The Impact of Internal Audit Practices on the Performance of Local Governments in Oyo State, Nigeria: A Study of Governance, Accountability, and Service Delivery

The Impact of Internal Audit Practices on the Performance of Local Governments in Oyo State, Nigeria: A Study of Governance, Accountability, and Service Delivery

Oni Taiwo Racheal, Prof. J. A. Adejuwon

Management and Accounting, Lead City University Ibadan

DOI: https://dx.doi.org/10.47772/IJRISS.2025.90400228

Received: 05 March 2025; Revised: 23 March 2025; Accepted: 25 March 2025; Published: 07 May 2025

ABSTRACT

This study investigates the impact of internal audit practices on the performance of local governments in Oyo State, Nigeria, using a descriptive research design. Data were collected through structured questionnaires from 259 finance staff across 33 Local Government Areas (LGAs) and 60 community members. Variables were measured using a Likert scale, and data were analyzed using SPSS version 25, with reliability confirmed via Cronbach’s Alpha. Descriptive and inferential statistics, including regression analysis, were employed to test hypotheses at a 0.05 significance level. The study indicates that the quality of internal auditors impacts performance, though not massively. Auditor independence has a greater effect, accounting for roughly 24% of performance differences. Monitoring and control activities also play a key role, contributing to about 23% of performance variation. Staff and community members generally view these factors favourably, with average scores ranging from 2.66 to 3.13. Overall, internal audit practices are considered positive (average score of 3.11), and they’ve led to improvements in financial management, education, and infrastructure. The study concludes that internal auditing is vital for enhancing local government performance, with auditor independence being the most impactful factor. Recommendations include investing in auditor training, safeguarding independence, and strengthening monitoring mechanisms to improve governance, transparency, and service delivery in Oyo State.

INTRODUCTION

Globally, performance metrics serve as a critical foundation for evaluating the effectiveness of organizations, irrespective of their private or public ownership. Performance is the cornerstone of organizational continuity and a primary focus for stakeholders, shaping expectations across all sectors. Within the public sector, where access and services are meant for all citizens, there is heightened scrutiny regarding performance outcomes, especially at the local government level. Local governments are the closest form of governance to citizens, making their performance a crucial determinant of public satisfaction and community well-being. They are expected to deliver essential services while fostering local development and addressing community needs. However, a critical examination of local government performance must consider both citizen expectations and organizational perspectives, which often present conflicting interests and reveal significant challenges.

Public sector performance is broadly defined as the efficient and effective achievement of governmental goals, emphasizing accountability, transparency, citizen satisfaction, and outcomes-based management. However, this definition oversimplifies the complexity of measuring public sector performance, particularly at the local level (Eneanya, 2018; Huy & Phuc, 2020). Evaluating performance solely based on efficiency and outcomes may overlook the political and socio-cultural contexts in which local governments operate. Additionally, using citizen satisfaction as a primary performance indicator introduces subjectivity, as individual expectations and socio-economic conditions can influence perceptions (Eneanya, 2018). The emphasis on reducing resources while maximizing outcomes may lead to a narrow interpretation of performance, neglecting critical aspects such as social justice and the equitable distribution of public services (David & Adepoju, 2020).

The public sector comprises diverse organizations that fulfill governmental objectives by providing essential services such as security, transportation, healthcare, and education, ensuring equitable access to opportunities for all citizens (Ojo, 2019). While public sector entities share similarities with private organizations, their internal audit practices differ due to variations in roles, responsibilities, and operational complexities. These differences are further influenced by factors such as organizational size, function, and external elements like a country’s developmental stage and cultural context, which can shape internal audit effectiveness and goal attainment (Adeyemi & Olarewaju, 2019; Rafindadi & Olanrewaju, 2019). This study examines internal audit practices and their impact on the performance of local governments in Oyo State, Nigeria, providing insights into how audit mechanisms enhance governmental efficiency and effectiveness.

