Impact of Organizational Structure on Internal Audit Effectiveness .A Case study of Ministry of Finance and Economic Development

Abstract

The Ministry of Finance and Economic Development has been facing issues of poor communication within the department which has led to miscommunication between people as there was no clarity on who needs information or where to send important messages in the accounting department leading to delayed internal audit process and audit reports. Therefore, this study aimed to assess the impact of organizational structure on internal audit effectiveness. The study was guided by three objectives which were to examine the relationship between hierarchical organisational structure and internal audit effectiveness, to investigate how functional organisational structure impact the work of internal auditors and to explore how divisional organisational structure affects the effectiveness of internal audits. The researcher adopted post-positivism research philosophy which advocate for the use of quantitative methods in data collection. Data was collected using a descriptive research design from a sample of 80 management and non-management employees in the Ministry of Finance and Economic Development. Simple random sampling was done within the department to collect primary data using questionnaires as the main research instrument. Findings from the study revealed that there is a strong negative relationship between hierarchical organisational structure, a strong positive relationship between functional organisational structure and divisional organisational structure and internal audit effectiveness. The study concluded that, hierarchical organizational structure, has slowed down decision-making processes and communication in the ministry which has negatively impacted audit quality effectiveness. The study further concluded that divisional organizational and functional organisational structure can enhance increased expertise and knowledge in the accounting department which promote audit quality in the ministry. The study recommended that, the internal function in the Ministry of Finance and Economic Development must be independent of the activities being audited and must also be independent from main organization tasks, each province should have has clearly defined roles and responsibilities and every province should have structures with clearly defined lines of control and responsibility as this improves communication over less formal structures