Almahuzi, Ahmed Salman (2020) Factors Impacting the Effectiveness of Internal Audit in the Saudi Arabian Public Sector. PhD thesis, Victoria University.

Abstract

This study investigates the effectiveness of internal audits in the Saudi Arabian public sector. The resource-based theory is used to explore external and internal factors that impact internal audit effectiveness. External factors are those outside the control of an internal audit department while internal factors are those within its control. The study examines the relationships between three external factors: top management support, organisational culture and independence of internal audits. It also examines the relationships between four internal factors: motivation of internal audit staff, size of the internal audit team, utilisation of information technology (IT) and competence of internal auditors. Lastly, the study considers the reasons for the non-implementation of internal audit units in some government organisations. Data were gathered using a mixed methods approach consisting of semi-structured interviews and a questionnaire. A total of 36 semi-structured interviews was conducted to gain the participants’ views on the nature of internal audits in the Saudi public sector and of the issues affecting the effectiveness of the audits. Further, 300 questionnaires were distributed to the managers of internal audit units and internal audit staff in the Saudi Arabian public sector, of which 290 were returned completed. The data were analysed thematically and statistically. Thematic analysis was used to analyse the interviews. The interview data were unanimous that top management support impacted not only internal audit effectiveness but also the other external factors. The interview findings also revealed a direct association between the three external factors. Multiple regression was used to analyse the collected data. The findings showed that the key external factors affecting internal audit effectiveness were top management support, organisational culture and independence of the internal audit. The first ordinary least squares (OLS) regression model indicated that, of these external factors, top management support was the most significant impacting internal audit effectiveness. In contrast, the interview data suggested that the competence of internal auditors was the most significant factor, affecting not only internal audit effectiveness but the other internal factors as well. The interview data also indicated a direct association between the four internal factors. The second OLS regression model suggested that, of the internal factors, the competence of internal auditors was the primary driver of internal audit effectiveness. As a standalone construct, the competence of internal auditors significantly impacted internal audit effectiveness; however, the same could be said of the links between internal audit effectiveness and the motivation of internal audit staff, the size of internal audit team and the utilisation of IT. In line with the resource-based theory, it is suggested that the Saudi public sector should capitalise on an effective internal audit as a valuable resource to promote organisational activities. The findings also revealed that although Saudi public organisations are legally required to have established internal audit departments, this function was lacking in a substantial number of organisations.

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