthened within the organization when the internal audit activity is also required by a legal mandate. 4 The sector/office has a professional staff that collectively has the necessary qualifications to conduct the full range of audits required by the mandate. 5 Internal auditors are complying with minimum education requirements established by their relevant professional organizations and standards. Source: Own survey, 2019. As it can be seen from the above table, the opinions of the respondents regarding formal mandate and proficiency of internal auditors were justified and here below is Figure.3 which explains formal mandate and proficiency of internal auditors. The graph indicated that the majority of the respondents (57.33%) were not sure about the idea, while (37.33%) agree with the idea that formal mandate and proficiency of internal auditors is better for effectiveness. 40 Figure 4. 2 Formal mandate and proficiency of internal auditors According to the second section of the questionnaire contain (Q1-Q5) which examines the competency of IAs. In the table 4.10 below, the respondents were asked if internal auditors have the relevant skills, tools and knowledge to facilitate achieving set goals and manage risks effectively. Specifically, 28(37.3%) of the respondents strongly agree and 11(14.7%) of respondents neither agree nor disagree as well as strongly disagree. In addition, the respondents were asked if internal auditors are sufficient skilled and have certification in auditing. The respondents agree 22(29.3%) with the idea and 17(22.7%) does not decided yet. Contrary, 11(14.7%) disagree with this idea. 41 In similar vein, the respondents were asked if internal audit staff number & their skill matches the scope of office's/sector’s internal operations. Most of the participants 24(32%) strongly agree and 19(25.3%) of the respondents strongly disagree. Moreover, the participants were asked where it is possible to audit and review each activity on time, and cover the planned scope of auditing activities. Most of the respondents 27(36%) agree and 18(24%) silence. In contrast, 7(9.3%) strongly disagree. Finally, the respondents were asked if the internal audit assist organization by maintaining effective control. Specifically, 22(29.3%) of respondents agree and 18(24%) still silence while 12(16%) of the respondents oppose the idea. Therefore, the researcher has to conclude that though the public sector internal audit must include all the relevant skills, tools and knowledge to facilitate achieving set goals and manage risks effectively. Table 4. 10 Competency of internal auditors S/N Competency of internal auditors 1 The internal auditors have the relevant skills, tools and knowledge. 2 Internal auditors are sufficient skilled and most 1 11(14. 7) The internal audit staff number & their skill matches the scope of office's/sector’s internal 5 28(37.3) 7(9.3) 11(14 .7) 17(22.7 ) 22(29 .3) 18(24) 19(25. 3) 11(14 .7) 8(10.7) 13(17 .3) 24(32) 7(9.3) 7(9.3) 18(24) 27(36 ) 16(21.3) 12(16) 9(12) 18(24) 22(29 .3) 14(18.7) of them have certification in auditing. 3 The scales 2 3 4 11(14 11(14.7 14(18 .7) ) .7) operations. 4 It is possible to audit and review each activity on time, and cover the planned scope of auditing activities. 5 The internal audit assists organization by maintaining effective control. Source: Own survey, 2019. From the above table, the reactions of the respondents regarding competency of internal audit were justified and here below is Figure 4.3 which explains competency of internal audit. The 42 graph indicated that the majority of the respondents (45.33%) were just silence and 41.33% agree with idea that there is competency of internal audit. Figure 4. 3 Competency of internal auditors According to the third section of the questionnaire contain (Q1-Q5) which examines the independence of IAs, the respondents were asked if internal auditors are independent or not. Depended on the information from the below table 4.11, about 18(24%)) of the respondents said that there is independency of internal auditor in the public organizations, 11(14.7%) of the respondents answered that the public organizations operate and manage its resources without independency of internal auditor, 20(26.7%) of the respondents responded that they have no ideas about the issues. As indicated in the below Table that about 24(32%) of the respondents responded that the public sectors organizations operate with independency of internal auditor that 43 enable the public institutions to run their daily activities, 10(13.3%) of the respondents demonstrated that the public sectors have no independency of internal auditor that could help them about the practices and operation of the sector/office and about 17(22.7%) of the respondents showed that they have no any knowledge about it. Based on the information from the below Table, about 14(18.7%) of respondents agree with the idea that internal audit operate independently and can audit any issue it considers in need of auditing, 12(16%) of the respondents stated that the internal audit does not operate independently and cannot audit any issue it considers in need of auditing and lastly, 20(26.7%) of the respondents indicated that they have no ideas about issues. In spite the fact that the large number of respondents said that there is independency of internal auditor in the public organizations and operates with independently and can audit any issue it considers in need of auditing, the implementation is so weak. The evident of this information is respondents’ ideas. Table 4. 11 Independency of internal auditors S/N Independency of internal auditors 1 Internal audit activity is an independent, objective assurance and consulting activity. 2 I freely decide the scope, time and extent of auditing procedures. 3 Internal audit operates independently and can audit any issue it considers in need of auditing. 4 I perform the auditing activities without any interference from anybody. 5 The internal audit staff has free access to all information and data about the organization. 1 9(12) 10(13. 3) 12(16) 8(10.7 ) 7(9.3) The scales 2 3 11(14. 20(26 7) .7) 10(13. 17(22 3) .7) 15(20) 20(26 .7) 11(14. 16(21 7) .3) 13(17. 17(22 3) .7) 4 17(22 .7) 24(32 ) 14(18 .7) 23(30 .7) 24(32 ) 5 18(24) 14(18. 7) 14(18. 7) 17(22. 7) 14(18. 7) Source: Own survey, 2019. From the above table, the perceptions of the respondents regarding independency of internal audit were justified and here below is Figure.4.4 which explains independency of internal audit. The graph indicated that the majority of the respondents (50.67%) were just silence and 40% agree with idea that there is independency of internal audit. 44 Figure 4. 4 Independency of internal auditors According to the fourth section of the questionnaire contain (Q1-Q5) which examines the organizational independence and objectivity of IAs, the respondents were asked if there is organizational independence and objectivity of IAs or does not exist. Depended on the information from the below table 4.12, about 20(26.7%) of the respondents said that there is organizational independency and objectivity of internal auditor in the public organizations, 16(21.3%) of the respondents answered that the public organizations operate and manage its resources without organizational independency and objectivity of internal auditor15 (20%) of the respondents responded that they have no ideas about the issues. As indicated in the below Table that about 24(32%) of the respondents responded that the public sectors organizations operate with independency of internal auditor that enable the public 45 institutions to run their daily activities, 10(13.3%) of the respondents demonstrated that the public sectors have no independency of internal auditor that could help them about the practices and operation of the sector/office and about 17(22.7%) of the respondents showed that they have no any knowledge about it. Based on the information from the below Table, about 14(18.7%) of respondents agree with the idea that internal audit operate independently and can audit any issue it considers in need of auditing, 12(16%) of the respondents stated that the internal audit does not operate independently and cannot audit any issue it considers in need of auditing and lastly, 20(26.7%) of the respondents indicated that they have no ideas about issues. Table 4. 12 Organizational independency and objectivity of internal auditors S/ N Organizational independency and objectivity of 1 Internal internal auditors 1 2 3 4 5 without 11(1 4.7) 16(21 .3) 15( 20) 20(26. 