Abstract

The overall objective of this study was to examine factors affecting the effectiveness of internal audits of selected public institutions in Hargeisa Somaliland. Explanatory research design has been used with primary data by employing a quantitative research method. The quantitative research method was used through 115 usable self-administered questionnaires. The questionnaire was constructed into a 5-point Likert scale form and distributed to internal auditors, and internal audit experts the study data has been analyzed by using the statistical package Stata version 17. According to the regression results of the study Technology and internal audit quality are positive and statically significant factors that determine the effectiveness of internal audits in selected Somaliland public institutions, other factors such as Management support and independency of internal auditors, also have a positive relationship with IAE, as regression result shows other variables show negative relationship with the internal audit effectiveness, so the researcher recommended the Somaliland Ministry of Finance must work one motivating and trigger the use of technology in the internal audits. The researcher also recommends that the Somaliland ministry of finance must develop suited internal audit standards applicable in the Somaliland context to develop the quality of the internal audit in the Somaliland context.

Key Words: internal audit, internal audit effectiveness, internal audit quality, Management support, internal auditors’ independency, relationship between internal and external auditor

Background of the study

According to Institute of internal Auditors (IIA) (2023), internal auditing is 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 an organized, disciplined approach to assess and improve the effectiveness of risk management, control, and governance processes. Internal audits are essential for organizations to ensure adherence to standard procedures and regulations, but it is difficult to assess their effectiveness and understand the factors that influence it (Turetken, Jethefer, & Ozkan, 2020).

After the global financial crisis in the world, risk management, as well as enhancing the effectiveness of internal audit activities, began to be focused on by corporate managers. Internal audit is considered a tool to help organizations to improve operational efficiency, increase compliance with regulations and ensure that the information on financial statements is truthful and reliable (Lien & Viet, 2023).

The UN 2030 Agenda for Sustainable Development requires strong institutions, Peace, and Justice to address corruption, which is consistent with Ghana's efforts to address misappropriation of public sector resources (Karikari Appiah, Amaning, Tettevi, Frimpong Owusu, & Opoku Ware, 2023), also Shuwaili, Hesarzadeh, and Bagherpour Velashani (2023) In recent years, the public sector has seen a marked growth in managerial willingness to employ internal audit services to support well-controlled organizational operations. Yet, there is little information available on how internal audits might be used effectively in the public sector.

In United Nations (UN), Internal audit contributes to Member States' and governing bodies' supervision responsibilities shown in the recent establishment of oversight committees has increased the effectiveness of the internal audit, and direct accountability has emerged at UN as a result of increased internal audit reports recently made public to governing bodies and in the public in general (UN, 2016), meanwhile study done by, Drogalas, Karagiorgos, and Arampatzis (2015),Internal auditing is an ongoing concept that is widely discussed, but its effectiveness in the Greek business environment has received little attention.

Researchers have adopted different factors and indicators to measure its effectiveness., Thirathon and Mitrapanont (2022) Study in Thailand, contributed practically by assisting regulators in determining the qualifications and competence of internal audit personnel and audit quality has positive and significance influence on internal audit effectiveness.

Orkaido and Moges (2022), addressed some of the vital challenges addressed in the Ethiopian internal audit manual were the following; lack of independence, lack of internal audit management support, also the obligating of internal auditor staffs to many tasks and lastly limited professional competency according to Ethiopian Internal Audit Manual (Ethiopia Ministry of Finance 2004).

Past studies done on internal audit effectiveness at both global and regional levels,(Asare, 2009; Buchanan, 2018; Enofe, Mgbame, Osa-Erhabor, & Ehiorobo, 2013; Gebre, 2018; Geda, 2018; Kontogeorgis, 2018; Noor & Mansor, 2019; Osisioma, 2013; Sawan, Alzeban, & Hamuda, 2013; Shamsuddin, Manijegar, Kirupanangtan, Rahman, & Selvanathan, 2014), has been empirically stated that having a robust internal audit is an effective means of promoting good governance in the view of the general public, therefore the effectiveness of IA has become one of the prospective areas of study that has piqued the interest of researchers, academics, governmental institutions, and policymakers.

Despite the importance of IA, there is less research focusing on the exact determinants of IA, and effectiveness since there is no generally accepted method for determining the factors that influence the effectiveness of IA,s as stated (Mansor, 2018). but some previous studies (Almahuzi, 2020; Badara & Saidin, 2013; Burnaby & Hass, 2009; Čular, Slapničar, & Vuko, 2020; Erasmus & Coetzee, 2018; Hailemariam, 2014; Newman & Comfort, 2018; Singh, Ravindran, Ganesan, Abbasi, & Haron, 2021; Yeboah, 2020), agreed on these four factors to measure internal audit effectiveness which are: internal auditors independence; management support; internal auditors competency; and an internal audit charter, there is a gap in the literate firstly, above researches focus on Internal auditors characteristics like , independence, competence, support from management only and this seems one major objective, secondly there also a gap that there are very less researches include technology as factors that influence the internal audit effectiveness. Third there is also theoretical gap in the previous studies, focusing only agent theory, as well as institutional theories.

This study employed the Unified Theory of Acceptance and Use of Technology (UTAUT) to study the role of technology on internal audit effectiveness because this theory is very rare to use Internal Audit other theories are used in Internal audit related studies , This study filled the gap and investigated the role of technology on the effectiveness of the internal audit, and also by contributing factors other than internal audit characteristics , by studying the role of Technology, Size of the internal audit Departments, the role of management support of the internal auditors , internal audit quality, the relationship between internal and external auditors, and internal auditor‘s independence on effectiveness on internal audit case of Somaliland public institutions.

