EFFECT OF INTERNAL AUDIT ON FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN TANZANIA

Abstract

This study aimed to examine the effect of internal audit practices in enhancing the financial performance of commercial banks in Singida, Tanzania. The general objective was to assess how internal audit standards, independence, and auditor competency influence financial outcomes. Specifically, the study aimed to evaluate the impact of internal audit standards, the role of audit independence, and the relationship between auditor competence, internal control processes, and financial performance. Using a sample size of 89 respondents, selected through stratified random sampling to ensure diverse representation, data were collected via structured Likert-scale questionnaires. Data were analysed using descriptive statistics and multiple regression analysis in Stata 15, the study revealed that internal audit standards significantly enhance financial performance by promoting accurate reporting and compliance. Independence in auditing emerged as a key factor, fostering objective evaluations that support transparency and accountability. Furthermore, auditor competence and strong internal control processes were found to positively affect financial outcomes, with competent auditors effectively managing risks and ensuring regulatory adherence. Based on these findings, the study recommends that bank management uphold high internal audit standards, prioritize auditor independence, and invest in auditor training programs. Regulators are advised to establish clear guidelines supporting audit independence, while policymakers should consider incentivizing banks to enhance internal audit practices.