THE INFLUENCE OF INTERNAL AUDIT SERVICES ON THE FINANCIAL PERFORMANCE OF LOCAL GOVERNMENT AUTHORITIES IN TANZANIA

Abstract

This study investigated the impact of internal audit services on financial performance of Local government Authorities in Tanzania. By employing a mixed-methods approach, the research explored the effectiveness of assurance activities and consulting services provided by internal audit functions, along with the challenges encountered in achieving their objectives. The research methodology utilized a combination of quantitative and qualitative techniques. Quantitative data was collected through a survey questionnaire distributed to internal audit professionals and financial managers. The survey gathered data on the perceived effectiveness of assurance activities and consulting services, as well as the challenges faced by internal audit units. Qualitative data was obtained through semi-structured interviews conducted with internal audit directors and senior management personnel. The analysis revealed mixed results regarding the effectiveness of assurance activities on financial performance. While assurance activities were found to contribute to stakeholder confidence and organizational risk management, their direct impact on financial metrics was not statistically significant. Conversely, consulting services provided by internal audit had a significant positive effect on financial performance. These services were instrumental in driving process improvement, risk management, and strategic planning within organizations.The study also identified several challenges faced by internal audit units, including resource limitations (budgetary constraints, staffing shortages), evolving technologies and the need for continuous skill development, and Organizational resistance to change and challenges in implementing audit recommendations. Based on the findings, the study offers recommendations for organizations to optimize the value of internal audit services and enhance their contribution to financial performance. These recommendations include prioritizing resource allocations to adequately support internal audit functions, encouraging the adoption of advanced technologies and audit methodologies, fostering a culture of openness and collaboration within the organization to address resistance to change, and implementing continuous monitoring and evaluation processes to track the impact of internal audit activities. The study further proposes areas for further research, including longitudinal studies to assess the long-term effectiveness of internal audit practices, comparative studies to identify best practices across different contexts, and investigations into the impact of emerging technologies on internal audit effectiveness