Somaliland's National Audit (NAO) Office established after independence from Somalia in 1991. NAO is a critical agency for overseeing public financial management, accountability, and transparency. In 2016, Somaliland's parliament rectified the National Audit Act to make the auditing more effective, further in Audit act Article 31, Section b) states that "Rules, procedures, and internal control systems (independent audits) are enough to assure successful income valuation, gathering, and allotment management." Section d) of this article also states that the internal controls, rules, and plan focuses and implemented are adequate to protect the oversight of public assets, but the Somaliland internal audit activity is still in the works and is being discussed in the House of Representatives, while the finance ministry uses an internally developed manual for internal auditing.

This is the day-to-day facilitation of the operations of the Internal Audit Function and includes; Budgeting and management accounting; Human resource administration, including staff evaluations and compensation. The Head of Internal Audit/ the Internal Auditors posted to the MDAs administratively reporting to the Director General in that MDA. The auditors in the MDAs will be required to regularly meet with the Director General and/ or the Minister in that MDA (at least quarterly or as and when required) to provide updates on the key issues identified during the audits.

Statement of the Problem

Internal audit function promotes an organization to accomplish its objectives by adopting a systematic, rigorous method of assessing and enhancing the effectiveness of risk management, control, and governance systems (IIA, 2020), Internal auditors and their function in all areas of the corporate governance structure are vital in today's dynamic, modern society, making them an important tool for enhancing accountability and transparency (Hazaea, et al., 2020). It is difficult to assess internal audit effectiveness and understand the factors that influence it (Turetken et al., 2020), as there is little information available on how internal audits might be used effectively in the public sector (Shuwaili et al., 2023).

Álvarez-Foronda, De-Pablos-Heredero, and Rodríguez-Sánchez (2023) Study explained the current significance of internal audit departments as stewards of the opportunities provided by modern technology to internal audit effectiveness. According to Almahuzi (2020) study In Saudi Arabia, stated that legal requirements for internal audit were non-existent so Internal Audit Functions were not established nor thoroughly developed, Somaliland internal audit act is still on process and there is no designated institution for internal audit as its part of the Ministry of finance development and chief of internal auditor in the MoFD supervises the internal auditors of the other MDA’s this will create problem of indecency, audit quality of the internal audit in Somaliland (Charter, 2020).

Adam (2016), Somaliland's economic progress has been hindered by corruption and weaknesses in internal control, resulting in less development and fewer investments. (Hassan, 2019), indicated that the level of corruption is 42.5% in Somaliland. Somalia (Somaliland) tied for the bottom place in Transparency International's 2021, 2022, Corruption Perceptions Index (CPI, 2022). leading to the risk of fraud and corruption., Menza, Aga, and Jerene (2019), Corruption is the illegal spending of public funds and weakening of sound governance and internal controls., Effective internal audit has a 47.4% impact on risk and fraud prevention.% as reviled by (Afrah et al., 2022). Furthermore Somaliland Auditor general addressed in his 2022 constitutional presentation to the parliament that four Government agencies failed to report their 2021 fiscal year financial report to the office of the auditor general(AGO, 2023) , Internal control systems in Somaliland are weak, leading to less segregation of duties and a need for immediate solutions. (Ibraahim, 2014).

So as there is literature as well as theoretical gap in previous studies lack of context specific studies motivated me to take this topic , so this study tried to investigate the role of technology in internal audit effectiveness as mentioned by these studies, (Akinleye & Olanipekun, 2019; Alqudah, Amran, & Hassan, 2019; Christ, Eulerich, Krane, & Wood, 2021; Deloitte, 2023b; Eulerich, Masli, Pickerd, & Wood, 2022), and also the study used (UTAUT) theory to explain this effect.

The study investigated role of Technology, Size of the internal audit Departments, the role of management support of the internal auditors , internal audit quality, the relationship between internal and external auditors, and internal auditor‘s independence on effectiveness on internal audit case of Somaliland public institutions.

Objectives of the Study

General Objective

The overall objective of the study is to identify the determinants of Internal Audit effectiveness in selected public institutions in Somaliland.

1.3.2. Specific Objectives

The study tried to achieve the following specific objectives that are related to the research hypothesis.

1. To assess the role of Technology in the effectiveness of internal audits in selected public institutions in Somaliland.

2. To investigate the role of Size of the internal audit department on the effectiveness of internal audits in selected public institutions in Somaliland.

3. To find out the role of management support to the internal auditors for the effectiveness of Internal Audit in selected public institutions in Somaliland.

4. To evaluate internal audit quality to the effectiveness of internal audit in selected public institutions in Somaliland.

5. To examine the role of the relationship between internal and external auditors in the effectiveness of internal audit in selected public institutions in Somaliland.

6. To investigate the internal auditor‘s independence to the effectiveness of internal audit in selected public institutions in Somaliland.

LITURTURE REVIEW

Theories of Internal Audit effectiveness

A new approach which is adopted by Endaya and Hanefah (2013), and Alkebsi and Aziz (2017) is a combination of four theories: Agency, Institutional, UTAUT (Venkatesh & Zhang, 2010) and contingency theory (Ondieki, 2013).

Unified Theory of Acceptance and Use of Technology

Marinagi, Trivellas, and Sakas (2014), study used the Unified Theory of Acceptance and Use of Technology (UTAUT) developed by (Venkatesh & Zhang, 2010) to explore the impact of information technology on the audit process from the perspective of auditors. Results show that higher effort expectancy means higher auditor's employment level in use of the IT, so study shows this theory support, Auditor processes must include emerging methodologies because to the increase in electronic evidence. With generalized audit software, auditors aim to evaluate client internal controls, the accuracy of their systems, and their capacity to manage risk.

