MEKELLE UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE
THESIS ON :

CHALLENGES OF INTERNAL AUDIT FUNCTIONS IN PROMOTING

GOOD GOVERNANCE AND FULFILLING THEIR VALUE ADDING
ROLE IN TVET COLLEGES : A CASE STUDY MAYCHEW TOWN.

BY:

AYMUT MEHARI

ID NO CBE/PR/157/o6 E.C

SUBMITTED IN PARITAL FULFILLMENT OF THE REQUIREMENTS

FOR THE MASTER OF SCIENCE

IN

FINANCE AND INVESTMENT

ADVISOR ARON H/SILASIE(ASS.PRO) CO. ADVISOR ASMAMAW GETIE(ASS.PRO )

MAY, 2015

MEKELLE,ETHIOPIA
 STATEMENT OF DECLARATION

I hereby declare that the thesis entitled “Challenges of internal audit functions in promoting

good governance and fulfilling their value adding role in TVET colleges : A Case study

Maychew Town ” submitted by me for the award of Master of Science (M.Sc.) Degree in

Finance and Investment in the Department of Accounting & Finance, Mekelle University, is the

original study done by me and it has not been submitted previously in part or full to this or any

other University for any Degree or Diploma or similar title.

Name Aymut Mehari Berhe

Signature---------------------

Date------------------------

ii
 CERTIFICATION

This is to certify that Mr. AYMUT MEHARI has been a bona fide student of Master of Finance and

Investment (MFI) in the Department of Accounting & Finance (AcFn), College of Business and

Economics (CBE), Mekelle University (MU), Mekelle since March, 2015.

With regard to the thesis entitled, ““Challenges of internal audit functions in promoting good

governance and fulfilling their value adding role in TVET colleges : A Case study Maychew Town””

for the Master of Science (M.Sc.) Degree in Finance and Investment in the Department of Accounting &

Finance, CBE, We certify that he has carried out the research work under our direct supervision and

guidance. The manuscript of the thesis has been thoroughly scrutinized by in view of the requirements of

the regulations of the University.

This thesis does not contain any conjoint research work with us or with anyone else. The final copy of the

thesis which is being submitted to the university office has been carefully read for its material and

language and he has completed his research work to our entire satisfaction.

To the best of our knowledge, the entire thesis comprises the candidate’s own piece of original research

work. Thus, the thesis is worthy of consideration for the award of MSc. Degree in Finance and

Investment. With best regards,

Principal Advisor Co-Advisor

Name: _Aron H/_Silasie(Ass. Prof) Name: Asmamaw Getie(Ass.Prof)

Sig.: _________________ Sig.: ________________

Date: _______________ Date: ______________

AcFn, CBE, MU, Mekelle AcFn, CBE, MU, Mekelle

External Examiner’s Name----------------------- Internal Examiner’s Name-------------------------

Signature---------------------------------- Signature----------------------------------

Date--------------------------------------- iii Date------------------------------------

ACKNOWLEDGMENTS

First and for most I would like to thank the Almighty God! and his mom Saint Merry!

My heartfelt thanks goes to my Principal advisor, Aron H/ Silasie (Asst. Prof.), for his
unreserved guidance, constructive comments and relentless effort exerted in advising and
teaching me throughout the job in writing this paper. My appreciation also goes to my co-advisor
Asmamaw Getie(Asst. Prof.) for his support and constructive comment.
My heartfelt thanks also goes to My lovely Wife Genet Abraha, and My Lovely Son &
Dauhgter Natnael Aymut and Tseday Aymut for their support in morale and Financial and My
Mother Endehaft Tesfay , Tibe Tesfay and my Lovely mom Behafta Wedajo.

Many thanks also forwarded to staff members of TVET Colleges for their willingness to provide
me necessary documents to extract necessary information and the respondents from the Colleges
for their patience to fill the questionnaire and for their active participation during the interview.

Finally my warm thanks and love go to my Family without whom I would not be the person I
am today. My success is the result of your determination.

(AYMUT MEHARI )
 iv
ABSTRACT
The main objective of the study was to assess the Challenges of internal audit functions in

promoting good governance and fulfilling their value adding role in TVET colleges A Case

study Maychew Town . The study used descriptive data analysis, supported by a case study

protocol using cross sectional study method. The study collected secondary data from the most

recent information from audit report of TVET College and primary data from finance head

office, management, Senior Accountants pay masters procurement and property officers , and

internal auditors of TVET Colleges using purposive sampling techniques and these respondents

were selected because the researcher assumes available information can be easily obtained from

these respondents. Accordingly, the findings were lack of expertise, lack of opportunities for

professional development, lack of incentives to hire /retain internal audit professionals, lack of

strict follow up to the internal and external audit findings, no careful in the use and protection

of information acquired in the way of their duties, limited to the internal control purposes of the

financial activities, poor internal control systems, lack of existence of ethics program, and lack

of the existence of fraudulent and prevention program, were identified as Challenges of

internal audit functions in promoting good governance and fulfilling their value adding role in

TVET colleges Therefore the management bodies of the TVET Colleges and other concerned

bodies should give a great attention to the aforementioned challenging factors of the internal

audit department of these TVET Colleges in order to identify major Challenges of internal

audit functions and their value adding role in TVET colleges. Other researchers are invited to

conduct a study by expanding the scope of this study to include other governmental higher

education of the country using other scientific research methods.

KEY WODS :Challenges, Good Governance, Value adding role

 v

ACRONYMS

AC Audit Committee

ANAO Australia National Audit Office

CEO Chief Executive Officers

ECIIA European Confederation of Institutes of Internal Auditing

EA External Audit

IA Internal Auditors

IIA Institute of Internal Auditors

IIARF Institute of Internal Auditors Research Foundation

INTOSAI International Organization of Supreme Audit Institutions

IPPF International Professional Practices Framework

MOFED Ministry of Finance and Economic Development of Ethiopia

O.A.G Office of the Auditor General

PFM Public Financial Management

PCAOB the creation of the Public Accounting Oversight Board in

TVET Technical Vocational and Educational Training

vi
Tables of Contents
Contents Pages
STATEMENT OF

DECLARATION……………………………………………………………..`…………………..ii

CERTIFICATION………………………………………………………………………………..iii

ACKNOWLEDGMENTS………………………………………………………………………..iv
ABSTRACT……………………………………………………………………………………….v
ACRONYMS……………………………………………………………………………………..vi
Contents………………………………………………………………………………………….vii
Lists of tables………………………………………………………………………………………………xi

Lists of Figures ………………………………………………………………………………………………………………………………..xii

CHAPTER ONE ………………………………………………………………………………. ..1
1.INTRODUCTION……………………………………………………………………………. .1

1.1 Background of the Study……………………………………………………………………. .1

1.2 Statement of the Problem……………………………………………………….... …….. ...4

1.3 Research Questions ……………………………………………………………………..5
1.4 Objectives of the Study ………………………………………………………………………6
1.4.1 General Objective…………………………………………………………………………...6
1.4.2 Specific Objectives………………………………………………………………………….6
1.5 Justification of the Study……………………………………………………………………..6
1.6 Significance of the Study…………………………………………………………………….8
CHAPTER TWO……………………………………………………………………………….....9
REVIEW OF RELATED LITERATURE………………………………………………………...9
Theoretical Review Literature…………………………………………………………………...9
2.Value Adding Role of Internal audit Functions……………………………………………….9
2.1 The Role of Government Auditing………………………………………………………...12
2.2 The Roles and Importance of Internal Audit ……………………………………………….13
vii
2.3 Internal audit functions and key stakeholders in the public sector…………………………..1
2.3.1 Internal audit functions and senior management…………………………………………18
2.3.2 Internal audit functions and external audit ………………………………………………..19
2.3.3 Internal audit functions and audit committee……………………………………………...20

2.3.4 The role of internal audit in Value adding for public Enterprises ……………………….21
2.4 Empirical Review on the Value adding role of internal audit functions ………………….22
CHAPTER THREE……………………………………………………………………………...29
METHODOLOGY………………………………………………………………………………29
3. Introduction …………………………………………………………………………………..29
3.1 Research Design……………………………………………………………………………...29

.3.2 Study Area……………………………………………………………………………..........29

3.3 Study population…………………………………………………………………………….30
3.4 Sampling method………………………………………………………………………….....30
3.5 Sample size………………………………………………………………………………….30
3.6 Data Types and Sources……………………………………………………………………..31
3.6.1 Primary data……………………………………………………………………………......31
3.6.2 Secondary source of data…………………………………………………………………..31
3.7 Data collection and instruments ……………………………………………………………32
3.7.1 Questionnaire………………………………………………………………………………32
3.7.2 Interview ………………………………………………………………………………....32
3.8 Data analysis………………………………………………………………………………...32
3.9 Scope of the Study…………………………………………………………………………32
3.10. Limitation of the Study……………………………………………………………………33
CHAPTER FOUR……………………………………………………………………………….34
4. DATA ANALYSIS AND DISCUSSION………………………………………………….34
4.1 Response rate………………………………………………………………………………..34
4.2 General background of respondents…………………………………………………………34
4.2.1 Sex of respondents………………………………………………………………………...34
4.2.2 Age of respondents………………………………………………………………………...35
4.2.3 Educational level of respondents…………………………………………………………..35
viii
4.2.4 Work experience of respondents ………………………………………………………….36
4.3 Responses of the Internal Auditors of the TVET Colleges………………………………….36
4.3.1. Competence of the internal auditors of the TVET Colleges……………………………...36
4.3.2 The major challenges facing the internal auditors of the TVET Colleges………………...37
4.3.3 Management support for the internal audit findings ………………………………………37
4.3.4 Relationship and interaction with external auditors………………………………………..37
4.3.5 Incentives to hire /retain internal audit professionals in the TVET Colleges……………...38
4.3.6 Means of communications to the internal audit findings………………………………….38
4.3.7 Management support for the internal audit department………………………………….39
4.3.8 Applications of good governance standards for public Sector in TVET Colleges …..........41
4.4 Perceptions of Senior Accountants of the TVET Colleges ………………………………....43
4.4.1TheValueaddingroleofinternalauditfunctionsinTVETColleges…………………………….43
4.4.2 The information of internal auditing on the internal control system………………...........43
4.4.3 The internal audit department accountability and integrity……………………………44
4.4.4 The Communications of the internal audit functions to the top management……...........44
4.4.5 Internal auditors as advisors and assurance providers of the top management……………45
4.4.6 Internal auditor as advisors and assurance providers to the top mgt …………………...45
4.4.7 Internal audit department provides ethics or guidance to the community………………...45
4.4.8 The effectiveness of the internal audit department……………………………………….45
4.5 Freedom of the internal Auditors of the TVET Colleges …………………………………...46
4.5.1 The use and protection of information acquired by the internal auditors………………....46
4.5.2 Management bodies commitment to add value to the internal audit functions……...........47
4.5.3 To whom the internal audit department should responsible……………………………....48
4.5.4 The contribution of the internal audit functions…………………………………………...48
4.5.5 The major activities of internal auditing…………………………………………………...49
4.5.6 The reliability of the internal audit findings and recommendations……………………….50
4.5.7 Internal auditors’ honesty, diligence and responsibility…………………………….........50
4.5.8 the overall governance of TVET Colleges……………………………………………….51
CHAPTER FIVE:………………………………………………………………………………..59
5. CONCLUSIONS AND RECOMMENDATIONS0…………………………………………..59
ix
5.1 CONCLUSIONS…………………………………………………………………………….59
5.2 RECOMMENDATIONS……………………………………………………………………60
Reference………………………………………………………………………………………....62
Appendix…………………………………………………………………………………………65
Appendix-A- Questionnaire to the internal auditors of the TVET Colleges ……………………66
Appendix-B- Questionnaire to the Management of the TVET Colleges ……………………….68
Appendix-C- Questionnaire to the property officers and procurement department……………..69
Appendix-D- Interview questions to the internal auditors’ of the Colleges ……………….........71

x
Lists of tables Pages

Table 4.1 Sex of respondents…………………………………………………………………….41

Table 4.2 Age of respondents…………………………………………………………………....42

Table 4.3 Educational level of respondents……………………………………………………...42

Table 4.4 Work experience of respondents………………………………………………………43

Table 4.5 .communications of the internal audit functions to the top mgt……………………...51

Table 4.6 internal auditors as advisors &assurance providers…………………………….. ….52

Table 4.7 senior management commitment to the internal audit functions……………………...54

Table 4.8 To whom the internal audit department should responsible…………………………..55

Table 4.9 Contribution of the internal audit functions…………………………………………...56

Table 4.10 Major activities of internal auditing………………………………………….............56

Table 4.11 internal audit functions to enhance good governance………………………………60

xi
Lists of Figures pages

Figure. 4.1 Freedom of internal Auditor ……………………………………………………….53

Figure 4.2 The use and protection of information acquired by the internal auditors…………...54
Figure. 4.3 The reliability of the internal audit findings and recommendations……………… 57

Figure. 4.4 Internal auditors’ honesty, diligence and responsibility …………………………..57

xii
 CHAPTER ONE

1 INTRODUCTION
This chapter presents background of the study, statement of the problem, research questions,
objective of the study, Justification of the study, significance of the study, scope of the study and
limitation of the study.
1.1 Background of the Study
Historically, internal auditing was perceived as being confined to merely ensuring that the
accounting and underlying records of an organization’s transactions were properly maintained,
that the assets management system was in place in order to safeguard the assets and also to see
whether policies and procedures were in place and were duly complied with. With changing
times, the concept of internal auditing has under gone significant changes with regard to its
definition, scope of coverage and approach. In some organizations, the scope of modern internal
auditing has been broadened from financial issues to include value for money, evaluation of risk,
managerial effectiveness and governance processes (Idris & Wan, 2012).

Perhaps one of the best ways for practitioners to gauge their value, then, is through the lens of
these stakeholders — particularly those tasked with organizational management and oversight.
Seeing how internal audit is perceived by its primary clients provides a unique window on what
the profession means to the organization and how its services are viewed.

