Factors Influencing the Effectiveness of Internal Auditing in Public Sector Bureaus: A Study in Sidama Region, Ethiopia.

Abstract

Background: In developing countries like Ethiopia, effective internal audit systems are vital for ensuring accountability and efficient use of public resources. Internal audit functions provide independent evaluations of internal controls, risk management, and governance processes — key elements for sound public financial management. Despite ongoing reforms by the Ethiopian government to strengthen these systems, challenges remain in implementation and effectiveness. In the newly established Sidama Region, rapid administrative restructuring, rising demand for services, and limited financial resources have intensified the need for robust internal audit practices. Understanding how internal audit contributes to accountability and resource management in this context is, therefore, essential to improving public sector performance.

Methods: The study investigated the influence of six independent variables independence of internal audit, objectivity of audit, internal audit quality, auditor competence, management support, and adherence to internal audit standards on the dependent variable, internal audit effectiveness. A quantitative research approach was adopted to ensure objectivity and enable statistical analysis of the relationships among these variables. The study utilized a structured questionnaire with items measured on a five-point Likert scale, allowing respondents to rate their level of agreement. A stratified random sampling technique was applied to ensure proportional representation of different public sector institutions. In total, 167 questionnaires were distributed, and 141 valid responses were returned, yielding an 84% response rate. Given that the dependent variable (internal audit effectiveness) was measured using an ordinal Likert scale, ordered logistic regression was employed as the primary analytical technique. This method is appropriate because it accounts for the ordinal nature of the dependent variable and estimates the likelihood of higher levels of audit effectiveness based on changes in the independent variables.

Results: The results of the regression analysis revealed that the independence of the internal audit function, audit quality, staff competency, management support, adherence to professional standards, and the use of information communication technology all have a positive and significant effect on internal audit effectiveness in the Sidama Region. These findings highlight that strengthening these factors enhances the ability of internal audit units to improve risk management, internal controls, and governance processes within the Ethiopian public sector. The regression results further demonstrated that there is a statistically significant and positive relationship between the examination process and internal audit effectiveness, as evidenced by the significance of the unstandardized regression coefficients. This indicates that internal audit quality makes a substantial contribution to strengthening internal audit effectiveness in the Sidama Region. The regression coefficient was found to be positive and statistically significant [β = 0.605, p = 0.000 < 0.05]. This result provides strong evidence that professional competency is a key determinant of internal audit effectiveness.

Conclusion: The study concludes that a combination of independence, audit quality, staff competency, management support, professional standards, and technological integration best explains internal audit effectiveness in the Sidama Region. Internal audit will be more valuable as a tool for encouraging accountability, openness, and good governance in Ethiopia's public sector if these elements are strengthened. The results suggest that in order to guarantee long-term gains in audit efficacy, policymakers and public sector executives should give top priority to the creation of explicit audit independence frameworks, make investments in ongoing professional training, and allot sufficient financial and technological resources.