This study used part of UTAUT which is Performance expectancy (PE)  the degree to which an individual believes that using a system IT helped him or her to attain gains in job performance, Recent research on the need for internal Auditors the use technology as stated IIA (2022) IT engagement adds value to the governance and effectiveness of the internal audit , also Alqaraleh, Almari, Ali, and Oudat (2022), indicate that there is a considerable association between information technology and the efficacy of internal audits also Deloitte (2023a)In their report of Topics for IT Internal Audit, stated that large corporates are continuing to invest in new technologies to improve the efficiency of internal processes, this study used this theory to build its conceptual framework

Agency theory

According to Mitnick (2015), this theory aims to comprehend the issues that occur whenever one party acts as a representative on behalf of another, there are two sides to agency: the actions and concerns related to soliciting and giving agent assistance on the agent side, as well as the activities and obstacles related with directing and regulating agent conduct on the management side, also stated in their study Changwony and Rotich (2015), that this theory supports a positivist group of philosophy. Also According to Gailmard (2014) stated It provides a logical framework for evaluating the accountability of political institutions It is a concept in the theory of contracts where the primary entity assumes responsibility for the work carried out by the other party's agent.

Based on the above paragraph, it can be seen clearly that this theory is a useful theory that can explain the relationship between some variables of the study, mainly internal auditor independence because if internal auditors' work is influenced by management, it loses this important attribute, and in another dimension, internal auditor competence affects internal audit effectiveness, and if internal auditors are not competent enough, managers may take this as an opportunity to manipulate financial statements and, For this reason, the agency theory is relevant to be embedded in the development of this research conceptual framework.

Institutional theory

Abu-Azza (2012b), described in his study how institutional effects on organization structures and practices are emphasized in organizational theory, also Amenta and Ramsey (2010), detailed that organizational pressures come from external or internal sources, Arena, Arnaboldi, and Azzone (2006) revealed that laws and regulations (coercive isomorphism), judgments made by another institution (mimetic isomorphism), professional consulting or professional groups have been recognized as institutional constraints that have an impact on both individuals and businesses (normative isomorphism). This resemblance can facilitate connections with other firms, attract career-minded employees, build trust, and qualify for administrative eligibility. (Abu-Azza, 2012b). Lastly, several studies in the internal audit have adopted an institutional theory (Abu-Azza, 2012b)(Al -Twaijry et al. 2003); (Arena & Azzone, 2007); (Changwony & Rotich, 2015); (Mihret et al., 2010). The following are the reasons why institutional theory is relevant to this investigation, Firstly, Institutional theory includes IA activities that are part of the organization's structures and aids in addressing such complex systems without restricting them to a specific set of organizational goals. Abu-Azza (2012b) Second, Institutional theory assists countries with undeveloped stock markets, such as Ethiopia. (Mihret et al., 2010), and the same as the case of this study Somaliland. Therefore, this study draws on isomorphic processes of normative and coercive as suggested by institutional theory to investigate the factors determining IA effectiveness.

The results of preceding studies (Cohen & Sayag, 2010; Mihret et al., 2010) reviled that management support is the most important variable on the effectiveness of IA and Also is the most important dynamism of other factors. In addition to directly promoting IA effectiveness as also detailed by different researchers (Alzeban & Gwilliam, 2014; Cohen & Sayag, 2010; Marfo-Yiadom, Tackie, & Achina, 2016; Shohihah, Djamhuri, & Purwanti, 2018) management support is also revealed a representative of IA effectiveness. Clear rationality, communication, proficiency, and due professional care, as well as training and growth (Endaya & Hanefah, 2016).

Based on the above discussion, it can be seen clearly that the institution theory is a useful theory that can explain the relationship between some variables of the study, mainly Management support of internal Audit, as stated by Mihret et al. (2010), Institutional theorists view organizations as components of an organizational field, which is made up of some entities or sectors that are somehow connected so management must support internal auditors work to facilitate the organization effectiveness so the institution theory is relevant to be embedded in the development of this research conceptual framework.

Contingency theory

According to the contingency theory of management, there is no standard strategy for directing, controlling, and managing organizations. Auditing functions are part of the organizations that are subject to a variety of external factors. The approach acknowledges that audit methods and outcomes are frequently influenced by changeable and contingent factors, an internal audit is designed to assess the dependability of an organization's information, rules, practices, and procedures. Regardless of the audit subject, a variety of factors influence a company's outcomes, and the contingency theory considers these elements during the audit process. (Ondieki, 2013), So this study used this theory because it investigates the role of variables, mainly internal audit quality, on internal audit effectiveness as contingent factors, Researcher employed this theory as the Somaliland internal audit regulations is based on industry guidelines provided in the IPPF issued by the IIA, as stated Ondieki (2013) , government regulations require certain financial organizations to have independent financial audits performed, while industry standards can require audits in other areas, such as accountability and independence. So this theory helped the researcher to assess the effect of the IA standards on internal audit which is issued by IIA, on internal audit quality and thus the effect of quality internal audit on internal effectiveness in Somaliland's public institutions; it’s also relevant to be embedded in the development of this research's conceptual framework.

Determinates of internal audit effectiveness

Technology

To better understand our profession and its practitioners, The Internal Audit Foundation and The IIA undertook a global view to support the new study, Internal Audit: A Global Perspective. With input from more than 3,600 auditors in 159 locations, the study covers the breadth and complexity of internal auditing as well as the intricacies of industries, sectors, and countries study showed Regional differences within a diverse profession that adds value to stakeholders through governance, sustainability, and IT engagements. (IIA, 2022), Technology could be necessary in pursuing the entity's goals and improving control over the organization's operations. The number of organizations utilizing technology as well as the volume of usage both continue to increase (Commission, 2013).

