Factors Affecting Internal Audit Effectiveness: The Case of Ethiopian Insurance Companies

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Addis Ababa University


IA activity plays a crucial role within an organization. IA activity helped an organization by evaluating the risks whether they are under control or worth taking. The overall objective of the study is to examine the factors determining the effectiveness of internal audit in Ethiopian Insurance private companies. The study focused on all Ethiopian private 16 insurance companies head office internal auditor’s staffs and Finance and accounts, insurance operation and HR department managers. Explanatory research design has been used with primary and secondary data by using mixed research method by employing quantitative and qualitative research methods. The quantitative research method used through 91 usable self-administered questionnaires. These questionnaires were constructed in 5-point likert scale, distributed to internal auditors and to triangulate the data additional questionnaires were distributed to department head of Ethiopian insurance companies and analyzed using STATA statistical software. The qualitative research method used through documents review and interview. The Ordinary Least Square (OLS) linear regression model was used to analysis the collected data and examines the association between IAE and four study’s variables. According to the results of the study; competence of IA teams, quality of IA, and management support were strong but not significantly effect on the effectiveness of internal audit regarding on value adding role, enhance department performance, and enhance organizational performance. However, independence of IA is the sole factor determining effectiveness of internal audit in Ethiopian insurance companies. The researcher mainly recommended; the country's financial regulatory organ (i.e National bank of Ethiopia) should work more on the ways of ensuring the organizational independence of internal auditors and should have to develop transparent and well organized approaches. Additionally, private insurance companies need to ensuring the effective functioning and changing the audit approach of Audit committee in line with current global to gain the benefit on advancement internal audit standards, approving and implementing internal audit charter and audit manual in each insurance company, audit report should be standardized and approve audit strategy.


A research thesis submitted to the department of accounting and finance, college of business and economics, in partial fulfillment of the requirement of Master of Science (MSC) in accounting and finance


Ethiopian insurance companies, Effectiveness of Internal Audit, Internal Audit