7) 13(17. 3) Internal auditors possess objectivity as a key factor for 11(1 4.7) 13(17 .3) 15( 20) 19(25. 3) 17(22. 7) 19( 25. 3) 16( 21. 3) 18( 24) 23(30. 7) 17(22. 7) 17(22. 7) 22(29. 3) 22(29. 3) 17(22. 7) audit activity are conducted interference by the entity under audit 2 The scales internal audit activity to add value 3 Management policy establishes internal audit unit 5(6.7 11(14 ) .7) 4 The organization implements internal audit 10(1 3.3) 10(13 .3) 9(12 ) 9(12) recommendations, and strength internal audit function. 5 The internal audit is able to cover all organizational units and all issues. Source: Own survey, 2019. Depended on the information from the above table, the reactions of the respondents regarding organizational independency and objectivity of internal auditors were justified and here below is Figure.4.5 which explains organizational independency and objectivity of internal auditors. The graph indicated that the majority of the respondents (52%) were just silence and (36%) agree with idea that there is organizational independency and objectivity of internal auditors. 46 Figure 4. 5 .Organizational independency and objectivity of internal auditors According to the fifth section of the questionnaire contain (Q1-Q5) which examines the management support to IAs, the respondents were asked about the existence of management support to internal auditors. Depended on the information from the below table 4.13, about 20(26.7%) of the respondents said that there is organizational independency and objectivity of internal auditor in the public organizations, 16(21.3%) of the respondents answered that the public organizations operate and manage its resources without organizational independency and objectivity of internal auditor 15 (20%) of the respondents responded that they have no ideas about the issues. As indicated in the below Table that about 24(32%) of the respondents responded that the public sectors organizations operate with independency of internal auditor that enable the public 47 institutions to run their daily activities, 10(13.3%) of the respondents demonstrated that the public sectors have no independency of internal auditor that could help them about the practices and operation of the sector/office and about 17(22.7%) of the respondents showed that they have no any knowledge about it. Based on the information from the below Table, about 24(32%) of respondents agree with the idea that internal audit gain assistance from management, 18(24%) of the respondents stated that the internal audit does not have management support and lastly, 18(24%) of the respondents indicated that they have no ideas about issues. Therefore, the researcher has to conclude that the public sector management has enough awareness and good perception about internal auditing roles. Table 4. 13 Management support to internal auditors S/N Management support to internal auditors 1 Top management demonstrates their enthusiasm to cultivating trust, integrity and competence within The scale 2 3 4 14(1 17(22 15(20 8.7) .7) ) 5 18(24) 9(12) 14(1 8.7) 18(24 ) 20(26 .7) 14(18.7 ) 12(16) 15(2 0) 21(28 ) 15(20 ) 13(17.3 ) 11(14. 7) 15(2 0) 21(28 ) 15(20 ) 13(17.3 ) 11(14. 7) 18(2 4) 17(22 .7) 15(20 ) 14(18.7 ) 8(10) 12(1 6) 21(28 ) 20(26 .7) 14(18.7 ) 1 11(14. 7) the office/sector. 2 Internal auditing practices is a value-adding activity and internal audit staff work smoothly & regularly with the management. 3 Internal auditing provides assurance through investigations, consultants & advisor particularity controls associated to management performance and internal operations. 4 The office/sector has enough awareness and good perception about internal auditing roles. 5 The office/sector supports me by providing training in order to improve my skill and update with the field. 6 The office/sector supports internal Auditing staffs by budgeting funds for certification to have 48 relevant education in auditing that allows them to audit all of the organization's/sector’s systems. 7 I can get the necessary resources that help me to 7(9.3) 12(1 6) 19(25 .3) 24(32 ) 13(17.3 ) 8(10.7 ) 18(2 4) 18(24 ) 17(22 .7) 14(14.7 ) 4(5.3) 10(1 3.3) 20(26 .7) 24(32 ) 17(22.7 ) 7(9.3) 14(1 18(24 8.70) ) 24(32 ) 12(16) perform auditing activities as needed 8 I receive full support, access to records and information from my office/sector 9 Top level management trusts and values the advice of the internal audit service 10 The internal audit service is seen as a key strategic partner throughout the organization Source: Own survey, 2019. From the above table, the views of the respondents regarding management support to internal auditors were justified and here below is Figure.4.6 which explains management support to internal auditors. The graph indicated that the majority of the respondents (61.33%) were just silence and (34.67%) agree with idea that there is management support to internal auditors. 49 Figure 4. 6 Management support to internal auditors From the sixth section of the questionnaire contain (Q1-Q5) which examines the cooperation between IAs and EAs, the respondents were asked about relation that exists among the internal auditors and external auditors. Depended on the information from the below table 4.14, about 23(30.7%) of the respondents said that there is good relationship that exists among the internal auditors and external auditors, 13(17.3%) of the respondents answered that the relationship that exists among the internal auditors and external auditors is not good, 20(26.7%) of the respondents responded that they have no ideas about the issues. In spite the fact that the large number of respondents said that there is good relationship that exists among the internal auditors and external auditors, the implementation is so weak. The evident of this information is respondents’ ideas. 50 Table 4. 14 Cooperation between internal auditors and external auditors S/N Cooperation between internal auditors and external auditors 1 1 2 3 4 5 8(10. 7) 12(1 6) 20(2 6.7) 23(3 0.7) 12(16) There is well-maintained relationship between internal 5(6.7) 13(1 7.3) 20(2 6.7) 23(3 0.7) 14(18. 7) 8(10. 7) 9(12 ) 17(2 2.7) 24(3 2) 17(22. 7) The coordination increases the efficiency, effectiveness 7(9.3) 13(1 7.3) 12(1 6) 23(3 0.7) 20(26. 7) 9(12 ) 14(1 8.7) 22(2 9.3) 22(29. 3) There are regular discussions between the internal auditors and external auditors across the year. 2 The scales and external auditors which has been seen as important to the success of internal audit functions. 3 The coordination and cooperation involves planning, opinions, reporting, and exchange of information that may facilitate higher quality audits and thus could prevent audit work duplication. 4 and economy of audits and could help management to provide a high quality public service. 5 The cooperation between internal and external auditors is frequently regarded as a main factor that could 8(10. 7) increase the effectiveness of internal audit in the public sector. Source: Own survey, 2019. Based on the information from the above table, the views of the respondents regarding relationship that exists among the internal auditors and external auditors were justified and here below is Figure 4.7 which explains the relationship that exists among the internal auditors and external auditors. The graph also indicated that the majority of the respondents (48%) were just silence and 45.33% agree with idea that there is good relationship that exists among the internal auditors and external auditors. 51 Figure 4. 7 Cooperation between internal auditors and external auditors The last section of the questionnaire contain (Q1-Q5) which examines the risk management and internal control system of IAs, the respondents were asked if internal auditors are proficient in governance, risk, and control tools and techniques. Depended on the information from the below table 4.15, about 17(22.7%) of the respondents said that internal auditors are proficient in governance, risk, and control tools and techniques within the sector/office, 19(25.3%) of the respondents answered that the internal auditors lacked proficient in governance, risk, and control tools and techniques, and 23(30. %7) of the respondents responded that they have no ideas about the issues. Therefore, the researcher has to conclude that the public sector internal auditors must possess the ability to relate the organizations risk appetite to the application of controls in operational areas. 