Depoliticization, Organizational Contingencies and Internal Audit Effectiveness: A case of Local Government Councils in Nigeria

Abstract

The pervasive nature and value addition of internal audit function has made the concept a prevalent phenomenon among organizations. To be effective, IA function is said to be contingent upon diverse organizational characteristics. Findings of prior studies that investigates the relationship of one or more organizational characteristics on internal audit (IA) effectiveness have revealed confounding results. Moreover, the effect of politics on organizational studies have not been adequately investigated by previous studies. Drawing from resource base theory and institutional theory, the purpose of this paper is to empirically investigate the role of depoliticization in moderating the relationship between organizational contingencies and IA effectiveness. A total of 236 finance directors and internal auditors of local governments participated in the survey research. Partial Least Squares Structural Equation Modeling (PLSSEM) was adopted to test the postulated hypotheses. The findings of the paper revealed that, there is significant positive relationship between organizational contingencies and IA effectiveness. Furthermore, the paper revealed that depoliticization moderates the relationship between organizational contingencies and IA effectiveness, such that the effect of organizational contingencies on IA effectiveness was found to be significant for local governments with higher depoliticized internal audit function and processes. Consequent upon this, this paper recommends thus: first, the local government managements should advocate for policy that will entrench the significance of competence and professionalism in the discharge of internal audit responsibilities. Second, efforts should be put in place through adequate funding and sensitization to adopt information technology as a way of enhance competitive advantage for the local government councils. Finally, the local government regulators should institute mechanisms to limit political maneuvering and interests amongst the local government actors when taking decisions regarding internal audit function and process.