Value adding role of Internal Audit functions

Since the enterprise wide failings that contributed to the 2007–2008 financial crisis, the task for
many internal auditors and their stakeholders has been to redefine the value of internal audit to
take account of a growing holistic approach to risk management. Spanning the entire
organization during the course of its work, prying into every operational business area and
process, internal audit is ideally placed for that role. Not only is it much more knowledgeable
about the business than the external auditor, internal audit’s uniquely independent status enables
it to take an in-depth but objective view of how well the company is performing.

“It’s a challenging job,” says Dittmeier, who also serves on the audit committees for Italy-based
multinationals Autogrill and Italmobiliare. Many corporate governance functions — risk,
compliance, and so on contribute to this process by explaining the role they play in managing
risk and control within the overall business. Internal audit’s unique contribution is to show them
how risk management and internal control systems provide adequate governance across the key
business processes. In that sense, the responsibilities of internal audit and the audit committee are
closely aligned, putting internal audit in the position of the “right hand man” to the chair of the
audit committee, Dittmeier (2010).

Joel Dobbs, CEO of Compass Talent Management Group, says that “It was very inefficient,” he
says, “and we were particularly concerned with the amount of money we were spending,
especially on telephones.” Internal audit identified several opportunities to cut costs by
untangling the mess of contracts that the different businesses had brought with them into the new
venture.

Melvyn Neate(2000), an independent audit committee member at the U.K.’s Office of Rail
Regulation and former head of audit at a major U.K. government department, says internal audit
can add a lot of value by becoming deeply involved in organizational change projects. Some
heads of audit worry that providing such consulting activities compromises the function’s
independence.

Many nonexecutive directors share Neate’s(2000) view, not least because there are big
challenges on the horizon — some of which threaten to undermine the value of internal audit
can provide. Generally, though internal audit was considered for years as a simple
administrative procedure of checking documents, counting assets, and reporting on past events to
various types of management, now a days, several factors such as democracy have led to a quiet
revolution in internal audit. Democracy requires government to be accountable in its use of
public money and in providing effective, efficient, and economical service delivery. Ever larger
and more complex systems require greater competencies, thus internal audit has had to become
ever more professional. Sheer size also brings with it the need to assess risk, deploying scarce
resources in the most logical manner to address those risks. Technological advances have made it
possible to track and analyze more data much faster. An informed world that keeps turning ever
faster makes it essential for governments to be well informed by internal audit about the risks
and improvements in public finance management and service delivery ( Nordin &Gansberghe,
2005). Hence, internal audit activities provide assurance on the effectiveness of public sector
entities’ internal control environment and may identify opportunities for performance
improvement (Asare, 2009).

Internal audit in Ethiopia had its early legislative root in the Constitution of 1923 which
authorized the establishment of an “Audit Commission” (Articles 34); and the Audit
Commission itself was established much later by Proclamation 69/1944 to audit the accounts of
the Ministry of Finance. Internal auditing in Ethiopia is operating in all organizations under the
supervision of different bodies, with varying forms and objectives. Moreover, proclamation No.
68/1997 requires that the Federal Democratic Republic of Ethiopia new economic policy be
supported by a modern and reliable audit system in order to ascertain proper implementation
through effective monitoring of administrative, developmental and service rendering institutions
in the public sector (MOFED, 2004). Thus, this study examines the value adding role of internal
auditing in promoting good governance in TVET Colleges , one of the government owned
higher institutions in Ethiopia.
1.2 Statement of the Problem
These days, internal auditors are supposed to evaluate and improve the effectiveness of risk
management, control, and governance processes of various organizations to attain the Value
adding role of Internal audit functions in public sectors . The scope of internal auditors has
widened overtime. Thus, internal auditors are charged with a much broader scope of operation
and are more involved in organizational processes in assuring the internal Audit functions
(MOFED, 2004). In a bid to ensure effective implementation of plans, ascertain economic use of
public resources, value adding role of Internal audit and enhance good governance, proclamation
No.67/1997 requires all public institutions to set up a reliable and effective internal audit system.
Yet, the internal auditors of public Enterprises are far from achieving these ends and are
ineffective to perform the wide scope of operations they are charged with. MOFED (2004) in its
internal audit procedural manual identified a number of bottlenecks that discourage internal
auditors in public sectors from carrying out their value adding roles. By and large public sectors
are among those public organizations which the general audit criticizes for failing to properly
maintain government accounts. Indeed, studies that will look into the internal audit practices
(functions) and the Challenges of internal audit functions in promoting good governance and
fulfilling their value adding role in TVET college to the government budget are few to the
knowledge of the researcher as stated by (Asare,009) that has conducted a study on internal
auditing in the public sector: promoting good governance and performance improvements . Thus,
this study examined Challenges of internal audit functions in promoting good governance and
fulfilling their value adding role in TVET college ,the existing audit work environment, the
auditors’ proficiencies, and the auditors’ professional ethical conducts and the role they played in
Value adding in TVET Colleges one of the public sectors in the country. Furthermore, the
study looks into how internal audit add values and functions in the TVET Colleges and assesses
whether or not the internal audit of the TVET Colleges gets the necessary support it requires to
carry out its functions from the various stakeholders including management bodies, external
audit, and audit committee, and its challenges among others.
Therefore, this study is assumed to be very important for the Challenges of internal audit
functions in promoting good governance and fulfilling their value adding role in TVET colleges
because there is no Prior research conducted in these TVET Colleges and it was trying to
assess how internal audit is sensitive and essential to enhance growth, Role of Internal audit,
Internal audit Functions , Challenges of Internal auditors , Risk management, Perception of
Internal auditors, The researcher selected these TVET Colleges to undertake the study because
firstly, there is a few research conducted by Dessalegn Getie Mihret under the title of Value-
added role of internal audit: case study in Telecommunication but no research conducted in
TVET Colleges in relation to Challenges of internal audit functions in promoting good
governance and fulfilling their value adding role . Secondly, TVET Colleges are one of the
governmental Public sectors in Ethiopia, hence, the researcher was trying to conduct detail
assessment on Challenges of internal audit functions in promoting good governance and
fulfilling their value adding role in TVET colleges.
1.3 Research Questions
The study addresses the following basic research questions:
1. What are the key challenges that affect the Value adding role of internal audit functions in
the TVET Colleges?
2. Does the management body of the TVET Colleges perceive the internal audit function as a
value adding function?
3. To what extent is the internal audit of the TVET Colleges contributing to the value adding
role exerted by the Colleges?
4. Are the Value adding role of Internal Audit standards set for public sectors applied in TVET
Colleges?
1.4 Objectives of the Study
1.4.1 General Objective
The general objective of the study was to examine the challenges of internal audit functions in
promoting good governance and full filling their value adding role in TVET Colleges.
1.4.2 Specific Objectives
The specific objectives that emanated from the general objective are:
 To identify the key problems affecting the Value adding role of internal audit functions in
TVET Colleges.
 To examine whether or not internal audit function is perceived as a value adding function
by the management bodies of TVET Colleges.
 To assess the application of the Value adding role of Internal Audit functions as
standards set in TVET Colleges
1.5 Justification of the Study
In recent years Dessalegn Getie Mihret(2008), under the title of Value-added role of internal
audit: case study in Telecommunication has conducted, however, public sectors in both
government owned and private sectors have experienced many new challenges and demands to
ensure the Value adding role of internal audit functions as the result of a number of factors
that discourage internal auditors in public sectors from carrying out their value adding roles.
To ensure the survival of these organizations, the Value adding role of internal audit function
has increasingly been viewed by regulators, directors of companies and governing members of
many public sector entities world-wide as one of the solutions (indicators of economic growth,
stability and Efficiency. Specifically, the need for ‘Value adding role of internal audit in the
management of corporations and public sector enterprises has focused attention on the internal
audit function. Value adding role of internal audit demands sound financial and operational
control over the activities of an entity Audit Functions . For an effective system of internal
controls to exist well-managed internal audit department is required, whose activities are
strongly supported by the key stakeholders for the internal audit activities to enhance Value
adding role of internal audit (the Audit Committee; management bodies ; the external auditor;
and Internal Audit functions within the organization).
1.6 Significance of the Study
The finding of this study will helps to the stakeholders of TVET Colleges to understand the
Challenges of internal audit functions in promoting good governance and fulfilling their value
adding role in TVET colleges, and audit performance of their Colleges in line with the
proclamations, by-laws, generally accepted auditing standards; internal audit standards and hence
it could be used in setting appropriate audit practices to add value to the Economy. The
researcher believes that this research project will have the following significance. To determine
whether the necessary control measures in place to provide assurance to the various
stakeholders’ as required by IIA and to draw the attention of the management of TVET Colleges
to the short-comings and the way of improving these. Enquiries of this type can help to assess the
extent to which the laws, policies and procedures promulgated regarding Value adding role of
internal audit functions in the public sectors are implemented. Identifying causes related to
implementation of those laws and regulations and creating awareness in this regard can
contribute as an input for legislators in improving those laws policies and procedures too. This
study could be used as an initiation for those who are interested to conduct a detailed and
comprehensive study regarding the Challenges of internal audit functions in promoting good
governance and fulfilling their value adding role in TVET colleges in Ethiopian public sectors .
1.7 Scope of the Study

The study was conducted to assess the challenges of internal audit functions in promoting good
governance and full filling their value adding role in TVET Colleges . The study area was covering
the following three Colleges that were found in Maychew Town which were Maychew Polly
Technique college, Maychew Agricultural College and Maychew Tilahun Yigzaw College . These
TVET Colleges have been chosen for the study for at least two reasons. First, though these TVET
Colleges were expanding in all parameters, Finance ,Machinery and other productive properties ,it
was help to ensure if there is Value adding role of Internal Audit functions practiced as standard set
by the National audit Law . Thus, it is to examine the challenges of internal audit functions in
promoting good governance and full filling their value adding role in TVET Colleges . Second, a
few attempt was made so far to examine the challenges of internal audit functions in promoting
good governance and full filling their value adding role in TVET Colleges. Thus, the study was to
examine challenges of internal audit functions in TVET Colleges.

1.8. Limitation of the Study

Since the legal law applicable based on the internal audit standards, in all courtiers as well as in all the
government offices of Ethiopia is similar, the findings of the law aspect of the study can be taken as
representative. But this research has reported the result of the study of the Value adding role of Internal Audit
and challenges of internal audit functions enhance Value adding role of Internal audit the case of TVET
Colleges ; therefore not be considered representative of the whole the Value adding role and challenges of
internal audit functions for these TVET colleges.
 CHAPTER TWO