52 Table 4. 15 Risk management and internal control system of internal auditors S/N Risk management and internal control system of The scales internal auditors 1 1 Internal auditors are proficient in governance, risk, and 10(13 .3) control tools and techniques 2 17(2 2.7) 3 22(29 .3) 4 5 14(18 12(1 .7) 6) 2 Internal auditors are proficient in controls identification 3 14(18 .7) Controls are flexible to manage changing environment, 8(10. 7) new risks and new operational gaps 18(2 4) 19(2 5.3) 19(25 .3) 23(30 .7) 15(20 ) 15(20 ) 4 There is understanding of how higher-level objectives 12(16 ) 20(2 6.7) 18(24 ) 17(22 8(10. .7) 7) 11(14 .7) 17(2 2.7) 20(26 .7) 16(21 .3) link with ministry’s operational objectives 5 Internal auditors possess the ability to relate the organizations risk appetite to the application of controls 9(12 ) 10(1 3.3) 11(1 4.7) in operational areas Source: Own survey, 2019. From the above table, the reactions of the respondents regarding risk management and internal control system of IAs were justified and here below is Figure 4.8 which explains risk management and internal control system of IAs. The graph indicated that the majority of the respondents (53.33%) were just silence and (21.33% agree with idea that there is risk management and internal control system of IAs. In contrast (24%) of the respondents does not support the idea. This indicates that internal auditors are not contributed to the risk management and internal control system of the organization. 53 Figure 4. 8 Risk management and internal control system of internal auditors 4.3. FACTORS AFFECTING THE EFFECTIVENESS OF INTERNAL AUDIT The regression result that are obtained by regressing the internal auditors effectiveness in helping an organization achieve its goals and added value contributions to the organizations on the formal mandate and standard for professional practice of internal auditors (FMSPPIA), competence of internal auditors (COMPIA), independence of internal auditors (INIA), organizational independence and objectivity of internal auditors (OIOIA), management support for internal auditors (MSIA), cooperation between internal auditors and external auditors (CIAEA) and risk management and internal control of internal auditors (RMIC) were analyze and reported. Finally, the hypothesis tests were discuss based on the proposed hypothesis and the regression output results. 54 4.3.1. EFFECT OF PROFESSIONAL PRACTICE AND COMPITENCE ON IAE Table 4. 16 Model Fitting Information Model -2 Log Likelihood Chi-Square Intercept Only 66.056 Final 58.201 df 7.855 Sig. 6 .009 Source: Own survey, 2019. The table above shows the results of the hypothesis checking against whether the model is statistically significant or not. As can be seen the p-vale is less than the 5% significance level. This is an indication the model fitted to the data is statistically significant. At least in the model there is one independent variable which affects the dependent variable significantly. Table 4. 17 Goodness-of-fit Chi-Square df Sig. Pearson 34.774 34 .431 Deviance 29.322 34 .696 Link function: Logit. Source: Own survey, 2019. As can be seen from the above table, the model goodness fit of tests. They all assume that, in the null hypothesis the model is good. However, in the contrary in the alternative hypothesis it is not. Therefore, by looking the model results it can be said the model is statistically significant. Table 4. 18 Pseudo R-square Cox and Snell .91 Nagelkerke .89 McFadden .81 Source: Own survey, 2019. As can be seen from the above table, the results of the R-square as they are indicative of the model goodness it can be said the model is good. To illustrate, all the values are above 80% and this is an indication the model is more informative. 55 Table 4. 19 Parameter Estimates Estimate [IAE = 1.00] [IAE = 2.00] Threshold [IAE = 3.00] I[AE= 4.00] [COMIA = 2.00] [COMPIA =3.00] [COMPIA=4.0 0] [COMPIA =5.00] Location [FMSPPIA =2.00] [FMSPPIA =3.00] [FMSPPIA =4.00] [FMSPPIA =5.00] Source: Own survey, 2019. Std. Error Wald df Sig. 95% Confidence Interval Lower Upper Bound Bound -27.942 -20.887 -26.596 -19.919 -24.864 -18.349 -21.311 -14.830 -24.415 -23.258 -21.606 -18.071 1.800 1.704 1.662 1.653 184.010 186.399 168.981 119.488 1 1 1 1 .000 .000 .000 .000 -.203 1.775 47.013 1 .009 -3.681 -.276 -1.151 1.622 82.504 1 .008 -4.331 -.029 -1.449 1.637 74.783 1 .006 -4.657 -.760 0a . . 0 . . . -19.889 .926 461.340 1 .000 -21.704 -18.074 -19.550 .528 1371.63 1 1 .000 -20.585 -18.516 -19.668 .000 . 1 . -19.668 -19.668 0a . . 0 . . . Specifically, in the above table when the competency decreases from strongly agree to disagree the internal audit effectiveness decreases by 0.203. In addition, when competency decreases from strongly agree to neutral the internal audit effectiveness decreases by 1.66. In addition, when competency decreases from strongly agree to neutral the internal audit effectiveness decreases by 1.15. Similarly, when competency decreases from strongly agree to agree the internal audit effectiveness decreases by 1.15. Specifically, when the FMSPPIA decreases from strongly agree to disagree the internal audit effectiveness decreases by 19.9. In addition, FMSPPIA decreases from strongly agree to neutral the internal audit effectiveness decreases by 19.5. Similarly, when FMSPPIA decreases from strongly agree to agree the internal audit effectiveness decreases by 19.7. 56 4.3.2. EFFECT OF THE INDEPENDENCY OF INTERNAL AUDITORS ON IAE Table 4. 20 Model Fitting Information Model -2 Log Likelihood Chi-Square Intercept Only 251.432 Final 210.171 55.261 df Sig. 3 .000 Source: Own survey, 2019. The table above shows the results of the hypothesis checking against whether the model is statistically significant or not. As can be seen the p-vale is less than the 5% significance level. This is an indication the model fitted to the data is statistically significant. At least in the model there is one independent variable which affects the dependent variable significantly. Table 4. 21 Goodness-of-Fit Chi-Square df Sig. Pearson 4.291 9 .891 Deviance 5.737 9 .766 Link function: Logit. Source: Own survey, 2019. As can be seen from the above table, the model goodness fit of tests. They all assume that, in the null hypothesis the model is good. However, in the contrary in the alternative hypothesis it is not. Therefore, by looking the model results it can be said the model is statistically significant. Table 4. 22 Pseudo R-Square Cox and Snell .88 Nagelkerke .86 McFadden .72 Source: Own survey, 2019. As can be seen from the above table, the results of the R-square as they are indicative of the model goodness it can be said the model is good. To illustrate, all the values are above 80% and this is an indication the model is more informative. 57 Table 4. 23 Parameter Estimates Estimate Std. Error [IAE = 1.00] [IAE= 2.00] Threshold [IAE = 3.00] [IAE = 4.00] [INIA =2.00] [INIA =3.00] Location [INIA=4.00] [INIA=5.00] Source: Own survey, 2019. -22.832 -21.677 -20.046 -16.623 -19.391 -19.254 -19.211 0a Wald df .772 873.703 .514 1780.028 .380 2782.499 .540 947.697 .886 478.679 .490 1541.018 .210 145. . . Sig. 1 1 1 1 1 1 1 0 .000 .000 .000 .000 .000 .000 .000 . 95% Confidence Interval Lower Upper Bound Bound -24.346 -21.318 -22.684 -20.670 -20.791 -19.301 -17.681 -15.565 -21.128 -17.654 -20.215 -18.292 -19.211 -18.211 . . The table above shows the results of the ordinal logistic regression and as can the independence of internal auditors has statistically significant effect on effectiveness. Specifically, as independent level decreases from strongly agree to neutral the effectiveness decreases by 19.254 in addition, as independence increases the effectiveness increases by 19.2. 4.3.3. EFFECT OF ORGANIZATIONAL INDEPENDENCY AND ONJECTIVITY ON IAE Table 4. 24 Model Fitting Information Model Intercept Only Final Source: Own survey, 2019. -2 Log Likelihood 42.057 138.588 Chi-Square df 3.468 Sig. 3 .005 The table above shows the results of the hypothesis checking against whether the model is statistically significant or not. As can be seen the p-vale is less than the 5% significance level. This is an indication the model fitted to the data is statistically significant. At least in the model there is one independent variable which affects the dependent variable significantly. Table 4. 