Research proposal on challenges of internal audit in many firms

Research Questions

            The research aims to answer the question “what are the challenges faced by internal auditors in Tanzania?” Specifically, the          research aims to answer the following questions:

1. What are the recent developments in the Internal Audit profession in Tanzania?

2. What are the policies governing the Internal Audit function in Tanzania?

3. What are the problems faced by the Internal Audit function in Tanzania?

4. What are the factors that Internal auditors perceive to influence effectiveness of internal audit function?

Literature Review

Governance Related Challenges

            The overall control environment poses challenges for the internal audit department. Internal audit policies must be able to flow with the changes in technology. New auditing techniques must be developed to mitigate the risks. The traditional sample ‘testing of transactions’ techniques do not apply and therefore a better understanding of the influence of these mechanisms has to be well understood. With the continued increase in regulations, the compliance requirements face by organizations will continue to increase and pose a challenge. The internal audit profession needs to work with management to have these seamlessly integrated in the Governance and Control framework rather than inefficiently overlay new requirements on piecemeal basis. At the same time, the audit process itself needs to be governed in a more effective manner so that risks of substandard audits can be minimized and/or their effectiveness enhanced. The two key measures in this regard are:

·         The reporting structure of IA to ensure their independence, and

·         The performance of audits according to some Audit Standards

Risk Related Challenges

            Internal audit can provide help and support in getting the Enterprise Risk Management (ERM) process off the ground, but subsequently, it has to become part of the regular activity of management. Internal audit needs to independently review the efficiency and effectiveness of ERM like any other process and have a mechanism in place to quantify the various risks so that these can be managed in an objective manner. Three areas which need special focus in ERM are the risks inherent from:

·         IT systems and processes

·         Financial improprieties and frauds

·         Emerging risk impacting business growth/continuity

Internal Control Related Challenges

            Many organizations have some form of internal controls or another – it’s a business imperative and so comes naturally. However these efforts are at best fragmented and operate without much coordination in a seamless manner. In other words, they are generally patchworks without an overall framework holding them together. The internal audit profession has also not been able to highlight this aspect very cohesively with the result that there is very little effort to see how these controls measure up to a standard framework. The internal audit community needs to take initiative to ensure that the Control Framework deployed by the organization is well understood by management and it is in line with the ERM process.

 

Research Method

            The researcher will employ both quantitative and qualitative approaches to data gathering. The researcher will make use of a survey and a focus group. A survey gathers data at a particular point in time with the intention of describing the nature of existing conditions can be compared, or determining the relationship that exist between specific events. Survey research according to Hutchinson (2004) can be defined most simply as a means of gathering information, usually through self-report using questionnaires or interviews (p. 285). The attraction of a survey lie in its appeal to generazability or universality within given parameters, its ability to make statements which are supported by large data banks and its ability to establish the degree of confidence which can be placed in a set of findings (Cohen et al., 2000, p. 171). The popularity of survey research is due in large to its utility on countless research situations. Surveys are used for such diverse purposes as needs assessment, program evaluation, attitude measurement, political opinion polling, and policy analysis, as well as for simple descriptions of behaviors, activities, and population characteristics. The scope of surveys can range from large-scale national surveys to smaller surveys confined to a single neighborhood, classroom, or organization. Another strength is its applicability on situations where direct manipulations of variables is either unfeasible to unethical (Hutchinson, 2004, p. 286). Surveys are best suited for descriptive research. Companies undertake surveys to learn about people’s knowledge, beliefs, preferences, and satisfaction, and to measure these magnitudes in the general population (Kotler 2000).

            The data of this research will be collected by means of questionnaires sent to Internal Auditors working in private organizations in Tanzania. A pilot test of the questionnaire will be conducted prior to its administration, involving professionals with accounting experience. Constructive feedback will be gathered and appropriate amendments will be incorporated into the questionnaire.

            The first part of the questionnaire will comprised some of demographic questions concerning gender, age, highest educational level, professional qualification and experience of the respondent. The second part of the questionnaire will consist of questions related to the respondent’s workplace. The third section of the questionnaire will seek information regarding the main challenges and problems normally faced by internal audit function.