Statement of the Problem

The public sector in Nigeria has consistently faced significant challenges in fulfilling its fundamental responsibilities, with widespread corruption and mismanagement of public funds severely undermining service delivery. High-profile cases, such as the embezzlement of funds intended for local projects in states like Kogi, Oyo, and Kano, highlight the systemic nature of the problem (Enweremadu, 2012, Manjo, Manjo, Yu2024)). The Nigerian Economic and Financial Crimes Commission (EFCC) has documented numerous instances of local government officials misappropriating funds earmarked for infrastructure and community development, further eroding public trust and limiting the effectiveness of governance structures (Aigboduwa & Awe, 2020; Adeleke & Oni, 2018). In response, regulatory bodies in developing nations have increased demands for more comprehensive reporting on governance and internal audit functions to enhance transparency and accountability (Adejare et al., 2019).

Despite these regulatory efforts and extensive scholarly attention, local governments in Nigeria continue to underperform, particularly in critical areas such as basic education, healthcare delivery, infrastructure development, and economic empowerment initiatives for youths and women. Scholars have identified several contributing factors, including inadequate resource allocation, weak governance frameworks, rampant corruption, and ineffective internal audit practices (Akinyemi et al., 2021; Aigboduwa & Awe, 2020). For instance, a study on local governments in Nigeria found that less than 40% of allocated funds reach their intended projects due to financial mismanagement and corrupt practices (Adeleke & Oni, 2018). Similarly, research has highlighted severe inadequacies in basic healthcare services at the local level, attributing this to insufficient funding and poor oversight mechanisms (Adejare et al., 2019).

To address this gap, the current study aims to examine influence of Internal audit practices in enhancing local government performance in Oyo State, Nigeria. A mixed-methods approach will be employed, utilizing primary data collection through surveys and in-depth interviews. The study instruments designed to capture insights from both local government staff and community members, ensuring a holistic assessment of internal audit mechanisms. This dual-perspective approach is expected to reveal a more accurate picture of internal audit effectiveness and its impact on key performance indicators, including basic education, healthcare access, infrastructure maintenance, and youth and women economic empowerment programs.

Objectives of the Study

The study aims to investigate Internal Audit practices and performance of local governments, Oyo state, Nigeria the specific objectives were to:

explore the influence of Internal Auditor Quality on performance of local governments, Oyo state, Nigeria.

examine the influence of Internal Auditor Independence on performance of local governments, Oyo state, Nigeria

investigate the Influence of Monitoring & Control Activities on performance of local governments, Oyo state, Nigeria

Hypotheses

Ho1: There is significant influence of internal auditor quality on the performance of local governments in Oyo State, Nigeria.

Ho2: Internal auditor independence does significantly influence the performance of local governments in Oyo State, Nigeria.

Ho3: Monitoring and control activities do have a significant influence on the performance of local governments in Oyo State, Nigeria.

Literature Review

This chapter contained the conceptual, theoretical, and empirical review, conceptual model and summary of the gaps in the literature reviewed related to the study.

Conceptual Review

Performance in Public Sector (Local Government)

Local government has been defined by several scholars and writers as a political authority established by law to manage the affairs of local communities within a specific area. It is designed to operate within the limits of the law under which it is created (Hazaea & Zhu, 2022). Local government can also be understood as a process of devolution of power to local authorities to provide services of a local nature (Kasztelnik & Gaines, 2019). Furthermore, it is regarded as a grassroots-level government that serves as an instrument for rural transformation (Ouda & Al-Htaybat, 2017).

In Nigeria, the establishment of local government as a third-tier administrative structure was aimed at decentralising governance, bringing government closer to the people at the local level, and facilitating social services critical to national development. Local governments are strategically positioned to serve approximately 80% of Nigeria’s estimated 160 million population. Consequently, they play a vital role in articulating and voicing the needs of the majority of Nigerians, as well as supporting rural development through the deployment of financial and human resources (Rafindadi & Olanrewaju, 2019).

The local level of government is the most accessible tier for citizens, serving as the branch responsible for addressing the needs of its constituents (Huy & Phuc, 2020). Through this branch of government, citizens are empowered to participate in the planning and design of public spaces (Nerantzidis et al., 2022). Local government refers to the administrative authority and governance structures tasked with managing and providing services at the community or municipal level. This includes municipal or district councils, elected officials, and administrative staff who oversee specific geographic areas. The primary objective of local government is to address the unique needs and interests of communities within its jurisdiction, including public services, land use planning, infrastructure development, and community well-being (Kayode & Oyeshola, 2021).