Alqaraleh et al. (2022) The study looked at this issue by collecting information from 153 internal auditors in Jordanian public businesses. The results showed a strong correlation between information technology and the effectiveness of internal audits.
Deloitte (2023a) Large corporations continue to invest in new technology to increase the effectiveness of internal processes, according to their study on Issues for IT Internal Audit. Internal Audit's participation in this transformation and initiatives will need a departure from the standard internal audit methodology in favor of a flexible evaluation of risks throughout the development of the new technology. Internal auditing has received a relatively little investigation to this point.

New Directions in Internal Audit Research is a recent article. by Christ et al. (2021) existing recommendations for forthcoming research are assumed three broad areas for additional academic research are identified, including information technology innovation use of internal auditing. Akinleye and Olanipekun (2019) A research looked at how information technology affected internal audits at universities in Southwest Nigeria. In addition to distributing questionnaires to the chosen universities, primary data were also utilized. This study concluded that internal audit and information technology have a significant relationship at Southwest Universities.

Eulerich et al. (2022), In research, internal audits at Southwest Nigerian universities were examined concerning information technology. Primary data were used, and the chosen universities received questionnaires. This study found a strong correlation between internal audit and information technology in Southwest Universities. Oluoch (2022) Indicated his study conducted in Kenya established that the use of IT in internal auditing is significant as it advances auditing efficiency and effectiveness within organizations,

Madhar and Almaktoomi (2022), The purpose of the research on the effectiveness of the internal audit process at the National Bank of Oman was to determine how information technology has affected internal auditing, perception, and banking transactions. Shown how by employing automated procedures, the productivity of the internal auditing and the audit function tasks may be increased. The effectiveness of internal audits and how customers see banking transactions at the National Bank of Oman are significantly impacted by information technology. It aids in the timely and accurate delivery of information, increases accuracy, enhances and facilitates further information analysis, lowers risk, and enhances control procedures.

According to Global (2022), The influence of IT must be considered with judgment during an evaluation of internal control over financial reporting. There are exclusive risks to be considered. The controls that alleviate these risks are important because of their universal effect on the reliability, integrity, and availability of processing and relevant data.

CBOK (2016), Common Body of Knowledge (CBOK) is the world’s largest ongoing study of the internal audit profession reported that IIA recognized the value of technology, including data mining, analysis tools, and continuous auditing, to help organizations work better.

According to (ICAEW (2021)), The Institute of Chartered Accountants in England and Wales recommended organizations utilize Technology where appropriate since it may enhance the control environment for risk management. This may enable internal audit departments of firms to make wise suggestions and more informed judgments by removing human error and streamlining data exchange across processes.

Size of the internal audit Departments

The size of the internal audit department has been identified as the key determinant of internal audit effectiveness, especially in larger organizations (Alzeban & Gwilliam, 2014). According to researchers Mashayekhi and Nourbakhsh (2022), According to researches, any firm can increase the likelihood of detecting maladministration by having an efficient and effective internal audit department and creates an obstacle for managers to abuse their organizational position and authority

According to Pham and Nguyen (2021), their study offers empirical data on internal audit (IA) features influencing the efficiency of internal auditing in Vietnamese steel businesses. The report makes use of information from a survey that received 114 replies from owners, managers, and internal auditors of 38 steel businesses in Vietnam between 2018 and 2019. The study concluded that the internal audit Departments has a substantial impact on the efficiency of the internal audit and suggested expanding the internal Departments.

Musah (2018) Analyzed variables that affect internal audit effectiveness amongst Ghanaian SOEs. The internal audit effectiveness of Ghanaian SOEs was found to be significantly influenced by factors including the size of the internal audit Departments, the professionalism of the internal audit staff, the independence of the internal audit Departments, and a positive working relationship among internal and external auditors.

Al-rbai (2022), Internal audit Departments in government institutions face various obstacles, such as a lack of incentives, inadequate budgets, difficulty in communication, a limited number of employees, and a lack of professional preparation.

Management support of internal Audit

Grima et al. (2023) The study was remitted to internal auditors (IA) in various countries, receiving 402 final valid responses. Exploratory factor analysis, factors, confirmed the positive influence of IA size, and management support, were having heights influence on internal audit effectiveness. Top management support is crucial to the acceptance and appreciation of the IAF (Internal Audit function) within an organization. International Standards for the Professional Practice of Internal Auditing (ISPPIA) states that internal auditors should be supported by top management and the Board of Directors to execute their duties and fulfill their responsibilities. Indeed, the internal audit department should have sufficient resources to improve the effectiveness of its activities (ISPPA, 2014).

According to Musah, Anokye, and Gakpetor (2018), The results of the study showed that management support for internal audit function is the most significant determinant of internal audit effectiveness. The study also revealed that the size of the internal audit Departments, competence of internal audit staff, independence of the internal audit Departments as well as good relationship between internal and external auditors were significant determinants of internal audit effectiveness.

According to the Institute of Internal Auditors' professional standards, management assistance is one of the crucial factors in ensuring the successful delivery of internal audit services in the public sector. Therefore, the researchers wanted to know how satisfied internal auditors were with the support they received from management, the majority (41) of internal auditors, or 66% of them, were found to be dissatisfied with the management's support services. 7 (11%) out of 14 (or 23%) people were dissatisfied with management support services.(A, Ataribanam, & Aa, 2017).