REVIEW OF RELATED LITERATURE

This chapter mainly focuses on review of related literatures that has been done in different
countries in the world. The theoretical literatures were incorporated in the introduction and
statement of the problem section of this study. The related literatures were collected in the area
of the value adding role of internal audit function to promote good governance in the public
sector.
Theoretical Review Literature
2 Value Adding Role of Internal audit Functions
The Conceptual frame work of "value adding " can vary considerably from one audit department
to the next. For many practitioners, this phrase describes audit work that helps management
improve the business, rather than assignments that simply verify compliance with policies and
procedures. For others, the opposite meaning may apply, for example, asking a wise internal
auditor to describe his department's innovative, value-adding audit practices. Rather than
discussing his own department, the auditor helped to broaden my understanding of adding value
by saying, "Remember what adds the most value in a country where, for instance, corruption is
prevalent, is compliance auditing." ( IIA ).
The type of work or services that constitute value-added practice, then, is largely situation
specific. What adds the most value for one organization, or even one area within an organization,
might be a waste of resources somewhere else. Hence, the influence of individual circumstances
gives rise to the question, "How can auditors identify the practices that will add the most value
given their own specific situation?" An obvious answer is, "Ask your stakeholders." Many
auditors seem to have taken this approach, as evidenced by a recent survey conducted by The
Institute of Internal Auditors." ( IIA ).
It acknowledges the changing role of internal auditing in organizations, the need for a
comprehensive and adaptable framework, and the ever increasing value that the IAF contributes
to contemporary organizations of differing sizes and types. As late as the beginning of the
twenty-first century, the evolutionary practice of internal auditing resulted in developing internal
audit best practices and adding value to the organization and its stakeholders by understanding
the link between internal audit and organizational goals. Before the enactment of Sarbanes-Oxley
Act of 2002 (SOX), internal audit services were focusing on detection not prevention. Internal
auditors were moving from a confrontational approach to partnering with management and
moving from a controls approach to a risk-based approach. They were also focusing on
consulting services (Roth, 2002).
Chapman and Anderson (2002) argue that the inclusion of assurance and consulting services in
the new definition of internal auditing results in internal auditing becoming a proactive,
consumer focused activity concerned with the important issues of control, risk management, and
governance. The definition specifically states the IAF is designed to add value and improve an
organization’s operations (The IIA, 2002).
The IIA standards indicate examples of assurance engagements as financial, performance,
compliance, system security, and diligence audits. Examples of consulting activities include
conducting internal control training, providing advice to management about the control concerns
in new systems, drafting policies, and participating in quality teams. In addition, assurance
services include financial auditing, performance auditing, and quick response auditing and
consulting services includes assessment services, facilitation services, and remediation services
(Anderson, 2003). These are all value-added activities and contribute to organizational success
and strategic achievement. This was reflected in the revised professional practices framework
which recognized that the IAF needed to support and promote a broad range of value-adding
activities (RGTF, 1999). This also allowed for the recognition of the practice of internal auditing
as evolutionary in the competitive marketplace (Krogstad et al., 1999). More focused discussion
of the factors that significantly impact the future of the IAF. Regulations Prior to the need for
compliance with the requirements of the SOX in the USA and similar laws in other countries, the
emphasis of the IAF in the late 1990s was more a consultative partner with management (Roth
and Espersen, 2003). Internal auditors also performed reviews of controls over operational
systems. In responding to regulatory and technological change factors, organizations are
evolving in their need or different types of internal audit involvement. The SOX (2002)
legislation in the USA resulted in extensive regulatory requirements for a more effective and
better documented system of internal controls over financial reporting in publicly listed
companies. The IAF is in an advantageous position to help organizations comply with these
requirements and is being called upon by companies to do much of the work in documenting and
testing key internal controls over financial reporting. The new regulatory requirements have
increased the IAF’s participation in the development of control documentation and compliance
auditing over financial reporting that was often left in the past to external auditors. SOX (2002)
legislation in the USA required the creation of the Public Accounting Oversight Board in 2004
(PCAOB, 2004). PCAOB was created to reform the auditing of internal control systems and
financial reporting systems. The major objectives of the PCAOB are to enhance reliable financial
reporting and to restore investor confidence after the business scandals and accounting failures of
early 2000s. Faced with the regulatory requirements of SOX (2002), many organizations turned
to their IAFs for help. Internal auditors involvement was primarily compliance work surrounding
the adequacy of key controls to aid in the increased reporting and governance requirements for
publicly held companies also influential were the changes in governance requirements that
various stock exchanges implemented (Gray,2004). Although SOX work primary emphasized
control compliance, it also required internal auditors to provide consulting activities such as
control system design. the requirements of SOX (2002) and the PCAOB (2004).
Although the resulting involvement in responding to regulatory requirements is still deemed
value-added work, it is a different trend than was evolving before the business scandals at the
beginning of the century in such areas as governance and risk assessment. An outcome of the
current regulatory climate in the USA is that many IAF resources are spent on SOX compliance
assurance work. A survey of audit managers undertaken in the third quarter of 2005 indicated
that SOX (2002) first year compliance efforts utilized 50 percent or more of internal audit
(PwC,2006).
In the resource constrained paradigm that the IAF operates, this emphasis means that resources
must be diverted from operational audits and consulting activities to increase SOX assurance
services. This is a challenging resource allocation problem for the IAF, where strong leadership
and analytical skills as well as the ability to manage projects more efficiently and effectively are
required. Also needed are effective communication and negotiation skills to interact with various
stakeholders. When diverting resources, leaders of the IAF must be certain that they have a
thorough understanding of how their work contributes value and links to strategy execution and
achievement.
The assurance work emphasis necessitated by regulatory requirements could also result in a
negative reputation effect. For example, IAF stakeholders may develop a negative perception
that is reverting back to the stereotypes of compliance duties in earlier periods. Gray (2004)
argues that the image of internal auditors may be regressing to that of “police” as they identify
negative findings in their assessment and tests of internal controls. This is a serious reputation
issue that the IAF must address. Internal auditors must understand when this is happening and
neutralize or eliminate such negative perceptions if they are to be effective in their assurance and
consulting activities, relationship with key stakeholders, and in their role as supporter of
organizational success. Ignoring such perceptions can result in reduced effectiveness of the IAF
in its assurance and consulting activities and with stakeholders.
Finally, an outcome of the expanding regulatory requirements is that internal auditors work
closely with internal management and external auditors. Critics question whether this might
damage the objectivity of the IAF (Krell, 2005).
Since independence and objectivity are the cornerstones of the definition of internal auditing,
there is a need for development of holistic models in which the IAF can maintain its objectivity
and independence despite the close working relationships with internal management and external
auditors. To do so may require internal auditors to use effective interpersonal skills such as
relationship management and team building, concepts that are widely researched and discussed
in management science.
Risk assessment ,A recent survey shows that regulatory requirements diverted internal audit
resources from other important internal audit activities such as risk-based audits to assurance
work (PwC, 2005A). Failure to address key strategic and operational risks as well as compliance
risk in an annual audit program undermines the effectiveness of the IAF.
2.1 The Role of Government Auditing
Government auditing is a cornerstone of good public sector governance. By providing unbiased,
objective assessments of whether public resources are responsibly and effectively managed to
achieve intended results, auditors help government organizations achieve accountability and
integrity, improve operations, and instill confidence among citizens and stakeholders. The
government auditor’s role supports the governance responsibilities of oversight, insight, and
foresight. Oversight addresses whether government entities are doing what they are supposed to
do and serves to detect and discourage public corruption. Insight assists decision-makers by
providing an independent assessment of government programs, policies, operations, and results.
Foresight identifies trends and emerging challenges. Auditors use tools such as financial audits,
performance audits, and investigation and advisory services to fulfill each of these roles (IIA,
2012).
Because public sector auditing is the key to good public governance, it is crucial that it maintain
the right resources for the right amount of time with an appropriately broad mandate to achieve
the organization’s governance objectives. The public sector audit activity’s mandate should be
sufficiently broad to enable it to respond to the full scope of the entity’s activities. Although
auditors may be able to add value to any segment of the organization for which they can provide
independent, objective assurance at a minimum, every public sector entity requires some form of
independent audit activity that has authority to evaluate the full range of public sector activities.
And as an essential element of a strong public sector governance structure, government auditing
supports the governance roles of oversight, insight, and foresight. Because government’s success
is measured primarily by its ability to deliver services successfully and carry out programs in an
equitable and appropriate manner, government audit activities should have the authority and the
competency to evaluate financial and program integrity, effectiveness, and efficiency. Moreover,
auditors must also protect the core values of the government, as it serves all citizens.
2.2 The Roles and Importance of Internal Audit
The business world is becoming increasingly complex due to new, evolving, and emerging risks.
Organizations are giving risk management more consideration, but implementing an effective
risk management program takes time and discipline. Internal auditors are finding they can play
important roles in risk management, but there are many roles that internal audit activities are
either not ready to pursue or are not proactive in pursuing (IIARF, 2011).

In the context of the globalization of business operations and the increasing use of information
technologies, complexity of business transactions, and business risk, the role of internal audit is
becoming increasingly important and the range of tasks performed by internal auditors is
growing. As a part of the company control system, the internal audit assesses the efficiency,
effectiveness, economy, and fairness of the realization of tasks, provides consulting services to
the enterprise’s management, and promotes the effectiveness of risk management with the aim of
creating added value and enhancing business activities (Ljubisavljević & Jovanović, 2011).
Public sector managers operate in a complex and challenging environment. This, in part, reflects
the evolving demands and expectations of the community, government and the Parliament.
Internal audit is an important element of the range of resources and mechanisms available to
public sector managers to assist them to meet their responsibilities within this environment
(ANAO, 2012).

Effective internal oversight and monitoring are crucial to good governance and effective Public
Financial Management (PFM). Internal oversight includes the internal audit function that must
be effective and should comply with generally accepted auditing standards with regards to
practice and approach. The focus of internal auditing is to determine whether public funds have
been spent for the purposes for which they were appropriated and thereby promoting
accountability. Internal audit undertakes reviews of individual systems and processes and
consequently makes recommendations to heads of public sector entities on how internal controls
could be improved. An internal audit function is an essential part of any public expenditure
management system and should ensure that public spending is within budgetary provisions;
disbursements comply with specified procedures, provides for the timely reconciliation
of accounts and effective systems for managing and accounting for physical and financial assets
(Commonwealth Secretariat, 2005).

According to Nordin & Gansberghe (2005), Management must recognize the value added role of
internal audit and contribute towards its effectiveness, and that as internal auditing in the public
sector assumes a status of professional practice, management would benefit from its
recommendations in improving its decision-making and thus would be playing a more proactive
and foresight role.
Moreover, Ljubisavljević, & Jovanović (2011), described that the financial and corporate
strategy of a company is underpinned by effective internal systems in which the internal audit
has an important role, raising the reliability of the internal control system, improving the process
of risk management, and, above all, satisfying the needs of internal users. The internal audit also
supports and enhances the system of responsibility that the executive directors and employees
have towards the owners and other stakeholders. The Internal Audit Department provides a
reliable, objective, and impartial service to the management, board of directors, and audit
committee, while stakeholders are interested in return on investments, sustainable growth, strong
leadership, and reliable reporting on the financial performance and business practices of a
company. Proper understanding of the role and importance of the internal audit is one of the
preconditions for successful strategy implementation and achievement of company goals.
The professional guidance of the Institute of Internal Auditors (IIA), also states that an effective
public sector audit activity strengthens governance by materially increasing citizens’ ability to
hold their government accountable. Auditors perform an especially important function in those
aspects of governance that are crucial in the public sector for promoting credibility, equity, and
appropriate behavior of government officials, while reducing the risk of public corruption. There
are several current forces that will necessitate further development of the profession such as risk
management, governance, e-business, privacy concerns (what kind of information should the
state make public and when), technology, environmental, health and safety, fraud/money
laundering, outsourcing, co-sourcing, etc.
Therefore, it is crucial that government audit activities are configured appropriately and have a
broad mandate to achieve these objectives. The audit activity must be empowered to act with
integrity and produce reliable services, although the specific means by which auditors achieve
these goals vary.
IIA defines internal auditing as 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. 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. The analysis assesses whether
risk management identifies the risks and puts controls in place to manage public funds in an
effective and efficient manner. Internal auditing works with those charged with governance,
such as, audit committee, senior management, and external auditors, in ensuring that appropriate
systems of internal control are designed and implemented. As such, internal auditing can provide
assistance regarding accomplishment of goals and objectives, strengthening controls, and
improving the efficiency and effectiveness of operations and compliance with authorities
(INTOSAI, 2010).
Internal auditing is performed in diverse environments and within organizations that vary in
purpose, size, and structure. Internal auditing has become a factor of the new accountability and
control era. The manner in which public sector entities maintain internal control and how they
are held accountable has evolved to require more transparency and more accountability from
these organizations that spend investor or taxpayer funds. This trend has significantly impacted
how management implements, monitors, and reports on internal control. The role of internal
auditing has evolved from an administrative procedure with a focus on compliance, to an
important element of good governance. In many cases the existence of internal auditing is
mandatory (INTOSAI, 2010).
As is true for all internal auditors, public sector internal auditors are called upon to assist
organizations in improving their operations. The public sector internal audit function is an
element of a strong public sector governance foundation. Most public sector internal auditors
also play a role in their entity’s accountability to the public as part of the check-and-balance
process. The diverse nature of the public sector places increasing importance and value on a
common understanding of independence as it is key to any auditor’s credibility.
Internal auditors owe a responsibility to the management and the board, providing them with
information about the adequacy and effectiveness of the sector’s system of internal control and
the quality of performance. The internal auditor ensures adherence to all financial, personnel,
lending, data processing, the other administrative policy and procedure as well as the economy,
efficiency and effectiveness with which resources are used. Internal audit serves a major
management control tool are to provide an assurance to management that the financial
information furnished to management to aid decision making is reliable, accurate and based on
reliable records and where otherwise to draw the attention of management to deficiencies in the
organization or system of internal control and to highlight areas of management practices
requiring corrective actions (Angus and Mohammed, 2011).
Internal auditors need to have both to carry out their responsibilities and add value to their
organizations in terms of reputation, effectiveness, efficiency, and compliance with laws,
regulations, policies and procedures. To be credible or believable they must be knowledgeable,
trustworthy, and ethical in conduct. They must adopt a fundamentally right way to behave based
on their individual set of personal values (IIARF, 2010).
In addition to that many internal auditors are playing various risk management roles, so clearly
management is not an impediment to internal audit involvement in risk management. However,
the percentage of internal auditors involved is not as high as might be expected, indicating that
management may not be aggressively pushing for internal auditing to play a more prominent role
in risk management. This may be due to concerns about what recent corporate governance
developments have raised the profile of risk management within organizations. While the prime
responsibility for risk management lies with the directors and senior management, internal
auditors are also seen as key contributors as consultants and assurance providers on risk
management processes and systems (IIARF, 2011).
2.3 Internal audit functions and key stakeholders in the public sector
To achieve the quality of governance, the company must focus on all cornerstones of good
governance and in particular the internal audit function. It assesses the commitment to the ethics
of the organization and its goals, programs and activities. It is also an important source to other
cornerstones such as the external audit, the Audit Committee, and senior management. The
internal audit function is to control and maintain the quality of good governance. The elements of
good governance include the audit committee, external auditor, internal audit, and the senior
management (Noura, et al, 2012).
The internal audit activity should identify all relevant stakeholders and their respective interests
in the work of or support from the internal audit activity and should solicit feedback from each of
these stakeholders as appropriate (IPPF – Practice guide, 2010). Because in today’s business
environment, the internal audit function has become a major support function for senior
management, the external auditors, the audit committee and other key stakeholders. When
properly designed and implemented, the internal audit function can play a key role in promoting
and supporting effective organizational good governance.
The elements of good governance include the audit committee, external auditor, internal audit,
and the senior management (Noura, et al, 2012). In addition, other parties can be included, such
as shareholders and professional organizations and other stakeholders (Staciokas & Rupsys,
2005). To secure the operations of governance of a strong company, there must be cooperation
between the various components of the system of governance, internal auditors, executive
management, financial management, board of directors, shareholders and external auditors
(ECIIA, 2005).
2.3.1 Internal audit functions and senior management
The relationship between internal audit and senior management, by investigating qualitatively
their expectations and perceptions with regard to each other, the acceptance and appreciation of
internal audit within the company is strongly dependent on the support they get from senior
management, reflected by their input for the internal audit planning during the year, their follow-
up on the outcomes of the internal audit work and their support for an extension of the internal
audit function. A professional internal audit activity will supplement senior management’s
actions, by providing independent and objective assurance on the effectiveness of the
organisation’s governance processes, how well it manages all kinds of risks, and whether internal
control processes are operating, as required, to manage risks to an acceptable level (Sarens & De
Beelde, 2006).
Better practice internal audit functions will interact on a regular basis with members of the senior
management team, and through the delivery of practical, business-focused and useful reports and
advice, will build a relationship that is based on cooperation, collaboration and mutual respect.
Because one measure of the effectiveness of internal audit is the extent to which managers seek
out internal audit to assist them in managing their business (ANAO, 2012).
The internal audit function is in a good position to help senior management of public institutions
to identify risks, suggest risk management strategies and, ultimately, provide assurance that the
risks are being appropriately managed. Thus, the internal auditing function evaluates the
effectiveness of public institutions in achieving agreed objectives and thereby promoting strong
governance and accountability regime. Internal audit function also applies professional skills
through the evaluation of the policies, procedures and operations that management put in place to
ensure the achievement of the organisation’s objectives. The recommendations made by internal
audit for improvement helps management in public sector entities to improve their risk
management, control and governance processes (Asare, 2009).
2.3.2 Internal audit functions and external audit
The role of internal audit is both internal and independent. Therefore, a solid and constructive
relationship with executive management must exist and is critical for an effective internal audit
activity. An administrative reporting line to the chief executive officer helps to reinforce the
organizational status of internal audit, to include the chief audit executive in important
information sharing sessions for executive management, to support its unrestricted access to
staff, information and documentation and to foster the organizational independence of internal
audit. A balanced relationship – neither too hostile, nor too friendly but based on mutual
confidence – is in the interest of the organisation. Both executive management and the board
have a responsibility in steering this process (ECIIA, 2005).
According to ANAO, (2012), establishing a professional working relationship between internal
audit and the external auditor should deliver benefits to both parties. It is important that internal
audit seek input from the external auditor in developing the internal audit strategy and internal
audit work plan. Internal and external audit consult with each other during the planning phase of
individual audits that address the key financial and business systems underpinning the entity’s
financial statements. In order for the external auditor to use specific work of the internal auditor,
the external auditor is required to evaluate the work of internal audit to determine its adequacy
for external audit purposes.

