ASSESSING THE EFFECT OF CORPORATE GOVERNANCE ON THE INDEPENDENCY OF INTERNAL AUDIT FUNCTION: A CASE STUDY ON ETHIOPIAN PRIVATE COMMERCIAL BANKS

Abstract

The concept of internal audit independence is an area of concern for all commercial banks, it will continue to be an important issue that must be addressed.. Therefore, the study has established how the independence of internal audit is affected by various corporate governance factors among commercial banks in Ethiopia. Data was collected using structured questionnaires distribute to all internal audit department managers, heads of audit and inspection division and risk and compliance officers/managers of the 16 private commercial banks in Ethiopia. Data collected was analyzed by descriptive statistics aided by SPSS version 20 data analysis tool. A regression model was used to analyze the relationship between internal audit independence and level of corporate governance factors within a test of significance of 95% confidence level. The study has revealed that there is positive linear relationship between independence of Internal audit function and the corporate governance factors; corporate governance setting (CGS), senior management support (SMS),effect of Remuneration committee(ERC),effect of Qualification and Experience of internal audit staff(EQEIAS)), Effectiveness of audit committee (EAC)) and Perception of Internal audit independence (POI) among private commercial banks in Ethiopian ,The results of this study can inform bard of directors on the extent to which important factors factor are considered in the establishments of corporate governance they help the independency of internal audit