25 Goodness-of-Fit Chi-Square Pearson Deviance Source: Own survey, 2019. df 12.953 14.542 58 Sig. 9 9 .165 .104 As can be seen from the above table, the model goodness fit of tests. They all assume that, in the null hypothesis the model is good. However, in the contrary in the alternative hypothesis it is not. Therefore, by looking the model results it can be said the model is statistically significant. Table 4. 26 Pseudo R-Square Cox and Snell Nagelkerke McFadden .88 .85 .87 Source: Own survey, 2019. As can be seen from the above table, the results of the R-square as they are indicative of the model goodness it can be said the model is good. To illustrate, all the values are above 85% and this is an indication the model is more informative. Table 4. 27 Parameter Estimates Estimate [IAE = 1.00] [IAE = 2.00] -2.016 -.853 1.407 1.305 2.052 4.428 1 1 95% Confidence Interval Lower Upper Bound Bound .152 -4.775 .742 .513 -3.411 1.704 [IAE = 3.00] .853 1.305 41.427 1 .513 -1.705 3.412 [IAE = 4.00] 4.192 [OIOIA =2.00] -1.041 [OIOIA =3.00] -1.661 Location [OIOIA=4.00] -2.008 [OIOIA =5.00] 0a Source: Own survey, 2019. 1.378 1.480 1.341 1.366 . 9.248 41.495 41.534 2.159 . 1 1 1 1 0 .002 .482 .215 .142 . 1.490 -2.860 -.967 -.670 . 6.893 0.942 4.289 -4.685 . Threshold Std. Error Wald df Sig. Specifically, in the above table when the organization independence decreases from strongly agree to disagree the internal audit effectiveness decreases by 1.04. In addition, when organization independence decreases from strongly agree to neutral the internal audit effectiveness decreases by 1.66. In addition, when organization independence decreases from strongly agree to agree the internal audit effectiveness decreases by 2. 59 4.3.4. EFFECT OF MANAGEMENT SUPPORT ON IAE Table 4. 28 Model Fitting Information Model Intercept Only Final -2 Log Likelihood Chi-Square df Sig. 99.614 96.694 2.920 2 .02 Source: Own survey, 2019. The table above shows the results of the hypothesis checking against whether the model is statistically significant or not. As can be seen the p-vale is less than the 5% significance level. This is an indication the model fitted to the data is statistically significant. At least in the model there is one independent variable which affects the dependent variable significantly. Table 4. 29 Goodness-of-Fit Chi-Square Pearson Deviance Source: Own survey, 2019. df 3.380 3.625 6 6 Sig. .760 .727 As can be seen from the above table, the model goodness fit of tests. They all assume that, in the null hypothesis the model is good. However, in the contrary in the alternative hypothesis it is not. Therefore, by looking the model results it can be said the model is statistically significant. Table 4. 30 Pseudo R-Square Cox and Snell Nagelkerke McFadden Link function: Logit. .88 .83 .85 Source: Own survey, 2019. As can be seen from the above table, the results of the R-square as they are indicative of the model goodness it can be said the model is good. To illustrate, all the values are above 80% and this is an indication the model is more informative. 60 Table 4. 31 Parameter Estimates Estimat e [IAE = -4.166 1.00] [IAE = -3.015 2.00] Threshold [IAE = -1.355 3.00] [IAE = 2.008 4.00] [MSIA -1.556 =2.00] [MSIA Location -.690 =3.00] [MSIA 0a =4.00] Source: Own survey, 2019. Std. Error Wald df Sig. 95% Confidence Interval Lower Upper Bound Bound .820 25.811 1 .000 -5.773 -2.559 .579 27.143 1 .000 -4.149 -1.881 9.289 1 .002 -2.226 -.484 52.506 15.776 1 .000 1.017 2.999 51.158 1.803 1 .00 -3.826 -.715 39.513 1.809 1 .179 -1.696 -.316 . . 0 . . . 41.444 The table above shows the results of ordinal logistic regression, effect of management support on effectiveness of internal audit, and as can be seen from the table the variable is statistically significant. In the first column the table shows the list of independent variables, in the next column it shows the values of the estimate, this is the log of odds, then, the standard error of the estimate, the Wald statistics, the degree of freedom, the p-value and the confidence interval are displayed. Specifically, when the management support decreases from strongly agree to disagree the internal audit effectiveness decreases by 1.56. In addition, when management support decreases from strongly agree to agree the internal audit effectiveness decreases by 6.9. 61 4.3.5. EFFECT OF COOPERATION BETWEEN INTEERNAL AND EXTERNAL AUDIT ON IAE Table 4. 32 Model Fitting Information Model -2 Log Likelihood Intercept 29.345 Only Final 118.636 Link function: Logit. Source: Own survey, 2019. Chi-Square df Sig. .709 3 .001 The table above shows the results of the hypothesis checking against whether the model is statistically significant or not. As can be seen the p-vale is less than the 5% significance level. This is an indication the model fitted to the data is statistically significant. At least in the model there is one independent variable which affects the dependent variable significantly. Table 4. 33 Goodness-of-Fit Chi-Square df Pearson Deviance Link function: Logit. Source: Own survey, 2019. 4.189 5.039 Sig. 9 9 .899 .831 As can be seen from the above table, the model goodness fit of tests. They all assume that, in the null hypothesis the model is good. However, in the contrary in the alternative hypothesis it is not. Therefore, by looking the model results it can be said the model is statistically significant. Table 4. 34 Pseudo R-Square Cox and Snell Nagelkerke McFadden Link function: Logit. Source: Own survey, 2019. .009 .011 .004 As can be seen from the above table, the results of the R-square as they are indicative of the model goodness it can be said the model is good. To illustrate, all the values are above 85% and this is an indication the model is more informative. 62 Table 4. 35 Parameter Estimates Estimat e [IAE = 1.00] -4.432 [IAE = 2.00] -3.279 Threshold [IAE = 3.00] -1.642 [IAE = 4.00] 1.642 [CIAEA -1.451 =2.00] [CIAEA -.767 =3.00] Location [CIAEA -.817 =4.00] [CIAEA 0a =5.00] Source: Own survey, 2019. Std. Error Wald df Sig. 95% Confidence Interval Lower Upper Bound Bound -8.769 -.094 -7.465 .907 -5.766 2.483 -2.483 .766 2.213 2.136 2.104 2.104 4.010 2.356 .609 .609 1 1 1 1 .045 .125 .435 .435 2.304 .397 1 .529 -5.966 -.065 2.122 .131 1 .718 -4.927 -.393 2.124 .148 1 .701 -4.980 -.347 . . 0 . . . Specifically, in the above table when the cooperation decreases from strongly agree to disagree the internal audit effectiveness decreases by 1.45. In addition, when cooperation decreases from strongly agree to neutral the internal audit effectiveness decreases by 0.76. Similarly, when cooperation decreases from strongly agree to agree the internal audit effectiveness decreases by 0.82. 4.3.6. IAE ON RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM Table 4. 36 Model Fitting Information Model -2 Log Likelihood Intercept 38.882 Only Final 110.082 Link function: Logit. Source: Own survey, 2019. Chi-Square 8.800 df Sig. 4 .006 The table above shows the results of the hypothesis checking against whether the model is statistically significant or not. As can be seen the p-vale is less than the 5% significance level. This is an indication the model fitted to the data is statistically significant. At least in the model there is one independent variable which affects the dependent variable significantly. 63 Table 4. 37 Goodness-of-Fit Chi-Square Pearson Deviance Link function: Logit. Source: Own survey, 2019. df Sig. 8.351 9.049 8 8 .400 .338 As can be seen from the above table, the model goodness fit of tests. They all assume that, in the null hypothesis the model is good. However, in the contrary in the alternative hypothesis it is not. Therefore, by looking the model results it can be said the model is statistically significant. Table 4. 38 Pseudo R-Square Cox and Snell Nagelkerke McFadden Link function: Logit. Source: Own survey, 2019. .84 .86 .855 As can be seen from the above table, the results of the R-square as they are indicative of the model goodness it can be said the model is good. To illustrate, all the values are above 85% and this is an indication the model is more informative. Table 4. 39 Parameter Estimates Estim ate [RMIC = 1.00] Threshold [RMIC = 2.00] [RMIC = 3.00] [IAE =1.00] [IAE =2.00] Location [IAE =3.00] [IAE =4.00] [IAE =5.00] Source: Own survey, 2019. 5.212 1.814 .785 -.514 2.674 -.308 -.835 0a Std. Error Wald 1.312 15.775 df Sig. 95% Confidence Interval Lower Upper Bound Bound 1 .000 -7.784 -2.640 .828 4.805 1 .028 -3.436 -.192 .797 1.586 .971 .105 1 1 .324 .746 -.776 -3.622 2.347 2.593 1.319 4.108 1 .043 -5.260 -.088 .917 .847 . .113 .972 . 