The IIA’s Standards for Professional Practice of Internal Auditing (1110–Organizational Independence) recognizes that internal auditors should have the support of senior management and of the board so that they can gain the cooperation of auditees and perform their work free from interference (IIA, 2016). This claim and the studies mentioned above support the idea that top management assistance is crucial for improving internal audit independence. Therefore, top management and the board of directors should assist internal auditors for them to perform their jobs effectively. For an internal audit department to keep track of management risk, management assistance is also crucial. Top management support is shown by the motivation provided by top management to internal auditors.

Internal audit quality

According to IIA (2023), Internal Audit Quality comprehensively addresses the Institute of Internal Auditors' (IIA) International Standards for the Professional Practice of Internal Auditing. With all eyes on internal audit, you need to understand stakeholder expectations and communicate success measures that demonstrate quality.

Taqi (2021) Stated that during the period 1981-2020, The Scopus database has 499 publications that explore the subject of audit quality. The degree to which audit standards are followed, the auditor's level of specialty, their professionalism, and their adherence to professional ethics may all be used to evaluate the quality of their work, Rudhani, Vokshi, and Hashani (2017), As it was one of the most important criteria in the samples of internal audit within the public sector in Kosovo, their study was able to establish that audit quality is indeed the essential component of the efficacy of internal audit.

Setyaningrum and Kuntadi (2019), According to the study's findings, communication and audit work both enhance internal audit effectiveness, but independence has little bearing. The Ministry of Transportation served as the study's responders. One of the organizations having IACM level 3 (integrated) in Indonesia is the Inspectorate General of the Ministry of Transportation.

According to Nugroho, Uzliawati, and Taqi (2021), The purpose of the research was to ascertain how the efficacy of internal audit was impacted by audit quality, internal audit size, and auditor competency with management assistance. Internal auditors employed by Indonesian State-Owned Companies (SOE) in the finance and insurance sectors made up the research population. The results demonstrated that audit quality has a favorable effect while management support moderates the effect, using raw data from a sample of 62 respondents.

also, a study by Mahyoro and Kasoga (2021), findings reveal that audit quality; organization setting and auditee attributes have a significant positive influence on the effectiveness of internal audit services in LGAs in Tanzania.

This is in line with the research of George, Theofanis, and Konstantinos (2015) in the Greek Athens Stocks Exchange company and the research of (Mihret et al., 2010) study conducted at several significant 49 Asian Journal for Social Science & Management Technology academic institutions in Ethiopia found that, when compared to other variables, the quality of internal audit has the greatest impact on the effectiveness of the internal audit.

Relationship between internal and external auditors

Khelil (2023), has in-depth discussed how important it is for internal and external auditors to work together. Interviewed internal auditors indicate that working closely with their external colleagues boosts their confidence and helps Tunisian research., Behrend and Eulerich (2019). also the body of research on the external auditor's assessment of Internal Audit Function (IAF) quality is the most advanced and pervasive study field, CIIA (2020), Chartered Institute of Internal Auditors Internal and external audits are complementary functions within the assurance framework and both are essential for the effective governance of an organization.

Awuah, Onumah, and Duho (2022), A research found that effective internal auditing was significantly influenced by the relationships between internal and external auditors. Also According to Onay (2021), In his research on the factors that affect internal audit effectiveness in Turkish organizations, the researcher interviewed 187 internal auditors who are active members of the Institute of Turkish Internal Auditors. The results of this study's regression analysis demonstrate that the link between internal and external auditors significantly reduces the effectiveness of internal audits in Turkish organizations.

The relationship between internal and external auditors has been widely addressed by professional standards (Institute of Internal Auditors [IIA], 2022; American Institute of Certified Public Accountants [AICPA], 2018; Public Company Accounting Oversight Board [PCAOB], 2013, 2007; International Standards for the Professional Practice of Internal Auditing (ISPPIA)). These standards suggest that working relationships between the respective audit parties should include sharing information and coordination of activities which consequently permits assisting internal auditors in performing their objectives and providing better service to the organization (Alzeban & Gwilliam, 2014).

Also, the information that the internal auditor provides to his or her external counterpart enables them to help produce a higher-quality audit opinion and maybe one that is delivered with greater resource efficiency,(Alzeban & Gwilliam, 2014; Behrend & Eulerich, 2019) .

Internal audit independence

Darwesh, Ali, and Hamad (2023), The study found that the principle of independence affects the decisions of the internal auditor and contributes to enhancing accountability and performance of the institution and thus contributes effectiveness of internal auditing. The importance of research was to develop the role and work of the internal auditor to improve the internal control system.

Independence is the freedom from situations and relationships that threaten an internal auditor's ability to objectively perform the responsibilities of internal audits in an unbiased manner. To achieve this, the chief audit executive must have direct and unrestricted access to senior management and those charged with governance to communicate and report and must report the independence of the internal audit to the board annually. (IIA, 2017)

Even though internal auditors are typically employed by corporations, professional groups are stressing the importance of IA independence more and more. Alzeban and Gwilliam (2014) IA independence is the freedom from conditions that threaten the ability of the IA activity to carry out IA responsibilities in an unbiased manner” (The Institute of Internal Auditors 2017, p. 23), (Joksimović & Alseddig, 2017) In addition, internal auditing standards (Standard 1100-Organizational Independence) stressed the significance of maintaining the organizational status and the independence of the IA function. These goals can be achieved by having the IA report to a level within the organization that permits it to carry out its responsibilities without interference in determining the scope of work, conducting the audit, and communicating the audit results. (Hazami‐Ammar, 2019).

