The Internal Audit Functions: Competence, Effectiveness and External Auditors’ Reliance in Tanzania

John Sosthenes, Judika King'ori, Henry Chalu


This study examines the influence of internal audit function competence on the extent of external auditors’ reliance on internal audit function work and whether the internal audit function effectiveness mediates such a relationship. Data was collected from 100 external auditors of the Dar es Salaam Stock Exchange-listed companies and analysed using a Partial Least Square Structural Equation Modelling. The result indicates that internal audit function competence does not affect the external auditors’ reliance on internal audit function work. Nevertheless, the result shows that the competence of internal audit function has a positive effect on the external auditors’ reliance on internal audit work. Also, the result reveals that internal audit function effectiveness has a positive influence on external auditors’ reliance on internal audit function work. Results suggest that internal audit function effectiveness fully mediates the relationship between internal audit function competence and the external auditors’ reliance on internal audit function work. Thus, improving competence can increase internal audit function effectiveness which can also increase the external auditors’ reliance on internal audit function work. The study contributes to the literature by adding a new dimension, the internal audit function effectiveness, in the external auditors’ reliance on the internal audit function. The study recommends to regulators closely monitor the implementation of the guidelines for internal audit functions to improve their effectiveness

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