1 1 0 .007 .004 . -1.489 -2.494 . -.106 -.025 . Specifically, in the above table when the effectiveness decreases from strongly agree to disagree the risk management and internal control decreases by 2.67. In addition, when effectiveness 64 decreases from strongly agree to neutral the risk management and internal control decreases by 0.31. Similarly, when effectiveness decreases from strongly agree to agree the risk management and internal control decreases by 0.84. 4.4. DISCUSSION In the model fitting information, (i.e. table 4.16, 4.20, 4.24, 4.28, 4.32, and 4.36); all hypotheses checking were conducted against whether the model is statistically significant or not. As can be seen the p-vale is less than the 5% significance level. This is an indication the model fitted to the data is statistically significant. At least in the model there is one independent variable which affects the dependent variable significantly. From the model goodness fit of tests (i.e. table 4.17, 4.21, 4.25, 4.29, 4.33, and4.37); they all assume that, in the null hypothesis the model is good. However, in the contrary in the alternative hypothesis it is not. Therefore, by looking the model results it can be said the model is statistically significant. From table 4.18, 4.22, 4.26, 4.30, 4.34, and 4.38; the results of the Rsquare as they are indicative of the model goodness it can be said the model is good. To illustrate, all the values are above 80% and this is an indication the model is more informative. Based on the coefficients of the dependent variable (β sign) all the hypotheses proposed by the researcher are acceptable because of all the seven hypotheses stated the positively relationship with the dependent variable are meet. HYPOTHESIS TEST The regression analysis whose results are presented in table 4.16- 39 above provides a more comprehensive and accurate examination of the research hypothesis. Therefore, the regression results obtained from the model were utilized to test these hypotheses. The hypotheses sought to test for a significant influence of FMSPPIA, COMPIA, INIA, OIOIA, MSIA, CIAEA; and RMIC on the direct effect of internal audit effectiveness which was measure in terms of scale. As can be seen in table 4.19, 4.23, 4.27, 4.31, 4.35 and 4.39 above the p value for the FMSPPIA, COMPIA, INIA, OIOIA, MSIA, CIAEA and RMIC are statistically significant at (p< 0.05) which suggests a strong support for all hypotheses and contribute statistically significantly. The following hypotheses test were conducted based on the regression results of the internal audit effectiveness obtained from the regression output. When β =0 , it means increase of value and β =0 65 , it is the decrease of value H1: There is a positive relationship between formal mandate and standards for professional practice of internal audit and internal audit effectiveness. The first hypothesis of this research posted that the effectiveness of the internal audit is positively related with formal mandate and standards for professional practice. Showing the strongly correlated relationship between the IAE and the formal mandate and standards for professional practice, the positive beta sign and a statistically significant result of the formal mandate and standards for professional practice related with the internal audit effectiveness (β = 0 , P<0.05) support the proposed hypothesis acceptable (table 4.19). The finding is consistent with (Tesema, 2018) formal mandate and standards for the professional practice (FMSPP) play an important role in promoting good governance in public institutions. The result is also collaborating with Mebratu (2015) who argued that formal mandate is positively related with risk management role of internal audit function. This implies the existence of formal mandate in the organization contribute to the effectiveness of internal auditors. H2: There is a positive relationship between competent staff of internal auditors and internal audit effectiveness. The existence of competent internal audit staff also supposed to be the factors of internal audit effectiveness and is the second hypothesis of this research. The regression result (table 4.19) supports this hypothesis at (P<0.05) level of significant and with the positive signs of beta (β =0 ). The result is consistence with (Tesema, 2018) who’s finding show that the existence of adequate and competent IA staff in the public sector office results with positively relationship with good governance and with high contribution for the good governance. But, this result was not collaborating with some previous auditing researches (Arena and Azzone, 2009; Cohen and Sayag, 2010) they said that there were no correlation between professional proficiency and adequacy with the IA effectiveness. This result indicated the significant contribution for internal audit effectiveness which leads to more support for the proposed hypothesis (H2). H3: There is a positive relationship between independence of internal audit and internal audit effectiveness. The third hypothesis of this research posted that the effectiveness of the internal audit is positively related with independence of internal audit. 66 Showing the strongly correlated relationship between the IAE and the independence of internal audit, the positive beta sign and a statistically significant result of theindependence of internal auditrelated with the internal audit effectiveness (β =0 , P<0.05) support the proposed hypothesis acceptable (table 4.23). The finding is consistent with (Tesema, 2018) who indicated that independency of internal audit plays an important role in promoting good governance in public institutions. H4: There is a positive relationship between organizational independences and objectivity of internal auditors and internal audit effectiveness. The fourth hypothesis of this research which is assumed to be the factors of IA effectiveness is the organization independence and objectivity of the IAs in which internal audit work were conducted. As shown in table 4.27 above the coefficient of OIOIA (β =0 , p< 0.05) were positively related with the effectiveness of IA. This result is supported by (Mihret and Yismaw, 2007) they argued that organizational setting, except for the budgetary status of internal audit, enables effective internal audit. In similar vein, (Tesema, 2018) assure that the presence of Organizational independences and objectivity of internal auditors in the public institutions results with positive relationship with good governance and with high contribution for the promotion of good governance by Internal audit staff are sufficiently independent to perform their professional obligations and duties It’s also consistent with the previous studies conducted by (Cohen, & Sayag, 2010; Van Peursem, 2005) they find that, the more organizational independence to the internal auditors plays the vital role in assurance of internal audit effectiveness by freely access of necessary documents, information and data about the organization for audit work, and can provide audit finding /report/ freely and directly to the responsible body, and this all supports the IA effectiveness in their sector. But, the result is inconsistent with (Hailemariam, 2014) result that has no statistically significant relationship between the organizational independence and the IA effectiveness. H5: There is a positive relationship between management support and internal audit effectiveness. The fifth hypothesis of this research posted that the effectiveness of the internal audit is directly related with the extent of the management support it receives. Showing the strongly correlated 67 relationship between the IAE and the management support, the positive beta sign and a statistically significant result of management support (table 4.31) related with the internal audit effectiveness (β =0 , P<0.05) support the proposed hypothesis acceptable. The management support in terms of providing resources, giving trainings, introducing with new technologies, providing enough facilities and encourages the internal audit process with commitments to promote and communicate their added value for the effectiveness of internal audit work in their office contributes for the IAE. The result coincide with the previous auditing research works of (Mihret, Yismaw, 2007; Cohen and Sayag, 2010) they find that the top management support was the critical determinants of internal audit effectiveness in audit finding and the commitment to strength internal