Internal Audit Practices in the Public Sector

Internal audit practices play a crucial role in promoting accountability, transparency, and effective governance within the public sector. In Nigeria, internal audit functions are responsible for evaluating and monitoring the adequacy and effectiveness of internal controls, risk management processes, and governance practices within government institutions (Ojo, 2019). The effectiveness of internal audit practices in the public sector depends on several factors, including organisational culture, leadership commitment, and resource allocation (Hazaea & Zhu, 2022). Adequate staffing, continuous professional development, and independence are essential elements for ensuring the credibility and effectiveness of internal audit functions (Nerantzidis et al., 2022).

The integration of technology and data analytics tools can enhance the efficiency and effectiveness of internal audit processes by enabling real-time monitoring, predictive analysis, and risk-based auditing (Kasztelnik & Gaines, 2019). Additionally, collaboration with external audit agencies, oversight bodies, and stakeholders can strengthen oversight and accountability mechanisms within the public sector (Rahman, Meah, & Chaudhory, 2019). Internal audit practices contribute significantly to enhancing the performance of local governments in Nigeria across various service delivery areas, including education, healthcare, infrastructure, and economic empowerment. By promoting accountability, transparency, and efficiency in resource management, internal audit processes improve governance outcomes and service delivery for citizens (Ouda & Al-Htaybat, 2017).

Internal Auditors: Roles and Responsibilities

Internal auditors have been defined in various ways by specialists and authors within auditing literature. They are typically responsible for ensuring that internal auditing is conducted effectively (Kayode & Oyeshola, 2021). As members of the internal audit team, internal auditors are appointed by management to review and assess the soundness and efficiency of financial, administrative, and internal control systems. Their role involves measuring, verifying, and evaluating the operational effectiveness of management practices.

Internal auditing is considered an independent, objective assurance and consulting activity designed to enhance and optimise an organisation’s operations (Nerantzidis et al., 2022). Internal auditors are employees of the organisation who report directly to management (Rafindadi & Olanrewaju, 2019). Their primary responsibility is to evaluate the work of others rather than to manage specific aspects of operations or data processing. To effectively review existing control systems, internal auditors must possess the necessary skills and allocate sufficient time to their tasks (Ouda & Al-Htaybat, 2017).

Theoretical Framework

Institutional Theory

Institutional Theory was developed and popularized by John W. Meyer and Brian Rowan in their seminal work in 1977 (Meyer & Rowan, 1977). However, the foundational concepts of the theory were further expanded upon by scholars such as Paul DiMaggio and Walter W. Powell in the 1980s, particularly through their work on institutional isomorphism (DiMaggio & Powell, 1983). Institutional Theory explores how institutions—comprising established norms, rules, and beliefs—shape the behavior and structures of organizations. Organizations often adopt formal structures and practices not necessarily for efficiency but to gain legitimacy within their institutional environment. Thus, organizations become similar over time due to coercive, mimetic, and normative pressures (DiMaggio & Powell, 1983).

Institutional theory provides a valuable framework for understanding how institutions, such as internal audit practices, shape organizational behavior and performance in the public sector. This theory examines the influence of institutional factors on decision-making processes, organizational culture, and performance outcomes within local governments. By analyzing the design, structure, and functioning of internal audit practices, researchers can gain insights into how these institutions impact the delivery of basic services, including education, healthcare, infrastructure, and economic empowerment programs (Jensen & Meckling, 1976; Shleifer & Vishny, 1997).

Moreover, the theory sheds light on the convergence of internal audit practices across different local governments. This convergence is driven by coercive pressures, such as laws and regulations that mandate certain audit practices; mimetic pressures, where local governments imitate the practices of successful counterparts; and normative pressures, which arise from professional standards and the expectations of the auditing profession. Understanding these pressures helps explain why internal audit practices tend to be similar across various local governments, despite differences in their specific contexts.

Using Institutional Theory also allows the study to consider the broader social, cultural, and political context influencing internal audit practices. It recognizes that these practices are not developed in isolation but are shaped by a wide array of external factors, including societal expectations and political dynamics. This broader perspective ensures a comprehensive understanding of how internal audit practices affect the performance of local governments.