Rakipi, De Santis, and D'Onza (2021) Emphasized that IA independence is fundamental to ensuring the trustworthiness of IA services, Additionally, IA's lack of independence impairs its capacity to give the audit committee assurance, which impairs the committee's capacity to successfully carry out its corporate governance responsibility.

However, there are some threats to this independence, including using the IA function as a learning experience for a future managerial position within the organization, having the CEO or Chief Financial Officer (CFO) approve the IA budget as this is seen as a potent means of imposing budget restrictions that may limit the scope and affect IA effectiveness, having senior management heavily involved in the development of the IA plan, and having IA serve as a consulting role and be paid for it.(Rakipi et al., 2021)

Conceptual framework

CHAPTER THREE RESEARCH METHADOLOGY

Econometric Analysis

Econometrics uses, mathematics, and statistical inference to quantify research phenomena. This introduce the concept of regression, hypothesis testing, and the fundamental analytical tool of econometrics. The regression line summarizes the relationship between two variables. It covers the mechanics of regression. In this part the researcher discussed the theory behind fitting a line, exposition of the ordinary least squares (OLS) regression coefficients,

Regression result

Regression analysis is a set of statistical methods used for the estimation of relationships between a dependent variable and one or more independent variables, so Regression analysis used to identify the factors which determine IA effectiveness, resulting the out below.

Table 4. 12: Regression results

Source: Stata 17, 2023. N= Number of Observations, **P< 0.01, 95% level of Confidence, *P< 0.01, 99% level of Confidence

Hypothesis Testing

Hypothesis testing involves testing study presumptions on a population parameter. It is employed to gauge the connection between two statistical variables, in this step the researcher went to study test the hypothesis made in the beginning of the study by using regression output in the table above. Therefore, the regression results obtained from the model were utilized to test these hypotheses.

The following hypotheses test were conducted based on the regression results of the internal audit effectiveness obtained from the regression output.

H1: technology has no significant effect on the effectiveness of internal audit in selected public institutions in Somaliland

The first variable of this research revealed that there was direct relationship between the Use of technology and internal audit effectiveness. And this hypothesis was supported by the regression result as of the regression results shows that Technology and IAE are positively and significant related at 0.05 and also 0.001 level of significance. So as revealed by IIA institute that IIA's Technology Trends Conference is intended to assist internal auditors of all levels in staying ahead of crucial technological concerns. And suggestion the use of latest technology from the institute supports this hypothesis as well as of the theory of Unified Theory of Acceptance and Use of Technology, so technology has direct relationship in to audit effectiveness and has statically significant effect on the internal audit effectiveness at 5% and even 1% level of significance because the value of p=0.001 is less than that of 0.05 level of significance so technology has significant effect in to internal audit effectiveness. This factor is very new as it emerge with the evolution of technology there are less research’s about the role of technology on internal audit effectiveness this result is consistence with some previous researcher’s likes (Commission, 2013), (Alqaraleh et al., 2022), (Orkaido & Moges) in sidama region in Ethiopia found that Technology has significant effect on internal audit effectiveness the case of sidama region study and also (Deloitte, 2023a) and the suggestion of IIA for the development of the technology as factor that is crucial in internal audit work all support this hypothesis which shows that technology use have positive relationship with internal audit effectiveness. Based on the above results hypotheses was accepted which indicated that there is statistically positive and significant relationship between Technology and internal audit effectiveness. So the researcher rejected the null hypothesis as technology positively and significantly effects the effectiveness of the internal audit.

H2: Size of the internal audit Departments has no significant effect on the effectiveness of public institutions in Somaliland

The effectiveness of internal audits was not affected by the size of the internal audit according to the research data. The regression result did not support this hypothesis claim since it showed that size of the internal audit has no direct impact on how successful an internal audit is. This variable has a negative correlation with the efficacy of an internal audit, the outcome of the regression analysis was negligible, and hence the proposed hypothesis (H2) was not supported. However, that doesn't mean that the importance of the size of the internal audit is not important as some of These studies reviled that the size of the internal audit department has strong with the IAE (Asiedu & Deffor, 2017; Newman & Comfort, 2018; Zain, Subramaniam, & Stewart, 2006),But it’s important to mention that the find of this study regarding the size of the internal audit is consistent with these studies (Alqudah et al., 2019; Drogalas, Anagnostopoulou, Koutoupis, & Pazarskis, 2018; Hailemariam, 2014; Hazaea, Tabash, Khatib, Jinyu, & Al-Kuhali, 2020; Muchiri & Jagongo, 2017), Considering the outcomes above, based on the above results, hypotheses were failed to accept which indicated that there is no statistically significant relationship between size of the internal audit and internal audit effectiveness.so the researcher failed to reject the null hypothesis.

H3: Management support to the internal auditors has no significant effect on the effectiveness of Internal Audit in selected public institutions in Somaliland.

According to this concept, the level of management support that an internal audit receives directly affects how successful it is. demonstrating the positive beta sign, a statistically significant outcome of management support connected to internal audit effectiveness, and the significantly associated association between IAE and management support (β = .0349726, t = 0.78, P= 0.436) although this variable has positive effect with the Internal audit effectiveness but it’s not statistically significant with p Value greater than 0.005 so this studied fail to reject the null hypothesis and so didn’t support the proposed hypothesis. The management's commitment to promoting and communicating the value they bring for the efficacy of the internal auditing tasks in their office, as well as their provision of resources, training, the introduction of new technologies, and adequate facilities, all contribute to the IAE. The management also encourages the procedure for internal auditing. However, the results did not line up with the earlier auditing research studies of (Cohen & Sayag, 2010; Mihret & Yismaw, 2007) and their study on IAE in Hidaya region in India (Nigusse, Thadvuai, & James) found that Management support contributes the effectiveness of internal audit positively and significantly all these studies find that the Top management support is key to internal audit effectiveness, as it helps to hire competent staff, d evelop career channels, and provide independence. Additionally, top management can contribute to the effectiveness of internal audit works by providing trainings, resources, and other necessary facilities. Therefore, the management can contribute for the effective result of the internal auditors through their support in terms of continuous training for their IA staff, fulfilling the necessary materials and facilities that the IA staff needs, also (Armstrong & Yidana, 2019; Kassie, 2021) so the researcher failed to reject the null hypothesis although Management support has positively related to IAE but It was not statistically significant .

