Financial management performance of public sector: quality of internal auditor

Abstract

This study examines the relationship between internal audit functions and financial management performance in the public sector in Malaysia. The internal auditor is entrusted with a monitoring responsibility to ensure the integrity of the management of public funds. The need for effective monitoring by an internal auditor is increasing as a result of the Auditor General Report concerning weaknesses in the financial management of the public sector. The present study conducts a survey on 80 internal audit units of government agencies and organisations. Financial management performance is measured using the Financial Management Accountability Index issued by the National Audit Department. The results show that the effectiveness of internal audits in enhancing the financial management of public sector relates significantly to the competency of internal auditors, the size of internal audit units, and cooperation between the internal auditors and audit committees. The findings have policy implications concerning the staffing and training programmes of internal audit units that will help improve financial management performance in the public sector.