Empirical Review

Internal audit practices and Performance in Public Sector

A study examined the effect of internal audit on expenditure control in Mubi North Local Government Area (LGA) using a survey research design. A sample of 50 staff members was selected from the study population, and data were collected through questionnaires. The data were analyzed using simple percentage statistics, and hypotheses were tested using chi-square. The findings revealed that internal audit in Mubi North LGA was highly ineffective due to poor implementation. The study identified that internal audit significantly impacts expenditure control, with the low quality of staff being the most critical factor hindering its effectiveness. The study recommended that top management prioritize internal audit by implementing strategies to enhance its practice among staff, which would improve expenditure control (Gokoglan, Borutecene, & Bilen, 2023).

Another study explored the transformation process from traditional enterprise resource planning (ERP) systems to cloud ERP systems in the UAE public sector. Using a qualitative case study approach, the study analyzed primary data from in-depth interviews with personnel from a case organization, supported by secondary and tertiary sources such as the organization’s website and prior studies. Thematic analysis of the findings demonstrated that transitioning to cloud ERP could yield practical benefits, including improved organizational control systems, cost reduction, and increased profitability. However, the effectiveness of cloud ERP implementation depended on the provider’s professionalism, which could lead to reduced organizational independence. The study also addressed misconceptions about cloud ERP’s privacy issues. Despite its contributions, the study was limited by its qualitative, single-case design, suggesting the need for future quantitative research involving multiple organizations and statistical analysis to strengthen the findings (Alsharari, 2021).

A third study investigated the impact of internal audit on the financial performance of deposit money banks in Nigeria. The study population included 22 commercial banks, with 16 banks sampled using a judgmental sampling technique and the hypergeometric formula. Primary data were collected through questionnaires, with 334 out of 360 distributed questionnaires deemed usable. Data analysis was conducted using Ordinary Least Squares (OLS) regression, correlation, adjusted R-square, and standard error through IBM SPSS Statistics 20. The results indicated a positive relationship (r = 28.9%) between internal audit and bank profitability. Additionally, internal audit reporting channels positively influenced financial performance (r = 25.5%). The study concluded that internal audit and its reporting channels significantly enhance the financial performance of deposit money banks in Nigeria (Kayode & Oyeshola, 2021).

Another study examined the relationship between internal audit variables, such as financial controls, management controls, public sector efficiency, and public sector management. The study utilized primary data collected through the administration of 150 questionnaires to respondents in internal audit units, ministries, departments, agencies, parastatals, and commissions in Ondo State, Nigeria. Of these, 144 questionnaires were retrieved and analyzed using simple percentages, descriptive statistics, and categorical least squares. The findings revealed that internal audit quality variables—such as internal audit competence (COMP), internal audit objectivity (OBJEC), internal audit challenges (CHAL), and internal audit performance (PERF)—had a positive and statistically significant relationship with financial controls, management controls, and public sector service delivery in the selected public entities in Nigeria (Kasztelnik & Gaines, 2019).

A related study investigated the extent to which determinants of internal audit staff, such as recruitment and accountability, influence the predictive value of the public sector control environment. Using a quantitative correlation analysis, the study examined the interdependence of these variables and their impact on the public sector environment. The study employed the COSO 2013 Internal Control Framework as a theoretical foundation. Empirical analysis, including multiple linear regression models and Kendall’s Tau-b correlation, revealed that recruitment significantly influenced the public sector control environment, while accountability did not show statistically significant effects. The study highlighted the importance of recruitment practices in shaping internal audit effectiveness (Titilayo & Promise, 2022).

A closely related study explored the interaction between internal auditors’ personality traits and the effectiveness of the internal audit function, as well as its impact on financial reporting quality. Data were collected through a questionnaire survey of 193 internal auditors from Jordanian companies listed on the Amman Stock Exchange. The results indicated that personality traits such as openness to experience, emotional stability, and conscientiousness significantly influenced internal audit effectiveness, while extraversion did not. Additionally, these traits indirectly affected financial reporting quality through their impact on internal audit effectiveness. The study concluded that internal auditors’ personality traits are intangible resources that enhance the effectiveness of the internal audit function (ALbawwat, Al-Hajaia, & Al Frijat, 2021).