H4: internal audit quality has no significant effect on the effectiveness of internal audit in selected public institutions in Somaliland

The fourth hypothesis put to the test deals with the positive correlation between the quality of internal audit and the effectiveness of internal audit in public sectors. The findings demonstrate a favorable relationship between the quality of internal audit work and the effectiveness of internal audit in public sectors, which is statistically significant. At a level of (P<0.000). The magnitude (ß) of the effect of this variable on the effectiveness of IA was 0.646157 and the t-value of 10.01. The questionnaires results which are collected from selected public institutions in Hargeisa Somaliland inspection teams and external auditors of OAG shows a mean value of 4.392 and standard deviation of 2.685. This implies that participants were agreed on the quality of IA work in public sectors. The standard deviation of 2.00. It indicates that the respondents ‘perceptions were close to one another. Descriptive statistics of the data are presented in Appendix 2. For the quality of IA the Internal audit work, compliance with the international standards, Internal audit report is accurate, evidence baseness of the internal audit work were analyzed and respondent agreed that Internal audit work has strong effect on internal audit effectiveness’ in the case of Somaliland ,

The researcher was unable to reject the study's primary hypothesis, which states that "quality of IA work is positively associated with the effectiveness of IA in public sectors," because the data show that this association to be statistically significant, It means effective audit planning compliance with the international standards, Internal audit report is accurate, evidence baseness of the internal audit work and extant of usage of audit work by external auditors had relatively significant effect on the effectiveness of IA in public sectors. The result is consistent with the previous studies (Abu-Azza, 2012a; Alsabti & Khalid, 2022; Marfo-Yiadom et al., 2016; Mihret & Yismaw, 2007), also their study in sidama region (Orkaido & Moges) revealed that internal audit work contributes significantly the effectiveness’ of internal audit . So the researcher rejected the null hypothesis as internal audit quality is statistically Significant at 0.005 Confidence level.

H5: the relationship between internal and external auditors has no significant effect on the effectiveness of internal audit in selected public institutions in Somaliland

According to the hypothesis of this study, there is a clear negative beta showing that the relationship between the effectiveness of the internal audit and the relationship between the internal and external auditors is negative. According to the regression results, the relationship between internal and external auditors has negative impact on the effectiveness of an internal audit, hence this hypothesis was not validated. Variable has a negative beta coefficient, the effectiveness of the internal audit is negatively correlated with it according to the regression analysis output result, which does not support the provided hypothesis. (H5). Additionally, just because the link between internal and external auditors is statistically insignificant and negative according to the data of the study is not mean when assessing the success of the internal audit doesn't indicate that it doesn't substantially contribute to that efficacy. This outcome did not line up with the findings of earlier studies by the researchers.(Al-Twaijry et al., 2003; Drogalas et al., 2015; Endaya & Hanefah, 2013; Musah, 2018; Salehi, 2016; Stefaniak, Houston, & Cornell, 2012) which stated that relationship between internal and external auditors are positively and significantly associated with IAE , We may draw the conclusion that the interaction between internal and external auditors significantly and positively affects the efficacy of internal auditing. Based on the aforementioned findings, it can be concluded that there is no statistically significant association between the efficacy of internal auditing and the relationship between internal and external auditors. So the researcher failed to reject the null hypothesis.

H6: Internal auditor’s independence has no significant effect on the effectiveness of internal audit in selected public institutions in Somaliland

The last hypothesis of this research suggested that the effectiveness of the internal audit was directly related with the independence of auditors. As shown in the regression result the positive beta sign and a statistically insignificant result of independence related with the internal audit effectiveness (β = 0.091967, t = 0.73, p value 0.465), so P>0.05.The regression result highly indicates that there was positive relation between internal audit effectiveness and independency of auditor because it has positive beta value. So based on regression result independency of audit teams has positive impact but not significant effect on these selected Somaliland public institutions internal audit effectiveness but insignificance of independency of audit teams in influential the internal audit effectiveness as the finding of this study didn’t mean that it doesn’t completely add to the effectiveness of an internal audit as we can obtain from the definition of the internal audit by IIA it shows the Internal audit is independent (IIA, 2017) . This result was inconsistent with

(Ahmad, 2015; Alexander & Nobes, 2008; Alkebsi & Aziz, 2017; Alqudah et al., 2019; Alsabti & Khalid, 2022; Alzeban & Gwilliam, 2014; Armstrong & Yidana, 2019; Badara & Saidin, 2014; Dellai & Omri, 2016; Endaya & Hanefah, 2013; FareedMastan et al., 2015; IIA, 2017; Iqbal, Melcher, & Elmallah, 1997; Maina, 2018; Mihret & Yismaw, 2007; Shewamene, 2014; Shohihah et al., 2018; Ta & Doan, 2022) which shown that the independence of the IAF is among the five important factors of the effectiveness in their studies Furthermore, (Cohen & Sayag, 2010) found that more organizational independence to the internal auditors plays the vital role IAE, although this study is consistent with the finding of (Terefe, 2021) study in Bahardar region in Ethiopian showed that independency of internal audit team is positively related but statistically significant, also Study of (Armstrong & Yidana, 2019) in Kenya resulted that internal audit independence is positively related to internal audit effectiveness but it was not significant, so Based on the above results, the hypotheses were not confirmed which indicated that there is statistically positive but insignificant relationship between independence and internal audit effectiveness. So the researcher failed to reject the null hypothesis.