audit through hiring proficient internal audit staff, developing career channels for internal audit staff, and providing internal audit work independence. Similarly, in this research finding the managements support in terms of trainings, resources and through other necessary facilities to the internal auditors the top management can contribute to the effectiveness of internal audit works for their office. Therefore, the management can contribute for the effective result of the internal auditors through their support in terms of continuous training for their IA staff, fulfilling the necessary materials and facilities that the IA staff needs; and this in turn strongly supports the first proposed hypothesis (H5). H6: There is a positive relationship between cooperation between internal auditors and external auditors and internal audit effectiveness. The sixth hypothesis of this research posted that the effectiveness of the internal audit is positively related with cooperation between internal auditors and external auditors. Showing the strongly correlated relationship between the IAE and the cooperation between internal auditors and external auditors, the positive beta sign but statistically insignificant result with the internal audit effectiveness (β =0 , P>0.05) which support the proposed hypothesis acceptable (table 4.35). The result was consistence with Adhista (2015) who suggest that higher internal audit effectiveness is associated with the nice relationship between internal and external auditors. 68 H7: There is a positive relationship between risk management and internal control and internal audit effectiveness. The last hypothesis of this research posted that the effectiveness of the internal audit is positively related with risk management and internal control. Showing the strongly correlated relationship between the IAE and the risk management and internal control, the positive beta sign and a statistically significant result of the risk management and internal control related with the internal audit effectiveness (β =0 , P<0.05) support the proposed hypothesis acceptable (table 4.39). The finding is inconsistent with (Tesema, 2018) who indicated that risk management and control have no significant contribution for the good governance. 69 CHAPTER FIVE 5. CONCLUSION AND RECCOMANDATION Based on findings of the study related to the formal mandate and standards for the professional practice of internal auditors, competency of internal auditors, independence of internal auditors, management support for internal auditors, organizational independence and objectivity of internal auditors, cooperation between internal and external auditors and risk management and internal control system of internal audit in the public sector offices, the conclusions and recommendations are drawn. According to the regression output, seven of the predictors were positively related and significantly contributed for the effectiveness of internal audit in a case of Gambella region, public sector offices. Therefore, the public sector offices should maintains using these elements of internal audit to be accountable, transparent, effective, efficient and responsive throughout their service delivery. 5.1. CONCLUSION The presences of effective internal audit in the office/sectors links with internal control risk management system, improves organizational effectiveness, economics and efficiency. By taking this aspect into consideration, this study identified factors that affect the IA effectiveness in the public sector offices and then analyzed the organizational dimensions in which the public sector office should carry out to enhance the IA effectiveness. And also by testing of the proposed hypotheses showing relations of these independent variables with the IAE the following conclusions were drawn.  The IAE of the public sector office increases, when there were increase from formal mandate and standard for professional practice; competence, independence, organizational independence and objectivity, management support, active cooperation among internal and external auditors, and risk management and internal control efficiency. The regression analysis (shown on table 4.19, 4.23, 4.27, 4.31, 4.35 and 4.39) shows very strong contributions of these variables for the IAE. Therefore, the overall effect of the formal mandate and standard for professional practice; competence, independence, organizational independence and objectivity management support, 70 cooperation between internal and external auditor and risk management and internal control efficiency in the public sector is very important for the IAE in the public sector offices.  In addition, the correlation analysis (shown on table 4.19, 4.23, 4.27, 4.31, 4.35 and 4.39) shows all the independent variables have the direct effect of the internal audit effectiveness (IAE) and the regression result also depicts all the independent variables have a positive sign of coefficients (shown on table 4.19, 4.23, 4.27, 4.31, 4.35 and 4.39) with IAE in the public sector offices.  Similarly, statistic descriptive on the graphs shows the neutrality of respondents on the effectiveness of internal auditors followed by the more percentage agreement that all predicted variables were contributed to IAE. However, one predicted variable the risk management and internal control role of IAs show the disagreement from the respondents.  Further, the correlation analysis (see table 4.19 and 4.35) showed the contributions of the independent variables to the internal audit effectiveness. Future research should seek to clarify the career pattern of internal auditors and on what basis they make career choices to move into and out of the IA profession. In that context, further research should explore the possibility of an optimum life cycle for performing IA most effectively. This conclusion requires future research may challenge and build on the findings of this research by testing the relationship of the questions that separate internal audit functions and their relationship with IA effectiveness in a Gambella setting and Ethiopia generally. 5.2. RECOMMENDATION After reviewing the research findings and achieved results with regard to the main objective of this study to determine the factors affecting of IAE in the public sector offices and also to prove the hypotheses, the researcher provides the following recommendations to the public sector offices, the internal auditors, Gambella regional government and the Ethiopian Institute of Internal Auditor (EIIA). The finding of this research proved that the formal mandate and standard for professional practice; competence, independence, organizational independence and objectivity, management support, cooperation between internal and external auditor, and risk management and internal 71 control efficiency were statistically significant and positively related with the IAE in the public sector offices, Gambella region.  Thus, researcher recommended that for the public institution to be effectively mitigating risk they should institute internal auditing in its operation and the public sector office should give focuses more for the internal audit functions by facilitating the IA works, and for the government to be effective in its operation and service delivery they should recognize more contribution of internal auditing.  The internal auditors of the public sector office should recommended to maintain and improve their effective contribution for the IAE in their office, by using the supports from their offices management team appropriately, by improving their professional certification in line with the institute of internal audit standards and organizational guidelines and by introducing themselves with modern technologies that improve their IA function for their office.  As the research proved that the existence of effective cooperation among internal external auditor and competence of internal auditors as one of the major factors which have significant level of contribution for the IAE, the public institutions have to accept internal auditors’ communication with the external auditors as a tool for effective internal control so as to realize their objectives set with ease. The internal auditors were recommended to maintain their competence as in the IIA’s standard, internal auditors must possess the knowledge, skills, and other competencies needed to perform their individual responsibilities.  