Internal audit will often be responsible for liaising with external audit on behalf of the entity and
be tasked with coordinating external audit activity in an entity. This role can be a useful way for
internal audit to be aware of planned and actual external audit coverage, and to assist in
facilitating external audit’s need for access to individuals and records to enable them to meet
their own audit responsibilities. A constructive relationship between external audit and internal
audit can also assist in the conduct of external audits, particularly in encouraging appropriate
involvement by relevant senior managers of the entity. Internal audit may have a role in assisting
the Audit Committee to assess the service provided by external audit. Such a role can only be
fulfilled when there is open, high-quality interaction between internal and external audit. Better
practice is to establish regular meetings between internal and external audit to allow for routine
exchange of information (ANAO, 2012).

Professionally, internal auditors strive to create an effective function whose results can be relied
upon by the external auditors as evidence of the overall strength of internal financial control. The
detailed background knowledge which internal audit has of the organisation may be of particular
value in allowing their external counterparts to understand the background and circumstances of
the activity they are reviewing (Idris and Wan, 2012).
In almost every sense the relationship between internal and external audit should not differ
between the public and private sectors. This is because essentially the same standards apply and
the individuals involved in the audit process share a common base of training and experience.
Both internal and external auditors are (or should be) ultimately concerned about the wise and
prudent management of entity resources that have been entrusted to managers on behalf of the
entity’s (Glass, 2005).
 2.3.3 Internal audit functions and audit committee
Today, the audit committee is widely recognized as a senior board committee with front line
governance responsibilities related not merely to financial reporting, but also to the oversight of
continuous disclosure and corporate reporting. Audit Committee is recognized as the cornerstone
of a successful and credible financial reporting system. The role of the Audit Committee is to
lend creditability to the integrity of the internal control and financial reporting system, and to
boost confidence in the company’s financial reporting. The essence to an Audit Committee’s
function is its independence, given that it needs to be made up of entirely non-executive
directors, majority of which are independent, which allows it to carry out its roles effectively.
The Audit Committee has an oversight function over internal controls and risk management, and
serves as a liaison between management and the external and internal auditors, providing an
authoritative avenue for resolution of divergence in views between the various parties (Idris and
Wan, 2012).
The audit committee can greatly strengthen the independence, integrity, and effectiveness of
public sector audit activities by providing independent oversight of the internal and external
audit work plans and results, assessing audit resource needs, and mediating the auditors’
relationship with the organization. Audit committees also ensure that audit results are aired and
any recommended improvements or corrective actions are addressed or resolved (IIA, 2012).
As Baltaci and Yilmaz (2006), an audit committee would exist to consult with the chief auditor
regarding the audit results and follow-up with reinforcements. The committee assists in
facilitating communication and audit results between the executive and the chief auditor. Further,
the executive may have special requests from the internal audit to identify pitfalls and
shortcomings in a particular program; and the committee assists in voicing such requests. The
audit committee preferably includes representatives from the senior management, budgetary and
accounting officials, legislative, and the head of internal audit. Members of the committee,
therefore, should be assigned by the legislative body, and at least one member should be
appointed from members of the legislative body.
Audit Committees play an integral role in the governance framework of public sector entities.
Audit Committees assist Chief Executives and Boards to understand whether key controls are
appropriate and operating effectively. In this respect, the relationship between internal audit and
the Audit Committee is crucial and has a number of dimensions. Internal audit being functionally
responsible to the Audit Committee for the conduct of the internal audit program; this places the
committee in the role of being internal audit’s primary client and requires internal audit to have a
sound professional relationship with the committee as a whole and each of its members (ANAO,
2012).
2.3.4 The role of internal audit in Value adding for public Enterprises
The audit function has become an integral part of government financial management and an
instrument for improving performance in the public enterprises. The need for Value adding and
accountability has compelled governments to demonstrate a stronger sense of responsibility in
the use of public funds and efficiency in the delivery of services. Management of national
economies today is more complex and demands greater competency and professionalism from
internal auditors if they are to be able to assist government in ensuring that scarce resources are
deployed more efficiently and to also effectively deal with the associated risks (Asare, 2009).

Internal audit function provides internal consulting service to the management in public sector
institutions and hence the executive arm of government for smooth and efficient functioning and
for reviewing and improving its performance. It also ensures that there are efficient controls and
greater transparency in the decision and policy-making processes of government functionaries
and institutions in delivering services successfully and in carrying out development programs in
an efficient and appropriate manner. Public Sector controls cover all aspects of activities
including financial, managerial and operational policies and are intended to safeguard assets,
ensure the accuracy and reliability of financial information and promote operational efficiency
(Asare, 2009).
To achieve the quality of governance, the company must focus on all cornerstones of corporate
governance and in particular the internal audit function. It assesses the commitment to the ethics
of the organization and its goals, programs and activities. It is also an important source to other
cornerstones such as the external audit, the Audit Committee, and senior management. The
internal audit function is to control and maintain the quality of corporate governance (Noura,
Mohamed Gaber, & Lena, 2012).

The Internal Auditing function has existed for quite a long time in Ethiopia; however, it got legal
recognition in the late 1980s. The internal Auditing function started in the budgetary public
sector as part of internal control. However the latter part of the 1930s witnessed the
establishment of internal Audit function in the Ministry of National Defense, Ministry of
Education, and Ministry of Finance. Internal Auditing in Ethiopia obtained legal recognition for
the first time in 1987 through proclamation No.13/1987. This proclamation empowered Office of
the Auditor General (O.A.G ) to direct the Internal Auditors of Government Office and Public
Enterprises in three aspects that are whether accounting records are properly maintained and
reliable ,whether the assets of the ministries and enterprises are adequately safeguarded and
properly maintained; and whether policies and procedures laid down by top officials
/management are complied with, this implies less attention was given to operational audit as a
service to management(Lema, 2000).

2.4 Empirical Review Prior studies on the Value adding role of internal audit functions

An Empirical research on the positioning of the internal audit in Serbian companies was
conducted on a sample of 214 companies in 13 districts using Survey questionnaires. The survey
was sent to persons employed in accounting, but also to employees responsible for implementing
management and supervision of business activities in the company. Its finding was Internal audit
determines the reliability, and integrity of financial and operational information that comes from
different organizational units, on which appropriate business decisions at all levels of
management are based. Successful implementation of internal audit tasks means that it must be
autonomous, i.e., company management should in no way influence its work, information,
conclusions, and evaluations. In this way the internal audit report becomes a means of
communication between internal audit and management, and an important guideline for the
successful management of the company (Ljubisavljević & Jovanović, 2011).
Alzeban & Sawan (2013) have studied on the role of internal audit function in the public sector
context in Saudi Arabia by focusing on the nature and practice of internal auditing in public
organizations. A qualitative approach was used to gain in-depth understanding of the nature and
characteristics of the IAF in the Saudi public sector, and consequently, interviews were
conducted. Questions were built upon the general objectives of the study, and covered the main
aspects including competence of the internal audit, independence of internal audit, management
support for internal audit, internal audit activities and interaction between audited organisations
and external auditors. A total of 29 face-to-face semi-structured interviews were undertaken with
three groups: 9 internal auditors, 10 general and senior managers in Saudi public sector
organisations, and 10 external auditors.
Interviewees reported that internal audit suffers from a lack of support from top management.
Resistance to the establishment of internal audit has created a negative attitude towards internal
audit and consequently, low levels of support. Several reasons were offered for the perceived
absence of management support. These included: ignorance on the part of top level management
regarding the importance of the internal audit role and lack of attention paid thereto; the
organisational status of internal audit which consequently affected its independence; and general
organisational resistance to the idea of establishing an internal audit function. Moreover, external
auditors also agreed that internal audit did not receive sufficient support from the highest
officials of the organizations this as one of the reasons for the lack of independence (Alzeban &
Sawan, 2013).
A weak relationship was seen to exist between external auditors and audited organisations, and
in particular such a relationship does not exist with internal auditors. Interviewees indicated
several influences in this respect, the first and perhaps the most important being the ingrained
mutually negative attitude towards each other. A second factor with potential to weaken the
relationship is the limited implementation of recommendations made by the external auditor.
Thirdly, the lack of qualified staff working within audited organisations might be a relevant
factor. It pays no attention to a number of related aspects including: the new regulation of
internal audit; the relationship between internal and external auditors, in terms of co-ordination,
reliance on internal audit work by external auditor, sharing working papers, and the need for
frequent meetings; and evaluating the objectivity of the internal audit function, the expertise of
the internal auditors, quality and effectiveness of internal audit work, and the scope of work. The
absence of consideration of these issues is likely to weaken the relationship between the two
audit parties given that external auditors are required to comply with the general audit standard
when performing audit work (Alzeban & Sawan, 2013).
Suyono & Hariyanto (2012) have carried out a study concerned with the relationship between
internal control, internal audit, and organization commitment with good governance: Indonesian
case. The aims of this research were to examine the relationship between internal control,
internal audit, and organization commitment with the Value adding role of Internal Audit
functions . The type of data in this research was primary data that could be collected using
survey method by questionnaires which were distributed to the respondents. The populations of
this research are local government of Central Java province, Indonesia which consists of 35
regions. The respondents include head of local government inspectorate, head of monitoring
division in local government inspectorate, head of internal audit team, and head of region.
Therefore, 35 sets of questionnaires were distributed to respondents. Exogenous variables are the
internal control, internal audit, and organization commitment. Meanwhile, endogenous variables
are good governance. With multiple linier regression analysis, the finding showed that internal
control, internal audit, and organization commitment have positive significant relationship with
the good governance. It means that when local government of Central Java province implements
the internal control, internal audit effectively, and high organization commitment, and therefore
makes the good governance practices increase.