A study aimed to assess auditors’ awareness of modern control systems and internal audit procedures, evaluate the application of modern methods in internal control and auditing systems, and identify factors contributing to corruption in Yemen. Primary data were collected through questionnaires distributed to internal audit management and financial departments in a public telecommunications corporation. Of the 45 questionnaires distributed, 42 were retrieved and analyzed, yielding a 93% response rate. The study identified weak internal control systems, deficiencies in accounting systems, insufficient penalties, low salaries, and nepotism as key factors encouraging financial corruption in Yemen. The findings highlighted the deeply rooted and institutionalized nature of administrative and financial corruption in the country, offering insights for policymakers, government agencies, and academicians (Hazaea & Zhu, 2022).

Another study investigated factors associated with internal audit effectiveness and the relationship between internal audit effectiveness and internal audit quality. Data were collected through 102 questionnaires from internal auditors and chief audit executives of 12 multinational companies in Malaysia. Structural equation modeling (SEM) using SmartPLS Software 3.0 revealed that management support, interdepartmental coordination, and auditee support and acceptance were significantly associated with internal audit effectiveness. Additionally, independence, objectivity, and competence were found to be critical components of internal audit quality. The study contributed to agency theory by emphasizing the importance of internal audit effectiveness in protecting stakeholders’ interests and to institutional theory by highlighting how structured systems foster a culture of governance and internal control (Singh et al., 2021).

The literature on internal audit practices and performance in local governments in Nigeria provides valuable insights into the theoretical foundations and conceptual framework underlying audit practices, several gaps and limitations remain. Future research should focus on conducting empirical studies, comparative analyses, and investigations into the role of external stakeholders and technology in shaping internal audit processes and outcomes. Addressing these gaps will contribute to a more comprehensive understanding of how internal audit practices can enhance governance effectiveness and service delivery outcomes in the public sector.

METHODOLOGY

This study employs a descriptive research methodology to assess the impact of internal audit practices on local government performance in Oyo State, Nigeria. It utilizes a structured questionnaire and interviews for data collection, with a Likert scale to measure variables. The study focuses on 726 finance department staff across 33 Local Government Areas (LGAs), selecting a sample of 259 using the Taro Yamane formula and random sampling. Additionally, 60 community members provide external perspectives. Two structured questionnaires are used to gather data on internal audit practices and governance. Validity is ensured through expert review and pilot testing, while reliability is assessed using Cronbach’s Alpha. Data is analyzed using SPSS version 25, employing descriptive and inferential statistics to examine relationships between audit practices and performance, with hypothesis testing conducted at a 0.05 significance level.

RESULTS AND DISCUSSION OF FINDINGS

The Results and Discussion of Findings of the investigation are presented in this chapter. The findings were based on the research questions and hypotheses that were raised in accordance with the study objective.

Analysis of Demographic Data

Table 4.1: demographic profile of students

Source: Researcher’s Field Survey, 2024

The study participants include the 259 staffs from the finance departments of thirty-three (33) Local Government Areas (LGAs) in Oyo State. 330 questionnaires were administered within the staffs. The research analyzed personal data of the respondents includes Gender: male staffs are 177 representing 68.3% and female participants are 82 representing (31.7%). Regarding age distribution, the largest proportion of respondents falls within the 21-30 age group, representing 32.8% (85) of the sample. This is followed by 31-40 age group, representing 29.0% (75) of the sample, by 51-60 age group, representing 16.2% (62) of the sample, by 41-50 age group, representing 15.1% (39) of the sample. Meanwhile, 15-20 age group, representing least age group with 6.9% (18) of the sample.  In terms of academic qualifications, the majority of respondents hold a BSc/HND degree, accounting for 51.0% (132) of the sample. This is followed by MSc holders representing 31.7% (82) of respondents, by individuals with NCE certificate representing at 12.0% (31) of respondents, by ND holder representing 3.9% (10) of respondents, and by individuals with PhD certificate representing at 1.5% (4) of respondents. Examining professional qualifications, the data show that the majority of respondents fall under the ACIB category representing 27.8% (72) of the sample. This is followed by ‘ACA‘and ‘CCA’ category, comprising 22.8% and 22.8 of the sample respectively. This is also followed by ACCA at 16.6% (43) of sample, and by CFA at 10.0% (26) of sample. In terms of job cadre, Accountant represent the largest proportion at 37.1% (96), followed by clerical officers representing 33.2% (86) of sample. Executive Officer account for approximately 29.7% (77) of the sample. When considering departmental distribution, the data show that the majority of respondents fall under the administration category representing 49.4% (128) of sample. This is followed by Audit departments constituting 32.0% (83) of respondents, while the finance department comprises 18.5% (83) of the respondents. Finally, analyzing years in service reveals that individuals with 5-10 years of experience form the largest group at 45.9% (119). This is followed by respondents with 11-15 years of experience, accounting for 34.7% (90) of the sample, followed by respondents with 1-4 years of experience, accounting for 11.6% (30) of the sample, and by respondents with 16 and above years of experience, accounting for 7.7% (20) of the sample. The detail is in table 1.

