The Influence of the Internal Audit Function Practices on Corporate Governance: The Case of State-Owned Enterprises in Tanzania

Abstract

The purpose of this research paper was to investigate the influence of internal audit function (IAF) practices on corporate governance (CG) in Tanzanian State-Owned Enterprises(SOEs). Data were collected through a questionnaire targeting the board of directors, audit committee members, management members, and internal and external auditors of 86 SOEs in Tanzania. Overall, the findings indicate that the IAF significantly influences the CG of Tanzanian SOEs. Specifically, the findings reveal that an internal auditor's competence, nature of work and compliance with standards, laws and regulations positively influence CG in Tanzania. These results support the application of the agency theory (supplemented by stakeholders and public choice theories), which explains the role of the IAF and its influence on CG for the benefit of a broader range of stakeholders, including the public at large. The results of this study suggest that organisations that allocate sufficient resources and effectively utilise their IAF to provide assurance and advisory services may improve their CG. This improvement can lead to increased accountability and transparency in SOEs. The results have an implication for the decision-makers, policymakers and chief audit executives to effectively use IAFs in enhancing CG practices. The Institute of Internal Auditors (IIA) may benefit from these results in their efforts to elevate the impact of internal audit in the public sector.