Finally; the Ethiopian Institute of Internal Auditor should contribute for the IAE by working in collaboration with the MoFED and other public sector offices to accomplish effective internal audit work by supplying the adequate and competent internal audit staffs and also to give short term trainings to upgrade the existing IA staffs proficiency in line with the institute of IA standards. 72 REFERRENCE Abudu, D., Gariba, O. and Samuel, E. (2015). The Organizational Independence of Internal Auditors in Ghana: Empirical evidence from local Government. Asian Journal of Economic Modeling, 2015, 3(2): 33-45. Abraham, Y. (2015). Determinants of Internal Audit Effectiveness. Empirical Study on the Construction Bank and Business bank. Adhista, C. (2015). 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Website Sources Http: //www.coso.org./coso ERM frame work and Http: //www.wikipedia.org./ internal Auditing 78 APPENDIX A: QUESTIONNAIRES Aksum University College of Business and Economics School of Graduate Studies Department of Accounting and Finance Dear Respondent: The main purpose of this questionnaire is to seek information with the aim of identifying the factors that affect internal audit (IA) effectiveness in Gambella Regional of Ethiopia and to conduct Master Thesis (Research) for the partial fulfillment of Master Degree in Accounting and Auditing at Aksum University. The results of the study will contribute to identify the factors that influence internal audit effectiveness. The conclusions of the study will draw in aggregate terms, without any reference to the specific office or individual respondents. Please, do not write your name on the questionnaire. I would also like to assure you that the information you provided will be treated as strictly confidential and used only for the purpose of this research only. Your honest and thoughtful response is valuable Thank you in advance for your support and participation. With best regards, Muoch Tongyik Rom, Mobile: +251- 917997408, 79 Email: muchtong147@gmail.com I. Questionnaire Administered to Directors Objective of the Questionnaire Effective internal audit function is an important management tool to monitor and direct the internal operations of an organization effectively and appropriately. In line with this, you are kindly requested to give your response to your personal profile, and to each statement related with the internal auditors' ability in helping an organization achieve its goals in your sector and the added contribution by internal audit to your sector as provided in the table below. A. The personal profiles General Instruction: Please indicate your choice by putting (√) mark in the bracket. 1. Sex/Gender/: Male (______) Female (______) 2. Age (in year): 20 to 29(___), 30 to 39(___), 40 to 49(_____), 50 to 59(_____), above 60 (____) 3. Your field of study: Accounting (______), Management (______), Economics (_______) Other specify(_____) 4. Level of education: Diploma (______), Bachelor's Degree (_____), Master’s Degree (_____) or others (_____) 5. Occupation: Internal auditor (__), Audit director (__), accountants (__), Finance director (__) 6. Work experience: (a) from 1-2, (b) from 3-5, (c) from 6-8, (c) from 9-10, (d) above 10 B. The questionnaire items (questions) The Questionnaire is prepared in Likert-scale form with five (5) point scales. I ask you to tick (√) or circle the appropriate scale (point) that indicates your opinion in table below. The values of scales are 5 = strongly agree, 4 = Agree, 3 = Neutral, 2 = Disagree, and 1 = strongly disagree S/No The effectiveness of internal auditors in helping an organization The Scales achieve its goals and added value contributions to the organizations 4 3 1 Internal audit ensures the economical, effective and efficient use of 5 resources in my office/sector. 4 3 2 In my office/sector internal audit ensures activity performed is 5 compliance with established policies, procedures, laws and regulations. 80 2 1 2 1 3 The recommendations of internal audit department provide 5 4 3 2 1 4 3 2 1 4 3 2 1 5 4 3 2 1 5 4 3 2 1 5 4 3 2 1 5 5 4 4 3 3 2 2 1 1 practical, cost-benefit solutions for correcting the problems that were found. 4 Internal auditors have the experience and expertise to address 5 corporate risk management problems within the organization 5 The organization’s culture, code of conduct, human resource 5 policies and performance reward systems support the business objectives, risk management and the internal control system. 6 7 8 9 10 II. The existing role that the internal audit is playing sufficient enough to address the very purpose for which it is established for. Internal auditors in your company are capable of carrying out internal control function under current corporate governance rules Internal auditors are accorded with on-job skills that suit their work in the internal audit unit. Internal auditors are provided with formal audit training courses Internal auditors evaluate and contribute to the improvement of governance and risk management. Questionnaire Administrated to Internal Auditors and accountants Objective of the Questionnaire Effective internal audit function is an important management tool to monitor and direct the internal operations of an organization effectively and appropriately. In line with this, you are kindly requested to give your response to your personal profile, and to each statement related with the internal auditors' ability in helping an organization achieve its goals in your sector and the added contribution by internal audit to your sector as provided in the table below. A. The personal profiles: General Instruction: Please indicate your choice by putting “√” mark in the bracket. 1. Sex/Gender/: Male (_____) Female (______) 2. Age (in year): 20 to 29 (____), 30 to 39 (____), 40 to 49 (___), 50 to 59 (___), above 60 (____) 81 3. Your field of study: Accounting (__), Management (_), Economics (__), other specify (__) 4. Level of education: Diploma (___), Bachelor's Degree (__), Master’s Degree (_____) or others specify (_____) 5. Occupation: Internal auditor (__), Audit director (__), accountants (__), Finance director (__) 6. Work experience: (a) from 1-2, (b) from 3-5, (c) from 6-8, (c) from 9-10, (d) above 10 B. The questionnaire items (questions) The Questionnaire is prepared in Likert-scale form with five (5) point scales. I ask you to tick (√) or circle the appropriate scale (point) that indicates your opinion in table below. The values of scales are 5= strongly agree, 4= Agree, 3= Neutral, 2= Disagree, 1= strongly disagree S/N Formal mandate and proficiency of internal auditors The Scales 1 Internal auditors have formal mandate and audit training courses 5 4 3 2 1 2 Internal auditors have ability to promote the value of the internal audit 5 4 3 2 1 activity within the organization 3 A formal mandate of an internal audit activity (such as that included in 5 4 3 2 1 an organizational policy) is strengthened within the organization when the internal audit activity is also required by a legal mandate. 4 The sector/office has a professional staff that collectively has the 5 4 3 2 1 necessary qualifications and competencies to conduct the full range of audits required by the mandate. 5 Internal auditors are complying with minimum education requirements 5 4 3 2 1 established by their relevant professional organizations and standards. Competency of internal auditors 1 The internal auditors have the relevant skills, tools and knowledge to 5 4 3 2 1 facilitate achieving set goals and manage risks effectively 2 In your office/sector there are sufficient skilled internal auditors. Most 5 4 3 2 1 of them have certification in auditing. 3 The internal audit staff number & their skill matches the scope of 5 4 3 2 82 1 office's/sector’s internal operations 4 It is possible to audit and review each activity on time, and cover the 5 4 3 2 1 planned scope of auditing activities. 5 The internal audit staff number & their skill matches the scope of 5 4 3 2 1 office's/sector’s internal operations Independency of internal auditors 1 In your office/sector, internal audit activity is an independent, 5 4 3 2 1 objective assurance and consulting activity. 2 I freely decide the scope, time and extent of auditing procedures based 5 4 3 2 1 on auditing standards and the organization policy. 3 The internal auditing operates totally independently, can audit any 5 4 3 2 1 5 4 3 2 1 5 4 3 2 1 In your sector, organizational independence is allowed that the audit 5 4 3 2 1 issue it considers in need of auditing. 