The internal control, the internal audit, & the organization commitment have a positive
significant relationship with the good governance. Because internal control consists of the
organization planning that includes all methods used to safeguard the company assets, to insure
the reliability of information, to support the efficiency and effectiveness of operations, and to
insure the compliance with rules and regulations. Internal audit is an organization function with
the duties to assess and evaluate all activities within the organization. This function is very
important to provide and support all information in managerial decision-making process.
Organization commitment is defined as the individual relative power to identify his/her self into
the organization. Governance has been variously defined as the exercise of authority or control to
manage a country’s affairs and resources (Suyono & Hariyanto, 2012).
Azham, et al, (2011), studied the Internal Audit in the Statutory Bodies and Government-linked
Companies with particular reference to Malaysia using descriptive method of analysis. The study
covers 47 organizations at the federal government level, comprising 27 statutory bodies and 20
government-linked companies. The primary concern of this research project was the internal
audit function in numerous statutory bodies and government-linked companies & the entities
studied had a number of grave deficiencies. To be more exact, there is a significant percentage of
these organizations where the internal audit units or departments are not able to operate
effectively as a result of an acute shortage of staff and the employment of staff lacking in
appropriate skills. In addition, in a majority of these organizations, the internal auditors are still
performing financial management audits. The internal audit function in many federal
organizations studied has a number of serious shortcomings. The two areas that need most urgent
attention are the staff numbers in the audit units or departments, and the competency of the audit
staff. There is a high percentage of these organizations where the internal audit units or
departments are not able to operate effectively as a result of the acute shortage of staff and of
staff lacking in appropriate audit skills.
Brierley, et al, (2001), have conducted a study using interview and direct observation research
methods to explain the failure to establish internal audit in the Sudanese public sector. Internal
audit does take place, primarily in the more prosperous North and East of the Sudan, then the
picture built up from interviews and observation is that the typical internal audit function fails to
meet any one of the five core standards of the IIA in terms of independence, professional
presidency, and scope of work, performance and management. The typical internal audit
department is engaged in largely the routine authorization of transactions, is staffed by
inexperienced and untrained personnel, and has insufficient credibility, independence or
authority to act in the manner conventionally ascribed to the internal audit function in the public
sector.
These all but intractable contextual factors have been translated into a number of specific
problems highlighted in this paper. These include low salary levels, low levels of training and
expertise, and the low esteem of staff. They also include a very limited technological
infrastructure and lack of co-operation and co-ordination between the various parties responsible
for internal audit within a highly diversified public sector. At the university level there is scope
both for increasing and updating the extent of curriculum content within accounting degrees
devoted to public sector accounting and auditing. From a recruitment perspective, the
recruitment of graduates who have specialized in accounting might be considered. This may
widen the pool of talent available to internal auditing departments and may indeed be an
essential step if there is to be any significant change in the internal audit role beyond traditional
financial audit. However, any improvement in training methods without any improvement in pay
levels is unlikely to have the desired effect when the pay of accountants and auditors in the
private sector is significantly higher than the public sector (Brierley et al, 2001).
Asare (2009) has conducted a study on internal auditing in the public sector: promoting good
governance and performance improvement. His study has shown that, a well configured internal
audit function can play a vital role in the governance and accountability process of public sector
institutions. Governing bodies and senior management in the public sector need the services
of internal audit to be effective and efficient. At the same time the legitimacy of internal audit
activity and its mission should be understood and supported by senior management of
government entities to enhance its effectiveness in promoting good public sector governance,
control and risk management systems. Internal audit has now found itself in the corporate
spotlight and it is no longer seen as a less important financial function and a nursery school for
careers in finance. A career in internal auditing has assumed a strategic significance and requires
exposure to thorough organisational processes and through interaction with executive
management. One needs to go through a broader base of experiences both technical and
behavioral to be effective in this function especially in the public sector where controls are still
weak and public expectations are enormous.
Furthermore, audit committees should maintain direct oversight on the internal audit function in
order to ensure that management is addressing issues on control and risk management raised.
However, most public entities have not recognized its importance and effectiveness in the
control, risk management and governance processes. Audit committees could play key role in
helping audit to carry out its legal and fiduciary responsibilities, and contribute towards the
integrity of the government’s financial information, system of internal control and legal and
ethical conduct of management and employees.
Davies (2008) has investigated a study on the effective working relationship between audit
committees and the internal audit function in the public sector and specifically within Welsh
local government. The objective of the study was to gather opinions of the heads of internal
audit, audit team members and audit committee chairs to identify areas that could be used either
as an example good practice or as items for debate amongst the heads of internal audit within
Wales. These opinions was focused on whether the audit committees recognize the importance of
having the appropriate skills and understanding to be able to access, utilize and review the
performance of both the head of internal audit and the internal audit function as part of the
corporate governance process. An additional feature was that discovered whether the role and
responsibilities of the audit committee are reflected in a sound working relationship between the
component parts that together form the cornerstone of corporate governance within local
government.
As the survey is based on qualitative rather than quantitative responses a questionnaire
containing direct questions for identifying the existence of an audit committee and its
membership and statements for agreement or disagreement formed. The objective was to gather
the opinions of the heads of internal audit on the working relationship that existed between them
and the Audit Committee within the 22 local government authorities.
The working relationship between the audit committee and internal audit will inevitably depend
on individual personalities, authority governance processes and the willingness by all parties
involved taking on board the published guidance on audit committee roles and responsibilities. In
addition when this is reflected in the public sector arena of local government there is always the
political issue to consider. In terms of this survey, the issues identified include a need for
increased knowledge and understanding of the audit and accounting aspects of the authority.
While an acknowledgement of the procedures for assessing performance is essential if the audit
committee is to work effectively. Communication between the audit committee members and the
head of internal audit is important for any working relationship (Davies, 2008).
Badara & Saidin (2012), have carried out a study concerned with improving the existing
functions of internal audit at organizational level. This study depicted the importance of having
and improving the existing functions of internal audit, it is a conceptual literature review. It’s
important to contribute in the literature on the improvement of the existing internal audit
functions so as to add value to organizations. Therefore, the objective of this study was to
highlight on improving the existing functions of internal audit in order to provide the expected
service required within the organization and thereby improve the standard of such organizations.
Internal auditor is an employee within an organization's internal audit department who is
assigned with the responsibility of performing internal auditing functions. Internal audit can be
seen as independent appraisal established within the organization with the aim of reviewing the
effectiveness and efficiency of the activities of an organization, ensuring compliance with
established regulations, evaluation of risk management and internal controls system of the
organization. Therefore, the internal audit is required to put more efforts towards improving
organizational operations (Badara & Saidin, 2012).
In this vein, the functions to be performed by the internal auditor within an organization need to
be taken into consideration in order to assist such organization in their objective achievement and
to provide objective feedback to management and continue to show that they can add value to
their organization. This shows internal audit functions are so wider to the extent that it
contributes to the achievement of organizational objectives. Therefore, more research is required
to be conducted on internal audit functions so as to contribute toward internal audit functions and
also to contribute in internal auditing literature (Badara & Saidin, 2012).
Generally, these concise reviews of the empirical studies showed that strong working
relationship between key stakeholders: the senior management, the external auditor, and the audit
committee as well as the internal audit functions play an important role in the Value adding role
of Internal Audit functions in , the governance and operation of an Public Enterprises. When
effectively implemented, operated, and managed, internal auditing is an important element in
helping an organization to achieve its objectives and to promote good governance in the public
sector. To identify key performance measures for activities that stakeholders believe add value
and improve the organization’s operations based on the key stakeholders. Thus, this study was
to identify the challenges of internal audit functions in promoting good governance and full
filling their value adding role in TVET Colleges.
Justification of the Study
Prior Research in the Researcher’s Findings by the Researcher
Value adding role of Name,
Internal Audit Methodology
Functions used, Sample
population, Types
of Data
Enterprise

1. /Internal Audit Internal Audit determines the reliability &

Function in Serbia integrity of Financial & operational information

2. /Role of Internal Alzaban & Internal auditor suffers from lack of support
Audit Function in Sawan, Interview from top mgt
Saudi Arabia & Questionnaire,
 Qualitative

3. R/p b/n Internal Suyon&Harianto, Internal control, Internal Audit and

control, Internal Primary data organizational commitment have positive r/p
Audit ,organizational survey, 35 regions with the value adding role of internal audit
commitment on Value in Java , functions .
adding role of the Indonesia public
Internal Audit functions enterprises,
Qualitative
4. Failure to Internal Beriraly, Internal Audit functions fails to meet the five
Audit functions in interview core standards of IlA-
Sudan public -direct proffesionalpresidence,scopeofwork’,Independen
enterprises observation, & ce,performance &mgt
Qualitative

5. New Delhi. (2006). Seminar paper The paper reveals that internal audit in Union
Seminar on improving Minis-tries and Departments is a nebulous area,
the effectiveness of which in today’s economic scenario requires
internal audit in immediate attention for greater functional clarity
government of India.

6. Empirical The study reveals that the existing internal audit

research
function in the public sector has less satisfactory
Belay (2007).
A Study on Effective involvement to assess the effectiveness of
Implementation of governance structure due to lack of resources,
Internal Audit Function poor leadership for internal audit function,
to Pro-mote Good absence of appropriate frame work to measure
Governance in the internal audit function performance-
Public Sector

CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3. Introduction
In this chapter, the methods used in data collection, analysis and presentation were presented as
follows . It therefore provides this a description of research design, area of study, population ,
sample size, data collection, Validity of the instruments, and data analysis.
3.1 Research Design
This research was carried out based on a descriptive study supported by Case study protocol
which was evaluating Challenges of internal audit functions in promoting good governance
and fulfilling their value adding role in TVET colleges. The descriptive study method which
was supported by case study protocol was selected for this investigation because it is appropriate
for this research topic helps to provide a richer, more detail understanding of internal audit
practices.. This part of the study was gathered the evidence by semi-structured interviews with
chief internal auditors and accounting and finance staff, by obtaining examples of internal audit
reports, policy documents in evaluation and Colleges Audit manuals . The researcher was also
undertake this study using cross-sectional research design in nature and which helps in
collecting data from a section of the study respondents.. This research design was suitable in the
sense that the information collected was involved in analyzing Challenges of internal audit
functions in promoting good governance and fulfilling their value adding role in TVET colleges
in these Public sectors . The study focused on qualitative research methodologies.
3.2 Study Area

The area of the study was Maychew Town particularly in TVET Colleges Located in southern
Zone of Tigray. The colleges were named as Maychew Polly Technique college, Maychew
Agricultural College, and Maychew Tilahun Yigzaw TVET Colleges This study was considered
the Internal Audit department, Finance officers , property Officers ,procurement ,Management
bodies and Budget officers was selected from the colleges who were assumed to have detailed
information about the study and be the role players in Internal audit related study information
in these TVET Colleges .

3.3 Study population

The researcher obtained information from employees of three TVET Colleges especially from
employees of these TVET colleges mainly from Internal Audit department, Finance , property
Officers ,procurement, Budget officers, pay masters and Managements. The researcher was
then involving all these categories in the study because the researcher assumed as if they have
all the study information. The total number of the study population was (70) people. The study
population was therefore included respondents from different departments from each colleges
that was selected during the study process in the study area. And since the population was less
than 100, significantly better results can be obtained through the entire study population of the
70 respondents The units of analysis is employees of three TVET Colleges who are working in
finance departments, audit departments and Managements

3.4 Sampling Method

The study used purposive sampling during the process of data collection from the study
respondents. The researcher perceived using purposive sampling techniques was appropriate
and this method was used to select all the study respondents.

3.5 Sample size

The total population were all employees of the three TVET college out of which 70
respondents were selected from procurement, budget officers ,management bodies , finance
and property officers and Internal audit departments of the three TVET Colleges using
purposive sampling techniques.

The table looks like as follows:

Departments College’s Name Total

 Poly Technique Agricultural Tilahun
college Yigzaw
College
TVET
College

Internal auditors 1 1 1 3

Finance officers 10 7 5 22

Property officers and pay 14 10 6 29

masters

Budget officers 3 2 1 6

Managements 5 3 2 10

Total 33 22 15 70

3.6 Data Types and Sources

A qualitative research was used to conduct with the goal of the challenges of internal audit
functions in promoting good governance and full filling their value adding role in TVET
Colleges . It was obvious that the method of data collection was tremendously dependent on the
character, type and nature of the problem, Internal Audit systems as well as the financial records
of these Colleges. To have enough information as much as possible and to address all the
research questions, primary and secondary source of data was used.

3.6.1 Primary data

Primary data was obtained through detailed questionnaires and through interviews. The
questionnaires was designed based on the objectives of the study which was to assess the
challenges of internal audit functions in promoting good governance and full filling their value
adding role in TVET Colleges . The questionnaires was carefully developed to get the opinion
and understanding of respondents regarding the challenges of internal audit functions in
promoting good governance and full filling their value adding role in TVET Colleges The
questionnaires was sent to the selected respondents of TVET Colleges who were directly
involved in the asset management process. Besides, interviews was conducted with the Internal
auditors ,Finance officers, Property officers, pay masters, Budget officers , and Managements bodies.

3.6.2 Secondary source of data

 Secondary sources of data involved in this research paper by referring the most recent
information from Internal audit reports and internal audit manuals, of TVET Colleges.
3.7 Data collection and instruments
3.7.1 Questionnaire
The questionnaire tool was close and open ended in nature and this were self administered
where the researcher fill the questionnaire in the study field as per respondents’ responses. The
tool was used to collect information from the non supervisors. The questionnaire was tested
using pilot test on twenty respondents .The questionnaire method of data collection was used
because of being cheap and gives freedom to respondents to express their feeling compared to
other methods.

3.7.2 Interview
An interview guide was also be drafted with questions that the researcher was asked during an
interview and this were open ended. The researcher personally recorded the provided responses
as per the study respondents during the process of carrying out an interview and the targeted
respondents was randomly selected out of the total of 70 respondents .

3.8 Data analysis

Data was coded in order to check for accuracy, completeness, consistency, uniformity and
presentation of data involved use of tables which was generated from the questions that were
relevant to the study variables.

The coded data was then also analyzed both quantitatively and qualitatively using SPSS soft
ware program . Quantitative data were grouped and statistical description such as tables showing
frequencies and percentages and pie- charts as well as graphs for better interpretation. However,
qualitative data were analyzed in a way of identifying the responses from respondents responses.

CHAPTER FOUR
4. DATA ANALYSIS AND DISCUSSION
This chapter analyzes and interprets the data collected from secondary and primary sources for
the study. It presents the response rate, the general background of the respondents, the result of
the interview and discussion made with respondents , and the response of the senior Accountants,
pay masters, budget officers, the finance heads, facility & property officers, and Management
bodies of the TVET colleges.

