Effect of internal auditing practices on performance of a public higher education institution

Abstract

The internal auditing value addition in organisational processes “has been an issue of global concern to” almost all investors of internal audit services. Investment in internal audit practices is expected to yield returns in effective organisational “governance, risk management and” internal control processes. “However, there is a reported lack of evaluation studies that explore the effect of internal audit practices” on organisational performance. This critical issue of not adequately evaluating the effect that internal audit brings to organisational processes “can be partially explained by the shortage of adequate internal auditing evaluation methods and” tools. “The overarching aim of this study was therefore to fill this inherent void by investigating the effect of internal audit practices on organisational performance to appropriately determine the extent of internal auditing effects on business” processes. The advanced evaluation model of evaluating the effects of technology systems on organisational performance indicators was applied for this purpose in this study. This model has been validated in “a case study of two departments in a public higher education institution which invests heavily in internal audit practices, as mandated by the Public Finance Management Act 1 of 1999” (Republic of South Africa, National Treasury 2017). In this study, the advanced evaluation model allows the institution “to determine the extent to which operational and overall performance can be boosted through automational, informational, and transformational effects of” internal audit practices. In addition, the study results have revealed the benefits of internal auditing of nonfinancial processes as well as financial processes: the results have confirmed a shift of internal audit practices from finance-based activities to more value adding operational activities. Moreover, this study observed that the effect of internal audit practices on organisational performance depends on factors such as “independence of internal audit activity, competence of internal auditors, internal audit quality, information technology tools, relationship between internal and external auditors, and” effective audit committee. This study found that “compliance with internal policies and procedures is the most crucial performance indicator in the” public higher education institution studied. In summary, the findings of this study, using an advanced evaluation model validated the benefit of internal auditing as a tool to help improve performance of an organisation.