4 I perform the auditing activities without any interference from anybody and without any influence from the organization. 5 The internal audit staff has free access to information and data about the organization, and unrestricted access to its site Organizational independency and objectivity of internal auditors 1 activity to conduct work without interference by the entity under audit 2 Internal auditors possess objectivity as a key factor for your internal 5 4 3 2 1 audit activity to add value 3 Management policy establishes internal audit unit 5 4 3 2 1 4 The organization encourages me to implement my recommendations, 5 4 3 2 1 5 The internal audit is able to cover all organizational units and all 5 4 3 2 issues. Management support to internal auditors 1 1 Top management through its support and policies demonstrate their 5 4 3 2 1 to promote value-added activities and to strength internal audit function. enthusiasm to cultivating trust, integrity and competence within the 83 office/sector 2 The office/sector considers internal auditing practices as a value- 5 4 3 2 1 adding activity and internal audit staff work smoothly & regularly with the management. 3 The office/sector see internal auditing as providing internal assurance 5 4 3 2 1 through investigations, check & assessment, and consultants & advisor particularity into controls associated to management performance and internal operations. 4 The office/sector has enough awareness and good perception about 5 4 3 2 1 internal auditing roles. 5 The office/sector supports me by providing training in order to 5 4 3 2 1 improve my skill and update with the field. 6 The office/sector supports Internal Auditing staffs by budgeting funds 5 4 3 2 1 for certification to have relevant education in auditing that allows them to audit all of the organization's/sector’s systems. 7 I can get the necessary resources (facilities) that help me to perform 5 4 3 2 1 auditing activities as needed 8 I receive full support, access to records and information from my 5 4 3 2 1 office/sector 9 Top level management trusts and values the advice of the internal 5 4 3 2 1 audit service 10 The internal audit service is seen as a key strategic partner throughout 5 4 3 2 1 the organization Cooperation between internal auditors and external auditors 1 There are regular discussions between the internal auditors and 5 4 3 2 1 external auditors across the year 2 There is well-maintained relationship between internal and external 5 4 3 2 auditors which has been seen as important to the success of internal audit functions and provide numerous benefits to the organization and external stakeholders as well. 84 1 3 The coordination and cooperation may include the planning, opinions, 5 4 3 2 1 reporting, and exchange of information that may facilitate higher quality audits and thus could prevent audit work duplication (i.e. internal vs. external audit). 4 The cooperation and coordination increases the efficiency, 5 4 3 2 1 effectiveness and economy of audits and could help management to provide a high quality public service. 5 The cooperation between internal and external auditors is frequently 5 4 3 2 1 regarded as a main factor that could increase the effectiveness of internal audit in the public sector. Risk management and internal control system of internal auditors 1 Internal auditors are proficient in governance, risk, and control tools 5 4 3 2 1 and techniques 2 Internal auditors are proficient in controls identification 5 4 3 2 1 3 Controls are flexible to manage changing environment, new risks and 5 4 3 2 1 new operational gaps 4 There is understanding of how higher-level objectives link with 5 4 3 2 1 5 4 3 2 1 ministry’s operational objectives 5 Internal auditors possess the ability to relate the organizations risk appetite to the application of controls in operational areas 85 APPENDIX B: RELIABILITY TEST FOR VARIABLES Table.4. 1 Cronbach’s Alpha results Variables Cronbach’s alpha Effectiveness 0.85 Formal mandate and proficiency 0.86 Competency of internal auditors 0.86 Independency of internal auditors 0.89 Organizational independency and objectivity of internal auditors 0.90 Management support to internal auditors 0.91 Cooperation between internal auditors and external auditors 0.92 Risk management and internal control system of internal auditors 0.93 APPENDIX C: EFFECT OF INDEPENDENT VARIABLES ON IAE Table.4.19. Parameter Estimates; Effect of FMSPPIA and COMPIA on IAE Estimat e [IAE = 1.00] Threshol [IAE = 2.00] d [IAE = 3.00] I[AE= 4.00] [COMIA = 2.00] [COMPIA =3.00] [COMPIA=4.0 0] [COMPIA =5.00] Location [FMSPPIA =2.00] [FMSPPIA =3.00] [FMSPPIA =4.00] [FMSPPIA =5.00] -24.415 -23.258 -21.606 -18.071 Std. Error Wald Sig. 95% Confidence Interval Lower Upper Bound Bound -27.942 -20.887 -26.596 -19.919 -24.864 -18.349 -21.311 -14.830 184.010 186.399 168.981 119.488 1 1 1 1 .000 .000 .000 .000 -.203 1.775 47.013 1 .009 -3.681 -.276 -1.151 1.622 82.504 1 .008 -4.331 -.029 -1.449 1.637 74.783 1 .006 -4.657 -.760 . 0 . . . -19.889 .926 461.340 1 .000 -21.704 -18.074 -19.550 .528 1371.63 1 1 .000 -20.585 -18.516 -19.668 .000 . 1 . -19.668 -19.668 0a . . 0 . . . 0a 1.800 1.704 1.662 1.653 df . 86 Table.4.23. Parameter Estimates; Effect of INIA on IAE Estimat Std. Error e [IAE = 1.00] Threshol [IAE= 2.00] d [IAE = 3.00] [IAE = 4.00] [INIA =2.00] [INIA =3.00] Location [INIA=4.00] [INIA=5.00] -22.832 -21.677 -20.046 -16.623 -19.391 -19.254 -19.211 0a .772 .514 .380 .540 .886 .490 .210 . Wald df 873.703 1780.028 2782.499 947.697 478.679 1541.018 145. . Sig. 1 1 1 1 1 1 1 0 95% Confidence Interval Lower Upper Bound Bound -24.346 -21.318 -22.684 -20.670 -20.791 -19.301 -17.681 -15.565 -21.128 -17.654 -20.215 -18.292 -19.211 -18.211 . . .000 .000 .000 .000 .000 .000 .000 . Table.4.27. Parameter Estimates; Effect of OIOIA on IAE Estimat e [IAE = 1.00] Threshol [IAE = 2.00] d [IAE = 3.00] [IAE = 4.00] [OIOIA =2.00] [OIOIA =3.00] Location [OIOIA=4.00] [OIOIA =5.00] -2.016 -.853 .853 4.192 -1.041 -1.661 -2.008 0a Std. Error Wald 1.407 2.052 1.305 4.428 1.305 41.427 1.378 9.248 1.480 41.495 1.341 41.534 1.366 2.159 . . 87 df Sig. 1 1 1 1 1 1 1 0 .152 .513 .513 .002 .482 .215 .142 . 95% Confidence Interval Lower Upper Bound Bound -4.775 .742 -3.411 1.704 -1.705 3.412 1.490 6.893 -2.860 0.942 -.967 4.289 -.670 -4.685 . . Table.4.31. Parameter Estimates; Effect of MSIA on IAE Estima te [IAE = 1.00] Thresh [IAE = 2.00] old [IAE = 3.00] [IAE = 4.00] [MSIA =2.00] Locatio [MSIA =3.00] n [MSIA =4.00] -4.166 -3.015 -1.355 2.008 -1.556 -.690 0a Std. Error Wald df .820 25.811 .579 27.143 41.444 9.289 52.506 15.776 51.158 1.803 39.513 1.809 . . Sig. 1 1 1 1 1 1 0 .000 .000 .002 .000 .00 .179 . 95% Confidence Interval Lower Upper Bound Bound -5.773 -2.559 -4.149 -1.881 -2.226 -.484 1.017 2.999 -3.826 -.715 -1.696 -.316 . . Table.4.35. Parameter Estimates, Effect of CIAEA on IAE Estima Std. te Error [IAE = 1.00] Thresh [IAE = 2.00] old [IAE = 3.00] [IAE = 4.00] [CIAEA =2.00] [CIAEA Locatio =3.00] n [CIAEA =4.00] [CIAEA =5.00] Wald df Sig. 95% Confidence Interval Lower Upper Bound Bound -8.769 -.094 -7.465 .907 -5.766 2.483 -2.483 .766 -4.432 -3.279 -1.642 1.642 2.213 4.010 2.136 2.356 2.104 .609 2.104 .609 1 1 1 1 .045 .125 .435 .435 -1.451 2.304 .397 1 .529 -5.966 -.065 -.767 2.122 .131 1 .718 -4.927 -.393 -.817 2.124 .148 1 .701 -4.980 -.347 0a . . 0 . . . 88 Table.4.39. Parameter Estimates, Effect of RMIC on IAE Estim Std. ate Error [RMIC = 1.00] Thresho ld [RMIC = 2.00] [RMIC = 3.00] [IAE =1.00] [IAE =2.00] Locatio n [IAE =3.00] [IAE =4.00] [IAE =5.00] 5.212 1.814 .785 -.514 2.674 -.308 -.835 0a Wald df 1.312 15.775 Sig. 95% Confidence Interval Lower Upper Bound Bound 1 .000 -7.784 -2.640 .828 4.805 1 .028 -3.436 -.192 .797 1.586 .971 .105 1 1 .324 .746 -.776 -3.622 2.347 2.593 1.319 4.108 1 .043 -5.260 -.088 .917 .847 . .113 .972 . 1 1 0 .007 .004 . -1.489 -2.494 . -.106 -.025 . APPENDIX D: TIME and BUDGET a. Time frame S/no 2018 Tasks N 1 Apply for college committee approval 2 Write literature review & methodology chapters 3 Prepare questionnaires 4 Distribute questionnaires 5 Collect questionnaires 6 Review and entering data 7 Analyze data 8 Prepare first draft report 9 Prepare final draft 10 Present final draft 11 Report findings 89 D 2019 J F M A M J b. Budget work S/no Items Unit cost Quantities Total costs 1 Per diem for researcher 220/day 220*20 days 4400 2 Transportation cost 3 Data collector, entry and cleaning 5 Total 8449 100/individual 100*4ind*6days 2400 15249 90