4.1 Response rate

Out of the total 70 respondents to whom the questionnaires were distributed, 87% of them
filled the questionnaire properly as per the instructions contained therein and responded, while
13% of them did not responded. Thus, the response rate is 87%. of the total respondents who
responded by filling the questionnaires properly and the remaining 13% was un responded .
4.2 General background of respondents
This section presents the general characteristics of respondents such as sex, age, educational
level, and work experiences.
4.2.1 Sex of respondents
Table 4.1 reveals that 65.6% of the respondents were male and the remaining 34.4% were
female. Therefore, majority of respondents were male. This implies that though male
participation is dominant, female participation is encouraging.
Table 4.1 Sex of respondents
Responses
Frequency Percent ( % )
Item Description
Male 40 65.6
1 Sex of respondents Female 21 34.4
Total 61 100
Source: Questionnaire 2015
4.2.2 Age of respondents
Table 4.2 indicates that the ages of respondents’ ranging from 18 years old to 30 years were
31.1%. , respondents with the age ranging from 31 to 40 years were 47.5% , respondents
within the age range of 41 to 60 years were 19.7% and Only one respondent 1.7% was found to
be above 60 years old. This implies that majorities of respondents were within the age range of
31-40 years old. Thus, relevant information were obtained from these respondents .
Table 4.2 Age of respondents
 Responses
Frequency Percent ( % )
Item Description
18-30 years 19 31.1
31-40 years 29 47.5
2 Age of respondents 41-60 years 12 19.7
Above 60 years 1 1.7
Total 61 100
Source: Questionnaire 2015
4.2.3 Educational level of respondents
Table 4.3 shows the educational background of the respondents. The table reveals that 77 %
respondents were first degree holders, while 3.3% respondents were second degree holders.
While 19.7% of the total respondents were diploma holders. Majority of the respondents were
bachelor degree holders followed by Diploma holders and the remaining second degree holders,.
This implies that educational level of majority respondents were Bachelor degree holders ,Thus,
it is relatively equipped with qualified personnel and relevant information was obtained from
these respondents than other respondents.
Table 4.3 Educational level of respondents
Responses
Frequency Percent ( % )
Item Description
Diploma 12 19.7
Educational Level of Degree 47 77
3
respondents MA. /MSc. 2 3.3
Total 61 100
Source: Questionnaire 2015

4.2.4 Work experience of respondents

Table 4.4 shows that 18 % of the total respondents had less than 3 years of work
experience.,41% of the total respondents had between 3 to 10 years of work experience,23% of
the total respondents had between 11 to 20 years of work experience,18% of the total
respondents had above 20 years of work experience. This implies that majority work experience
of respondents were between 3-10 years. Of work experience.
Table 4.4 Work experience of respondents
Responses
Description
 Total 61 100
Source: Questionnaire 2015
4.3 Responses of the Internal Auditors of the TVET Colleges
In this section the responses of the internal auditors obtained through questionnaire and in-depth
interviews are presented and analyzed based on the competence of the internal audit,
independence of the internal audit, management support for the internal audit department and
findings, internal audit activities and interaction between audited organizations and external
auditors, if internal audit department has sufficient number of staff.
4.3.1. Competence of the internal auditors of the TVET Colleges
In any public sector having enough and qualified man power helps for the successfulness of the
public sector’s objectives within the given time and resource effectively and efficiently. Hence,
respondents were asked whether or not the audit departments of the TVET Colleges have shown
progress in terms of number of qualified staff. All respondents were with the opinion that the
audit departments have not shown any progress in this regard. The auditors expressed that the
efforts exerted to equip the internal audit department of the TVET Colleges are not sufficient,
and thus, the audit departments of the TVET Colleges are lacking qualified staff from time to
time. In addition to that, it is in the open-ended section of the interview that many internal
auditors talk about staff lacking in audit competence as the primary problem or weakness. The
analysis was supported by the extent literature of (Suyono & Hariyanto, 2012). They said that
Governance has been variously defined as the exercise of authority or control to manage a
country’s affairs and resources using qualified man power and technology.
4.3.2 The major challenges facing the internal auditors of the TVET Colleges
The major factors that lead to the emergence of internal auditing are; the extended management
in different business activities, the employment of thousands of people, conducting operations in
many places, falsifications and improperly maintenance of accounting records are among the
problems, and the causes for the growth of an internal auditing in public sectors. Thus,
respondents were asked to identify the major risks that the internal auditors in the TVET
Colleges are facing. Majority of respondents identified lack of expertise as one of the major
risks faced by the internal auditors in the TVET Colleges, while the respondents identified lack
of opportunities for Professional development as a risk.
The analysis was supported by the extent literature such as Alzahan &Sawan, Ljubisavljević, &
Jovanović (2011).They stated that Internal Audit determines the reliability & integrity of
Financial & operational information through evaluation of risk and management effectiveness..
4.3.3 Management support for the internal audit findings
The role of internal audit is both internal and independent. Therefore, a strong and productive
relationship with management bodies must exist and is significant for an effective internal audit
functions. That is why; respondents were conducted how the management bodies of the TVET
Colleges responds to their findings and recommendations. The researcher had also an open
discussion with the respondents in this regard. All respondents had of the opinion that the
management bodies provides positive response to their reports and recommendations, while
none of the respondents were with the opinion that the response from the management bodies
to the findings and recommendations of the internal auditors is negative. The discussion that the
researcher had with the internal auditors of the TVET Colleges revealed that the management
bodies of these colleges generally considered the internal auditors as supportive and important
wing to the ongoing efforts that these colleges has been embarking to ensure good governance.
Supported by the extent Literature of (Alzeban & Sawan, 2013), stated as Internal auditor
suffers from lack of support from top managements.

4.3.4 Relationship and interaction with external auditors

Establishing a professional working relationship between the internal auditor and the external
auditor should deliver benefits to the public organization, because professionally, internal
auditors strive to create an effective function whose results can be relied upon by the external
auditors as evidence of the overall strength of internal financial control. As a result the internal
auditors were asked whether or not there is difference between their findings and the findings
issued by the external auditors . All respondents responded that there is difference between the
internal and external audit findings and recommendations. The discussion that the researcher had
with the internal auditors to solicit(seek) the reason for this difference uncovers that the key
reason for the difference is communication gap between the internal auditors and the external
auditors. This communication gap may create difficulty to accept, take correction actions and
make follow up to the findings and recommendations of internal auditors by the management
bodies .Supported by the extent literature of (Alzeban & Sawan, 2013). They said that, external
auditors also agreed that internal audit did not receive sufficient support from the highest
officials of the organizations this as one of the reasons for the lack of independence .
4.3.5 Incentives to hire /retain internal audit professionals in the TVET Colleges
The internal auditors of these TVET Colleges were approached to identify the incentives that the
colleges provides to retain or hire internal auditors. All respondents had the opinion that these
TVET Colleges provides no incentive either to hire or retain internal auditors of the required
skill and knowledge. Generally, there are only three internal auditors including the internal audit
department director directed by the Finance office of the Town . The fact that these Colleges
are expanding and consuming huge amount of public resource in its endeavor to produce
qualified and competent graduates, three auditors may not suffice to carry out their
responsibilities to the level required. Thus, the TVET colleges should devise mechanisms to
provide the necessary incentives so as to retain and hire internal auditors. (Brierley et al, 2001)
said that any improvement in training methods without any improvement in pay levels is unlikely
to have the desired effect when the pay of accountants and auditors in the private sector is
significantly higher than the public sector.
4.3.6 Means of communications to the internal audit findings
Effective communication is one requirement of proper governance of the public organization, at
the same time it's the key to strengthening the relationship among the internal auditor and
external auditor and the Audit Committee. In this sense, respondents were asked how internal
auditors communicate their findings and recommendations with the management bodies as well
as the community of these TVET Colleges Respondents said that the only means of
communication that they use to confer their findings and recommendations is the audit
conference which basically takes place quarterly or annually.
4.3.7 Management support for the internal audit department
Internal audit functions are supplement to the management’s actions, by providing independent
and objective assurance on the effectiveness of the organization’s good governance processes.
Hence, the study tried to examine the management bodies support for the internal audit
department of the TVET Colleges based on: top management provides the necessary support to
internal audit department and its staff members, top management allocates sufficient fund for
annual training and development of the internal audit staffs members, salary levels are sufficient
to allow the organization to attract and retain auditors with the required professional skills and
qualifications, quality assurance & improvement programs exist, the existence of complete
internal audit manual to guide internal auditors, top management consideration to the internal
audit functions as a value adding service, and top management demands implementation of
corrective actions recommended by internal audit. Thus, respondents were asked to reflect their
perception with regard to the supports that the management provides to them.

As far as the first parameter is concerned, “top management provides the necessary support to
the internal audit department and its staff members”, almost all of the internal auditors of the
TVET Colleges replied that the senior management of these TVET Colleges provides all the
necessary supports to the department. The fact that the top management provides the necessary
support to the internal audit department and its staff members reflects that the internal auditors
are encouraged by the management to contribute to the assurance of good governance in these
TVET Colleges .
The second parameter considered in this line is “does the senior management of the TVET
Colleges allocate sufficient fund for annual training and development of the internal audit staffs
members?” Most of the internal auditors perceived that there was no consistent and sufficient
fund allocated by the top management of the TVET Colleges for annual training and
development of the internal audit staffs members of these TVET colleges The result may
indicate that the management of the Colleges in some years allocates sufficient fund while less
in other times for the audit department of these TVET Colleges .
Based on the third parameter is concerned “the existing number of staff in the audit
department”, the internal auditors were asked whether or not the existing number of internal
auditors is sufficient. All of the internal auditors perceived that the internal audit department has
not sufficiently staffed to handle the wide spectrum of the audit functions they are charged with
in these TVET Colleges . Thus, the internal audit department of these TVET Colleges has only
three internal auditors are for these three TVET Colleges . This indicates the internal audit
department of the TVET Colleges has suffering from lack of expertise. Therefore, this is one of
the major problems for the internal audit functions not to play as the Value adding role internal
audit functions to promote good governance in the TVET Colleges .
The fourth parameter considered in this line is, “whether the internal auditors of these TVET
Colleges have satisfied with what has paid and additional incentives.” All of the respondents
replied that, their salary is paid based on the civil service scale. But, even though they were
working to the whole financial activities to these TVET Colleges with few man powers there
was no additional incentives have taken yet.
As far as the fifth parameter the internal auditors were asked with regard to the existence of
quality assurance and improvement program in these TVET Colleges . All of the internal
auditors were perceived that, quality assurance and improvement program was not available in
these TVET College . Lack of quality assurance and improvement program was certainly
affecting the functions of the internal audit functions. Hence, these Colleges management should
open quality assurance and improvement program in order to help the internal audit functions
and enhance the value adding role of internal audit functions to promote good governance at
these TVET Colleges .
According to the sixth parameter in relation to, “the existence of complete internal audit manual
to guide the internal auditors of these TVET Colleges ,” all of the internal auditors perceived that
complete internal audit manual exists in these TVET Colleges .Thus, having complete internal
audit manual helps to run the internal audit functions at the TVET Colleges. But even though
there is complete manual, because of low professional development and training, there is
inconsistence in the use of the manual.
The seventh parameter conducted in this line is, “internal auditors were asked whether or not
they believe that the top management considers their function as a value adding role .” All of the
internal auditors perceived that the top management indeed considers the internal audit function
as a value adding role . Such a consideration by the top management will have a vast
contribution in encouraging the internal auditors in their endeavor to ensure the value adding role
of internal audit to promote good governance in the TVET Colleges.
As far as the eighth parameter the internal auditors were also asked to rate how the top
management responds to their recommendations. Majority of the internal auditors perceived that
the top management was not as responsive as they expect it to be in taking corrective measures
based on their findings and recommendations.
Therefore, the management bodies support for the internal audit department of the TVET
Colleges was one of the challenges to the internal audit functions for the value adding role of
internal audit functions in promoting good governance at these TVET Colleges . When we look
at the management support for the internal audit department of these TVET Colleges such as,
allocations of sufficient fund for annual training and development of the internal audit
department, the existing number of staffs in the audit department, additional incentives to the
internal audit, existence of quality assurance and improvement program, and top management
responds to internal audit findings and recommendations were the major challenges for the
internal audit functions for the value adding role in these TVET Colleges to promote good
governance at these TVET Colleges. Supported by the extent literature of (Alzeban & Sawan,
2013). Stated as, external auditors also agreed that internal audit did not receive sufficient
support from the highest officials of the organizations this as one of the reasons for the lack of
independence.
4.3.8 Applications of good governance standards for public Sector in TVET Colleges
An attempt was made to examine the application of good governance standards in these TVET
Colleges taking into account the good governance standards set for public sectors focusing on the
TVET Colleges purpose and on outcomes for citizens and service users, performing effectively
in clearly defined functions and roles, promoting values for these TVET Colleges and
demonstrating the values of good governance through performance, taking informed, transparent
decisions and managing risk, Developing the capacity and capability of the governing body to
be effective, and engaging stakeholders and making accountability real. The standards of good
governance and the perceptions of respondents are indicated below based on the above
mentioned measures.
Based on the first measure is concerned, “focusing on TVET Colleges purpose and on outcomes
for citizens and service users”, all of the internal auditors of the these TVET Colleges replied
that the TVET Colleges focused on the public sector’s purpose and on outcomes for citizens
and service users. Hence, the TVET Colleges encouraged to the assurance of the value adding
role of internal audit functions to promote good governance standards in public sectors in the
TVET Colleges. This implies that as a principle, internal auditors of these TVET Colleges
perform their duty based on the audit principles and standards.
According to the second measure in relation to, “Performing effectively in clearly defined
functions and roles”, all of the internal auditors of the TVET Colleges replied that the TVET
Colleges focused on Performing effectively in clearly defined functions and roles. Hence, the
TVET Colleges ensure to promote the good governance standards in public services in the
TVET Colleges. The third measure considered in this line is, “Promoting values for the whole
TVET Colleges and demonstrating the values of good governance standards through
performance”, almost all of the internal auditors of these TVET Colleges replied that the TVET
Colleges are promoting values and demonstrating the values of good governance through
performance was not as such satisfactory. Thus, Promoting values for the whole TVET Colleges
and demonstrating the values of good governance standards through performance is one of the
problems to ensure good governance at the TVET Colleges .
As far as the fourth measure considered, “Taking informed transparent decisions and managing
risk”, almost all of the internal auditors of the TVET Colleges replied that the TVET Colleges
taking informed, transparent decisions and managing risk was less satisfactory. Thus, taking
informed, transparent decisions and managing risk is one of the problems to enhance good
governance at the TVET Colleges.
According to the fifth measure in relation to, “Developing the capacity and capability of the
governing body to be effective”, all of the internal auditors of TVET Colleges responded that
the TVET Colleges implemented developing the capacity and capability of the governing body
to be effective was less satisfactory. Thus, developing the capacity and capability of the
governing body to be effective is one of the problems to promote good governance at the TVET
Colleges.
As far as the sixth measure considered, “Engaging stakeholders and making accountability real”,
almost all of the internal auditors of the TVET Colleges responded that, the TVET Colleges
focusing on engaging stakeholders and making accountability real. Hence, the TVET Colleges
encouraged to the assurance of good governance standards in public services sectors in the
TVET Colleges.
Therefore; three of the six standards of good governance in public sectors in the TVET colleges
were perceived by the internal auditors as highly applied in the TVET Colleges . The application
of the remaining three of the standards of good governance in public sectors in the TVET
colleges was perceived by the internal auditors as to less satisfactory. This implies that the
TVET Colleges is trying its best to apply the good governance principles or standards set for
public services to the expectation of the internal auditors.
4.4 Perceptions of Senior Accountants of the TVET Colleges
The senior Accountants of the TVET Colleges was asked a series of questions to assess the
contribution of the internal audit functions to the overall governance process of these TVET
colleges response of the senior Accountants of TVET Colleges in this regard is presented in this
section.
4.4.1 The Value adding role of internal audit functions in promoting good governance in
TVET Colleges
The first question that was raised to the senior Accountants of these colleges was related to the
value adding role of the internal audit functions in promoting good governance in these TVET
Colleges . All of the respondents have the opinion that, though the internal audit plays an
important role in promoting good governance in TVET Colleges, the existence of role of the
internal audit functions in these TVET Colleges is not sufficiently satisfying.
4.4.2 The information of internal auditing on the internal control system
The second question that was asked to the senior Accountants of TVET Colleges is related to
whether the report issued by the internal audit of these TVET Colleges identifies the key
problems of the internal control system of the TVET Colleges . All of the respondents were
with the opinion that the report issued by the internal audit of these TVET Colleges identifies
the problems of the internal control system and brings to the notice of the senior Accountants t of
the TVET Colleges .