Table 4. 13: Summary of hypothesis testing

CONCULTION AND RECCOMENDADTION

Conclusion

Somaliland in recent years focused on increasing the capability and number of internal auditors Special female internal auditors, but still places a high priority on audit quality and quantity. This study uses a sample of 115 internal auditors from the selected public institution in Hargeisa Somaliland to give empirical information on factors influencing internal audit effectiveness. So this study examined factors that affect internal audit effectiveness in thirteen selected public institutions. Questionnaire was collected the data used to test the hypotheses.

1. The regression analysis in the study shows very strong contributions of these variables to the internal audit effectiveness (IAE) which are Technology and internal audit quality. The overall effect of these variables was clear, but other variables such as Management support and internal auditor’s independence also had a positive impact on internal audit effectiveness. Studies have shown that IAE increases when there are independent internal auditors and management that understands and supports the internal audit work. Also there are another variables such as Size of the internal audit department and the relationship between Internal and external auditors which are very important factors that influence the IAE as shown in the previous chapters so Neglecting these two variables may decrease the value of the internal audit effectiveness in Somaliland public institutions .

2. The researcher found that the use of technology in internal audit in Somaliland are good enough to reach effective internal audit work in contract with the suggestion of IIA to take the advantage of technology to achieve effectiveness in the internal auditing . Also study concluded that internal audit has quality because Somaliland uses the Internal Audit standards developed by Institute of Internal auditors.

3. Comparing the results of the study with previous literature, it can be generally argued that all of the four examined factors that has positive relation with internal audit (Technology, internal audit quality, Management support, and independence of internal) showed to be associated with internal audit effectiveness. This outcome is in line with the general standards of IPPF which consider these four factors as important indicators of internal audit.

4. This study underlines the necessity of transform the assertions made in this article into verifiable research hypotheses in order to experimentally verify the effectiveness of internal audits within the given theoretical framework by using Unified Theory of Acceptance and Use of Technology, which is the first time used in Internal audit effectiveness ass per research made by the researcher also study employed, Agency theory ,Institutional theory, Contingency theory to identify the effect of some study variables ad to help to construct the study conceptual frame work . Based on the current theoretical framework, the researcher investigated the variables that may interact and impact internal audit effectiveness in order to gain a deeper understanding of the subject and suggest ways to enhance it.

5. The findings of the study shows that Technology and audit quality are most influential factors of internal audit work in Somaliland context in the view of the research it’s because of technology is available in Somaliland and almost government uses latest technology in most financial transactions, likes of employee payroll which is totally technology oriented every employee has number and receives his /her salary in mobile banking with the help of the central bank , and also Somaliland uses the International audit standards which has very strong quality but the independency, management support of internal audit work , skills of the internal audit department , which can be shown in the size of the internal department which seems less as it required so as study reviled these aspects are less important to the top management of these institutions.

6. For the effectiveness of the internal audit there must be smooth relationship between internal and external auditors which significantly predicts effectiveness of internal audit, but the study shows that this variable has negative relationship with IAE so the researchers believes that there are weakness in the system of the Somaliland general auditor office this can be important factor for this weak relationship , the fact that the office did share any financial report regarding any institution which is available for the public can be the strong point for this weak relationship.

Recommendations

1. Somaliland Ministry of Finance development must work on the develop more comprehensive and effective internal audit standards to enhance the internal audit quality since the internal audit act is in the parliament for long time the researcher recommended urgently work on the internal audit law to govern the audit work since the manual of internal audit in Somaliland is draft from international standards but the need of trail made laws and standards is crucial in the work of internal auditing on Somaliland. ( Internal audit quality )

2. The study suggested that the primary factor influencing internal auditing performance for auditors should be adherence to professional standards. So the public higher education institution in Somaliland should support the IAE by collaborating with the financial institutions and other public sectors to have effective internal audit work. This can be done by providing enough qualified internal audit staff and by providing short-term trainings to upgrade the skills of the current IA staff in accordance with IIA standards. ( Internal audit quality )

3. The researcher recommends to the Somaliland public institutions mainly ministry of finance development , Ministry of Information technology and public higher education to promote further research on internal audit researches in Somaliland to discover the problems related to internal audit effectiveness in relation to use of technology, to support internal audit staff the IT skills that enable them to do their job in effective way this contributed the effectiveness of IA, the training likes of the Institute of internal auditors Manual for technological use in their latest programme in 2023 conference .( Use of technology )

4. The study recommended that management should put more emphasis on the support received by the internal auditors and provide adequate budgetary allocations. It should also ensure that the internal auditors are recruited in their right proportion, enhance the development of the internal auditors, give more autonomy to the internal audit, and encourage the corporation between the audit committee and the internal auditors.

5. The government must support the internal audit departments with the availability of resources both human and material resources are which also significantly predicts the effectiveness of internal audit. Including certification and IT software use .( Use of technology )

In order for an internal audit to be effective, the researcher also suggested that auditors should be free from management interference, bias both academically and materially, and maintain professionalism code of ethics through ongoing training and education. They should also work to improve a harmonious relationship with all staff members, regardless of their positions.