Effect of internal audit practices on firm performance: The case of some selected micro finance institutions in Addis Ababa

Abstract

This study aimed to investigate the Effect of internal audit practices on the firm performance: The case of some selected micro finance institutions in Addis Ababa”. Samples (129 internal auditors) were driven from 29 micro finance branches. Primary and secondary sources of data and mix of qualitative and quantitative research approach were used. Questionnaires and interviews were used to collect qualitative and quantitative data respectively. Descriptive and inferential statistics were used to analyze data. The R square indicated that 98.7% of the variance in firm performance was explained by the five internal audit related factors. The result of linear regression analysis results that sampling (β=0.852, p <0.05) caused a statistically significant effect on firm performance followed by the effect of internal audit planning (β=0.186, p <0.05), following up (β=0.39, p <0.0) reporting (β=0.033, p <0.05) and field work (β=0.017, p <0.05). Based on this is recommended all the transactions have to be verified, the select/sample auditees have to be using the risk based approach, the audit plan have to be identified explicit steps to follow, participating managements and board members in the entrance and exit meetings and management bodies of the Micro finances ought to be follow the implementation of the audit recommendations and management corrective actions are re- followed up on to provide assurance that plans are implemented.