4.4.3 The internal audit department accountability and integrity

The third question that was brought to the notice of the three TVET colleges of senior
Accountants, budget officers and pay masters was related to the accountability and integrity of
the internal audit department of the TVET Colleges . 60.7 % of the respondents are positive in
this regard where as 34.2% of the respondents are negatively perceived the remaining 5.1 %
perceived by the internal audit department as neither nor which implies that there is no
Accountability and Integrity in the internal audit department. The analysis indicates that , there is
no proper managerial decision for the failure of the financial activities in the internal audit
departments. Why ?, because the statistics reveals around39.3% of respondents are doubtful
about the accountability and integrity of the internal auditors.
4.4.4 The Communications of the internal audit functions to the top management
The other question that asked to the respondents was about the communication between the
internal audit and the managements. All of the respondents had the opinion that the
communication between the internal auditors and the top management of the TVET Colleges is
not smooth because the statistics revealed that 50.9% indicates smooth relationship ,and39.3%
very poor the remaining 9.8 % is a decision of neither nor which implies there is communication
problem between Internal auditors and the managements
Table 4.5 .communications of the internal audit functions to the top management.

Descriptions Responses
Frequencies
Percents
Items very low 8 13.11
Low 16 26.23
neither high nor low 6 9.85
High 22 36.06
very high 9 14.75
Total 61 100

Sources: Questionnaire 2015

This implies that around 49.1 % of the respondents felt that no good communication between
internal auditors and the management bodies of these TVET colleges.
4.4.5 Internal auditors as advisors and assurance providers of the top management
All of the respondents replied that internal auditors were as advisors and assurance providers of
the top management within the TVET Colleges. Therefore internal auditors as advisors and
assurance providers of the top management within the TVET Colleges were not a problem for
the value adding role of internal audit functions and development of good governance at the
TVET Colleges.
4.4.6 Internal auditor as advisors and assurance providers to the top mgt of the TVET
colleges
Table 4.6 internal auditors as advisors &assurance providers

Descriptions Frequency Percent

Items Yes 37 60.7
No 22 36.1
I don’t know 2 3.3
Total 61 100.0
Sources: Questionnaire 2015
The analysis behind this indicates that 60.7% of the internal auditors are performing their
internal audit work, where as 36.1% are not performing their internal audit work and the
remaining 3.3% I don’t know .This shows internal auditors have lack of commitments to
perform their audit work in these TVTET Colleges .
4.4.7 The effectiveness of the internal audit department
Most of the respondents replied that the internal audit department was effective at promoting
ethics and values within the TVET colleges . Twelve respondent rated that the internal audit
department was not effective at promoting ethics and values within the TVET Colleges. Hence, it
was a problem that the value adding role of internal audit functions for the promotion of good
governance at the TVET Colleges.
4.5 Freedom of the internal Auditors of the TVET Colleges
Figure 4.5 shows that 54.1 % of respondents, 27.9 % respondents 16.4% of respondents, 1.6%
of respondent responded “yes”, “no”, “sometimes”, and “do not know” the internal auditors of
the TVET Colleges free from conflicting duties and are able to investigate any area respectively.
Above half of the respondents replied that there were no conflicting duties for and are able to
investigate any area the internal auditors of the TVET Colleges . Nearly 16.4% of the
respondents perceived that, sometimes there were no conflicting duties and are able to
investigate any area the internal auditors of these TVET Colleges. This result implies that the
internal auditors of the TVET Colleges had freedom from conflicting duties and are able to
investigate any risk area of TVET College.
Figure. 4.1 Freedom of internal Auditors

Source: Questionnaire 2015

4.5.1 The use and protection of information acquired by the internal auditors
Figure 4.3 demonstrates that 47 % of respondents, 28 % respondents, and 25% of respondents,
replied “yes”, “no”, and “do not know” about the use and protection of information acquired by
the internal auditors of the TVET Colleges respectively. It means around half of the respondents
responded that there was careful in the use and Protection of information by the internal auditors
which was acquired in the way of their duties. Nearly 28% of the respondents perceived that,
there was no careful in the use and Protection of information and 25% of the respondents replied
that, they did not know about the use and Protection of information by the internal auditors of the
TVET Colleges. This result indicates that, 53% of respondents responded either there was no
careful in the use and Protection of information or did not know about the use and Protection of
information by the internal auditors. Therefore, the internal auditors should careful in the use and
protection of information acquired in the way of their duties to get further information in order to
improve their internal audit functions.

Figure 4.2 The use and protection of information acquired by the internal auditors

Source: Questionnaire 2015

4.5.2 Management bodies commitment to add value to the internal audit functions
As shown in Table 4.7, 26.2%, 54.1%, 11.5%, and 8.2% of respondents responded that the
management bodies commitment to add value to the internal audit functions, were rated very
satisfactory, satisfactory, below satisfactory, and poor, respectively. Majority of respondents
perceived that the management bodies commitment to add value to the internal audit functions
was satisfactory which is respondents80.3% responded very satisfactory and satisfactory .
Table 4.7 senior management commitment to the internal audit functions
Responses
Item Description Frequency Percent ( % )
Very satisfactory 16 26.2
Management bodies commitment to Satisfactory 33 54.1
10 add value to the internal audit Below satisfactory 7 11.5
Poor 5 8.2
functions
Total 61 100
Source: Questionnaire 2015
4.5.3 To whom the internal audit department should responsible
Table 4.8 reveals that, 32.8% responded that it should be responsible to the audit
commitee,29.5%, responded that it should be responsible to the Finance officer, 29.5%
responded that it should be responsible to the internal auditors and 8.2% resounded that to others
Majority of the respondents replied that the internal audit department should responsible to the
audit committee of the TVET Colleges and next to the internal auditors to support services. It
means the internal audit department should responsible to the audit committee of TVET colleges
in order to make corrective actions and follow up to the internal and external audit findings and
improve the internal audit functions to enhance the value adding role of internal audit functions
to promote good governance in the TVET colleges . Here it tries to analyzes that respondents
have problem of knowledge to whom it should be responsible because more than 80% should
have been expected to answered to the audit committee. internal audit is required to put more
efforts towards improving organizational operations (Badara & Saidin, 2012).They said that
internal audit functions are so wider to the extent that it contributes to the achievement of
organizational objectives.
Table 4.8 To whom the internal audit department should responsible
Responses
Frequency Percent ( % )
Item Description
To the audit committee, , 20 32.8
To whom the internal
To the finance officers 18 29.5
11 audit department should To the internal auditors 18 29.5
To others 5 8.2
be responsible?
Total 61 100
Source: Questionnaire 2015
4.5.4 The contribution of the internal audit functions
As depicted in the table 4.9 bellow 47.5% of the respondents believed that the contribution of the
internal audit function was for internal control purposes of TVET Colleges .The remaining
34.4%, 16.4% and 13% of respondents perceived that the contribution of the internal audit
function was to evaluate work performance, management advisory service and others,
respectively. The greatest part of respondents 47.5% perceived that the contribution of the
internal audit function was for internal control purposes of the TVET Colleges. But the internal
audit function is not for internal control purposes only rather to evaluate work performance,
provide management advisory services and other regulatory compliance. Hence, limiting the
internal audit function to the internal control purposes only was the problem for the value adding
role of internal audit functions to promote good governance at TVET Colleges . From the
respondents point of there is lack of awareness what the majorities of the internal auditors
activities so the majorities of the internal auditors are evaluation of work performance.
Table 4.9 Contribution of the internal audit functions
Responses
Frequency Percent ( % )
Item Description
To evaluate work performance 21 34.4
To provide management
The major activities of
11 advisory services 10 16.4
internal auditing Internal control purposes 29 47.5
Other 1 1.7
Total 61 100
Source: Questionnaire 2015
4.5.5 The major activities of internal auditing
The respondents were asked to identify the major activities of the internal auditing in TVET
Colleges . The response of the respondents is summarized in Table 4.10. It reveals, 60.6% of the
respondents identified financial activities as the major activity of the internal auditors. The
remaining 5%, 18%, and 14.75% of the respondents identified operational activities, strategic
activities, and regulatory compliance activities as the major activities of the internal auditors
respectively.
Table 4.10 Major activities of internal auditing
Responses
 Frequency Percent ( % )
Description
Item
Financial activities 37 60.6
The major activities of Operational activities 3 5
11 Strategic activities 11 18
internal auditing Regulatory compliance 10 16.4
Total 61 100
Source: Questionnaire 2015

4.5.6 The reliability of the internal audit findings and recommendations

Respondents (management bodies ) were asked to reply whether the internal audit findings and
recommendations reliable or not. The response of the respondents is shown in Figure 4.4. As
Figure 4.6 reveals, majority 57% of the respondents have the opinion that the internal audit
findings and recommendations are reliable and valid. However, 26% of the respondents question
the reliability of the reports issued by the internal auditors of the TVET Colleges and have the
opinion that the internal audit findings and recommendations are not reliable.
Figure. 4.3 The reliability of the internal audit findings and recommendations

Source: Questionnaire 2015

4.5.7 Internal auditors’ honesty, diligence and responsibility
The respondents were asked whether or not they perceive that the internal auditors of the TVET
Colleges are carrying out their functions honestly, diligently and responsibly. The response of
the respondents is indicated in Figure 3.5. 47% of the respondents are of the opinion that the
internal auditors are honest, diligent and responsible in performing their duties, but 40% of the
respondents replied that they don’t know whether the internal auditors are honest, diligent and
responsible in carrying out their functions. The remaining respondents perceive that the internal
auditors don’t perform their work diligently, honestly and responsibly. This implies that because
more than half of respondents responded in the decision of neither nor, so there is problem of
honesty, diligence and responsibility in these TVET Colleges .

Figure. 4.4 Internal auditors’ honesty, diligence and responsibility

Source: Questionnaire 2015

4.5.8 the overall governance of TVET Colleges
This research tried to examine the overall governance of these TVET Colleges based on the
factors stated in Table 4.12. The internal control system of the TVET Colleges perceived as,
high 19%, medium 35%, 35%, and 11%, by the respondents. Majority of the respondents
/property officers and pay masters/ of TVET Colleges replied that the internal control system of
the TVET Colleges was low. It means that the internal control system of the TVET Colleges
was a challenge factor to enhance the value adding role of internal audit functions to promote
good governance at TVET colleges .
The existence of ethics program at the TVET Colleges was rated as, very high 2%, high 10 19%,
medium 34%, low 32%, and very low 13%, of the respondents respectively. Both who were
rated the existence of ethics program at the TVET Colleges as, medium and low are equal. This
means the lack of existence of ethics program at the TVET Colleges is another problem for the
internal audit functions and to the development of good governance in the TVET Colleges.
When we evaluate the existence of corruption and prevention program of the TVET Colleges ,
respondents perceived that as, very high 8%, high 15%, medium 30%, low 32%, and very low
15%, of the respondents respectively. Majority of respondents perceived that the existence of
corruption and prevention program of the TVET Colleges was low. Hence, lack of the existence
of corruption and prevention program at the TVET colleges was one of the challenges to the
internal audit department to enhance good governance at the TVET colleges..
In relation to the performance management and accountability of the TVET Colleges as rated by
respondents as, very high 4%, high 30%, medium 36% low 26% and very low 4% of the
respondents respectively. Majority of the respondents was rated the current performance
management and accountability of the TVET Colleges as medium. As of this study we can say
that the current performance management and accountability of the TVET Colleges was not a
major challenge to the value adding role of internal audit functions to Promote good governance
at the TVET Colleges. Regarding the communication among management and staff of the TVET
Colleges was perceived as, very high 4%, high 19%, medium 34%, low 34%, and very low 9%
of the respondents respectively. Both who were perceived the existence of communication
among management and staff of the TVET Colleges as, medium and low are equal. This implies
the communication among management and staff of the TVET Colleges is not another problem
for the internal audit functions and to develop good governance at the TVET Colleges.
Acceptance of the internal and external audit findings and recommendations at the TVET
Colleges were perceived as, very high 8%, high 41%, medium 34%, low 15%, and very low 2%,
of the respondents respectively. Majority of the respondents perceived that the acceptance of the
internal and external audit findings and recommendations at the TVET Colleges was high.
Therefore; it was not a problem for the development of good governance at the TVET Colleges.
In relation to the overall contribution of the internal audit functions to promote good governance
at the TVET Colleges was rated as, very high 4%, high 20%, medium 34%, low 38%, and very
low 4%, of the respondents respectively. Majority of the respondents rated that the overall
 contribution of the internal audit functions to promote good governance at the TVET Colleges
was low. As a result it is a challenge for the internal audit functions to promote good governance
at the TVET colleges.
The overall governance process of the TVET Colleges were perceived by the respondents as,
very high 6%, high 26%, medium 45% low 15%, and very low 8% of the respondents
respectively. Even though three fourth of the respondents perceived that the overall governance
process of TVET Colleges was medium and above it needs great attention because around 23%
of the respondents perceived the overall governance process of TVET Colleges low and very
low. Therefore, the overall governance process of the TVET Colleges was one of the challenges
to the internal audit functions to promote good governance at the TVET college . When we look
at the overall governance process of the TVET such as, internal control system, existence of
ethics program, existence of corruption and prevention program, the overall contribution of the
internal audit functions to promote good governance, and the overall governance process of the
TVET were the major challenges for the internal audit functions to promote good governance at
the TVET Colleges. Thus, the senior management should take corrective actions to the
aforementioned problems in order to support their internal audit functions to enhance good
governance at the TVET Colleges.
Table 4.11 internal audit functions to enhance good governance

Very
Medium
High

Low
Very High

Low
Factor
Fr Pe Fre Fre Fre Per Fre Per
eq rc q Perc q Perc q c q c

Internal Control system of the TVET Colleges 0 0 10 19 18 34 19 36 6 11

Ethics Program of TVET Colleges 1 2 10 19 18 34 17 32 7 13

Fraud & corruption Prevention Program of the 4 8 8 15 16 30 17 32 8 15

TVET Colleges
Performance management and accountability. 2 4 16 30 19 36 14 26 2 4

Communication among management and staff. 2 4 10 19 18 34 18 34 5 9

Acceptance of the findings & recommendations

4 8 22 41 18 34 8 15 1 2
made by internal & external auditors.

