The Practice and Challenge of Internal Auditing Function of Privately Owned Commercial Banks of Ethiopia in Light of International Accepted Auditing Standards and Principles

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Addis Ababa University


The aim of this study was to examine the practice and challenge of internal auditing function of privately owned commercial banks of Ethiopia in light of international accepted auditing standards and principles on selected 16 Ethiopian privately owned commercial banks. An interview data collection method was used. The study used semi-structured face to face interview to 8 purposely selected head of internal audit departments as a primary data. The findings of the study showed that majority of internal audit activities and responsibilities were practiced by all internal audit departments of commercial banks in line with accepted international auditing standards and principles. However, some internal audit departments faced challenges in the following areas of internal audit independence such as: non-existence of NBE involvement in the removal process of the head internal audit department; lower remuneration of head of internal audit department compared to others having equivalent status; failure to conduct an evaluation on board and sub-committee performance by some banks; the misconception of senior management and board of director/audit committee with respect to penalty imposed by NBE for the non-compliance as the result of internal audit report; not issuing RBIA framework or guidelines by NBE to have uniformity and consistency among all commercial banks; NBE‟s instruction to widening the audit coverage which is contradictory with RBIA methodology; and branch residence auditors are mainly engaged in routine checking activities of the internal control which is different from risk based auditing. The study recommends that the senior management, the BoD/audit committee of the commercial banks and NBE have to provide the necessary support and the internal audit department has to implement the accepted international auditing standards and principles so as to have effective internal audit functions in all commercial banks.


A Thesis Submitted in Partial Fulfillment of the Requirements for the Award of the Degree of Master of Art In Business Administration


Audit committee, Independence, Head internal audit