Audit Committee and Internal Control Effectiveness in Public Sector Entities

Cosmas R Masanja

Abstract


This paper reports the findings of a study that examined the audit committee and internal control effectiveness nexus. The study worked on the assertion that the audit committee of the board enhances internal control effectiveness, which is widely documented and supported, more so in the private sector. As a result, many public sector entities’ governing boards are increasingly establishing such audit committees. Yet, it is unclear to what extent such increase in audit committees contribute to public sector entities’ internal control effectiveness, especially in developing economies. This study, therefore, examined the explanatory power of the audit committee’s characteristics, internal control specific oversight processes, and management support on the effectiveness of internal control of the reporting entity. Data was collected using structured questionnaire administered with key audit committee stakeholders of social security funds in Tanzania. Ordinary Least Square (OLS) was used to multi-regress the investigated independent variables against the dependent variable. Overall, results show that audit committee characteristics, audit committee internal control specific oversight processes and management support to audit committee significantly account for internal control effectiveness. Indeed, internal control specific oversight processes have the most significant positive explanatory power followed by management support to the audit committee and audit committee characteristics, respectively. Scholars, policymakers, audit committees, boards, and managers may use the results of this study to inform strategies and/or interventions aimed to improve audit committee’s contribution to internal control effectiveness.

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References


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