Overall contribution made by the internal audit 2 4 11 20 18 34 20 38 2 4

functions to promote good governance.

The overall governance process of the TVET 3 6 14 26 24 45 8 15 4 8

Colleges-
Source: Questionnaire 2015

CHAPTER FIVE

5. CONCLUSIONS AND RECOMMENDATIONS

This study was conducted with the purpose of examining challenges of internal audit functions
in promoting good governance and full filling their value adding role in TVET Colleges
Since the study followed a case study approach, the details of factors which affect value adding
role f internal audit functions and challenges of internal audit functions in promoting good
governance and full filling their value adding role in TVET Colleges were carefully assessed.
The study’s target population was internal auditors, senior Accountants, property officers
paymasters , Budget officers, Management bodies, and Finance heads of the TVET Colleges.
The study had focused on gathering both primary and secondary data. The primary data, which
was a major source for the study, was collected through questionnaires from 61 employees
(internal auditors, senior Accountants , property officers, pay masters budget officers
,Management bodies and Finance heads) and others who are experienced and knowledge able
about it in the TVET Colleges. On the other hand, the secondary data was collected from the
most recent information from Internal audit reports and internal audit manuals of TVET
Colleges.
The study was qualitative study so descriptive method of data analysis was used. The results of
the analysis was interpreted and presented in the form of texts, tables and figures. Hence, this
chapter presented conclusions and recommendations on the study’s findings of challenges of
internal audit functions in promoting good governance and full filling their value adding role in
TVET Colleges in order with the objectives of the study in TVET colleges.
5.1 CONCLUSIONS
The following conclusions identified here below were derived from the analysis and discussions
of this study.
 This study revealed that the internal audit department of TVET colleges was facing
different challenges while conducting challenges of internal audit functions in promoting
good governance and full filling their value adding role in TVET Colleges . The major
challenges which the internal auditors face in their endeavor to perform their audit work
function and thereby promote value adding role of internal audit functions in TVET
Colleges include lack of expertise, lack of opportunities for Professional development,
communication gap with external auditors, and lack of additional incentives to the
internal auditors. The communication gap is basically creating difficulty to accept, take
corrective actions and make follow up to the findings and recommendations of internal
auditors by the management bodies and the TVET Colleges as a whole.
 The senior management of the TVET Colleges rated that the existing role of challenges
of internal audit functions in promoting good governance and full filling their value
adding role in TVET Colleges was weak. Therefore this weak internal audit function is
a great challenge to the overall governance of the TVET Colleges to attain maximum
value adding role .
 Based on the result revealed in the analysis and interpretation from the respondents of
property officers ,Budget officers, Management bodies ,finance heads and pay masters of
TVET Colleges , challenges of internal audit functions in promoting good governance
and full filling their value adding role in TVET Colleges was facing with the following
problems not to improve the overall internal audit functions and promoting governance
at the TVET Colleges.
Hence, the major challenges of the value adding role of internal audit functions were, no careful
in the use and protection of information acquired in the way of their duties, limited to the internal
control purposes of the financial activities, no follow up to the internal and external audit
findings and recommendations, poor internal control system, , lack of existence of ethics
program, and lack of the existence of corruption and prevention program were the main
problems to the internal audit functions not to enhance good governance at the TVET Colleges

5.2 RECOMMENDATIONS
On the basis of the findings and conclusions reached, the following possible recommendations
are forwarded. Efforts should be exerted to:
 Equip the internal audit department of the TVET Colleges with qualified and professional
auditors.
 Retain and attract qualified auditors by providing various incentives such training,
professional development, computerized auditing and motivating rewards .
 Provide various capacity building trainings, which could be short-term as well as long
term, to the internal auditors of the TVET College so that the internal auditors could be
able to contribute their share in the value adding role of internal audit functions in
promoting good governance in the TVET colleges.
 Open forums or other media to the internal auditors so that the internal auditors could be
able to communicate their findings and recommendations to the concerned stakeholders
of the TVET Colleges. This will play an important role in the value adding role of
internal audit functions in promoting good governance in the TVET Colleges.
 Create means of communication between the internal auditors and the external auditors
through open national ,regional ,and institutional conference .
 Careful in the use and protection of information acquired in the way of their duties, to the
internal control purposes of the financial activities, to the internal and external audit
findings and recommendations, and to the internal control system.
 Open ethics program, corruption and prevention program, and placing the internal
auditors at each college.
 In order to improve the value adding role of internal audit functions and overall
governance of the TVET Colleges ,there should be strong communications among the
internal auditors, external auditors, Management bodies ,senior Accountants, and other
concerned bodies; the Human resources or managements of TVET colleges should hire
 enough internal audit professionals, prepare training for professional development
program, open ethics, and corruption & prevention programs.

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(IIA) titled, "Value Added Services of Internal Auditing" (see "Value-added Practices"
Appendix
MEKELLE UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF ACCOUNTING AND FINANCE

Research Questionnaire
Dear sir/ Respondent’s !
The following questions are prepared only for research purpose to be undertaken on the Value
adding Role of Internal Audit functions in Public enterprises through effective Internal Audit
functions the case of TVET Colleges by Mr. Aymut Mehari , who is post graduate student in
Mekelle University; master’s of Science in Finance and Investment specialization. The
information you are going to provide will help me to analyze the issue under study. Therefore,
you are kindly requested to answer the research questions appropriately as per the requirements
listed below.
Thank you in advance for your commitment of time and consideration.

I General Information
Please answer the following questions by ticking the appropriate box.
1. Sex:
Male, Female,
2. Age:
18-30, 41-60 ,
31-40, above 60 ,
3. Educational level:
Diploma, MA,
Degree, PhD, and Above,
4. Work Experience:
Less than 3 Years, Between 11-20 Years,
Between 3-10 Years, Above 20 Years,

5. Do you think that the TVET College’s audit department has progressed its Auditing system ?
Yes No Don't Know
6. What are the major risks facing in the Value adding role of internal audit functions in
TVET Colleges ?
Lack of expertise Lack of opportunity for professional development
Lack of management support, Other: ________________________________.
7. Does the TVET Colleges management respondents positively perceive to the internal audit
findings and recommendations?
Yes No Sometimes Don't Know
8. Is there any difference between the internal and external audit findings and recommendations
in TVET Colleges ?
Yes No Don't Know
If yes, (please describe) ______________________________________________________.
9. Is your Colleges offering any special incentives to hire/retain internal audit professionals?
Yes No Don't Know
10. In your opinion, do you have the confidence and support from the senior management of the
TVET Colleges for your internal audit functions?
Yes No Don't Know
 If no, why? _____________________________________________________________.
11. How do you communicate with the senior management and the community of the TVET
colleges on the internal audit findings and recommendations?
______________________________________________________________________________
________________________________________________________________________.

12. Here under, different sentences related to the senior management support to the internal audit
department of the TVET Colleges . Therefore; please tick () on the spaces representing
your choice from the response options provided.

(5)

Strongly
Agree

(3) Neither Agree nor Disagree

Disagree
Measures
Strongly Agree

(4)

Disagree (1)
(2)
(4)

1. Top management provides the necessary support

to internal audit department and its staff
members.
2. Top Management allocates sufficient fund for
annual training and development of the internal
audit staffs members.
3. Internal audit department has sufficient number
of staff.
4. Salary levels are sufficient to allow the
organization to attract and retain auditors with
the required professional skills and
qualifications.
5. Quality assurance & improvement programs
exist
6. There exists complete internal audit manual to
guide internal audit functions .
7. Top management considers the internal audit
functions as a value adding roles .
8. Top management demands implementation of
corrective actions recommended by internal
audit standards.

13. Below are lists of statements based on the Value adding standards of TVET C for public
Enterprises . Tick () on the spaces representing your choice according to your College’s
performance to each statement.

Low
(5)

High

Neither high nor Low

Very Low
Measures
Very high

(2)
(4)
(4)

(1)
(3)

1. Audit function Focuses on the College’s

purpose and on outcomes for service users.
2. Performing effectively in clearly defined
functions and roles.
3. Promoting values for the whole Colleges and
demonstrating the values of Internal Audit
through performance.
4. Taking informed, transparent decisions and
managing risk.
5. Developing the capacity and capability of the
governing body to be effective.
6. Engaging stakeholders and making
accountability real.

14. Do you believe that the existing Value adding role of the internal audit function is playing
sufficient enough to address the purpose for which it is established?
Yes No Don't Know
If not, why? _____________________________________________________________.

15. Do you believe that internal auditing provides information on the problems of the internal
control systems of the TVET Colleges?
Yes No Don't Know
If not, why? _____________________________________________________________.

16. Does the Internal Audit Department help ensure accountability and integrity within the
TVET Colleges ?
Yes No Don't Know
If not, why? _____________________________________________________________.

17. Does the Internal Audit Department ensure adequate communication of audit activity to the
top management of the Colleges?
Yes No Don't Know
If not, why? _____________________________________________________________.

18. Does internal Auditors has sufficient training and competency as advisors and assurance
providers to the top management of the TVET Colleges ?
Yes No Don't Know
If yes, how often? If not, why?
__________________________________________________.

19. Does the Internal Audit functions all Audit practice based on ethics/values related guidance
to the College ?
 Yes No Don't Know
If yes, how often? If not, why?
__________________________________________________.

20. Does the Internal Audit Department perform value adding Consulting engagement which is
consistent with the overall values and goals of the Colleges ?
Yes No Don't Know
21. In your opinion are internal audit functions free from conflicting duties and are able to
investigate any area?
Yes x No x Sometimes x Don't Know x
If not, why?
_________________________________________________________________.

22. How do you feel that the management of College has a commitment to add value to the
internal audit functions?
Very satisfactory, Satisfactory Below satisfactory Poor
23. In your opinion to whom the internal audit department should responsible?
To the audit committee x To the Internal Auditor x
To the Finance Officer Other:
x x
24. What is the contribution of the internal audit functions to the Colleges ?
To evaluate work performance, x
Management advisory service x
Internal controlling purposes Other: ___________________________.
x

25. Do internal auditors perform their work with honesty, diligence, and responsibility?
Yes x No x Don't Know x
26. Here under, different sentences related to the overall Value adding role of Internal audit
functions . Please tick () on the space representing according to the performance of the
colleges .
27.
 (5)

Neither high nor Low

Low

Very Low
High
Descriptions

Very high

(2)
(4)
(4)

(1)
(3)
1. Internal Control system of the College.

2. Ethics Program of the College.

3. Fraud & corruption Prevention Program of the
College.
4. Performance management and accountability.
5. Communication among management and staff.

6. Acceptance of the findings & recommendations

made by internal & external audit.

7. Overall contribution made by the internal audit

functions to add Value .
8. The overall governance processes of College.

Interview questions to the internal auditors’ of the Colleges

Dear Participants,
In this interview, you will be asked questions about internal audit functions of the TVET
Colleges . Your responses will be used to draw some conclusions in aggregate terms, without
referencing to specific participants. Your responses will be kept confidential and will be used
only for research purpose and therefore be free in expressing your feelings. This is the Case
study protocol that draws all activities of these public Enterprises
The questions are organized into six groups:
• Internal Audit Role and Mandate
• Internal Audit Relationships
• Internal Audit Resources
• Internal Audit Process
• Closing Questions
• Audit Committee Assessment

1. Do you have an internal audit function in your college?

2. What should internal audit function do in your college ?
3. What is the mandate of your College’s internal audit function?
4. What is the relationship between internal audit and the audit committee in your college ?
5. To whom does internal audit report administratively in your college ?
6. How is the internal audit function staffed in your college ?
7. How does internal audit get and maintain the expertise it needs to conduct its assignments in
your college ?
8. Are the activities of internal audit appropriately coordinated with those of the external
auditors?
9. How is the internal audit plan developed in your college ?
10. What does the internal audit plan not cover in your college ?
11. How are internal audit findings reported in your college ?
12. How are your college’s Finance managers required to respond to internal audit findings and
recommendations?
13. What services does internal audit provide in connection with fraud in your college ?
14. How do you assess the effectiveness of your internal audit function in your college ?
15. Does internal audit have sufficient resources to implement the Audit functions in your
college ?
16. Does the internal audit function get appropriate support from the CEO and senior
management team in your college ?
17. Are you satisfied that this TVET College has adequate internal controls over its major risks?
18. Are there any other matters that you wish to bring to the audit committee’s attention in your
college?
19. Are there other ways in which internal audit and the audit committee could support each
other in your college ?
20. Are the audit committee satisfied with internal audit function in your college ?
Thank You for your participation!!and Cooperation !!