Also, 60 educated community members where purposively sampled from three senatorial districts in Oyo State. The community member sampled comprises of 63.3% (38) male participants and 36.7% (22) female participants. Regarding age distribution, the largest proportion of respondents falls within the 36-45 age group, representing 46.7% (28) of the sample. This is followed by 26-35 age group, representing 33.3% (20) of the sample, by 46-55 age group, representing 18.3% (11) of the sample, and by 18-25 age group, representing 1.7% (1) of the sample. Regarding educational qualification, 98.3% (59) of sample had tertiary education qualification and 1.7% (1) of sample had postgraduate education. Finally, examining their occupational status, 40.0% (24) are employed, 31.7% (19) are self-employed while 13 of the sample are retiree.

Testing of Hypotheses

Ho1: There is significant influence of internal auditor quality on the performance of local governments in Oyo State, Nigeria.

Table 4.6: influence of internal auditor quality on the performance of local governments in Oyo State, Nigeria

Source: Researcher’s Field Survey, 2024

Table 4.6 presents the results of a regression analysis examining the influence of internal auditor quality on the performance of local governments in Oyo State, Nigeria. The model summary indicates that the predictors (internal auditor quality) collectively explain approximately 3.1% of the variance in the performance of local governments, as indicated by the R square value of 0.031. The standard error of the estimate is approximately .37317. The ANOVA table demonstrates that the regression model is statistically significant (F (1,257) = 8.274, p < 0.004), suggesting that the predictors (internal auditor quality) significantly contribute to explaining the variance in the performance of local governments in Oyo State. Examining the coefficients, internal auditor quality (β = 0.177, p < 0.004) have statistically significant positive effects on performance of local governments in Oyo State. This indicates that an increase in the internal auditor quality is associated with a higher the performance of local governments.

Ho2: Internal auditor independence does significantly influence the performance of local governments in Oyo State, Nigeria.

Table 4.7: influence of internal auditor independence on the performance of local governments in Oyo State, Nigeria

Source: Researcher’s Field Survey, 2024

Table 4.7 presents the results of a regression analysis of the influence of internal auditor independent on the performance of local governments in Oyo State, Nigeria. The model summary indicates that the predictors (internal auditor independent) collectively explain approximately 23.8% of the variance in the performance of local governments, as indicated by the R square value of 0.238. The standard error of the estimate is approximately .33086. The ANOVA table demonstrates that the regression model is statistically significant (F (1,257) = 80.454, p < 0.000), suggesting that the predictors (internal auditor independent) significantly contribute to explaining the variance in the performance of local governments in Oyo State. Examining the coefficients, internal auditor independent (β = .488, p < 0.000) have statistically significant positive effects on performance of local governments in Oyo State. This indicates that an increase in the internal auditor independent is associated with a higher the performance of local governments.

Ho3: Monitoring and control activities do have a significant influence on the performance of local governments in Oyo State, Nigeria

Table 4.8: Influence of Monitoring and control activities on the performance of local governments in Oyo State, Nigeria

Source: Researcher’s Field Survey, 2024

Table 4.8 presents the results of a regression analysis of the influence of monitoring and control activities on the performance of local governments in Oyo State, Nigeria. The model summary indicates that the predictors (monitoring and control activities) collectively explain approximately 22.7% of the variance in the performance of local governments, as indicated by the R square value of 0.227. The standard error of the estimate is approximately .33325. The ANOVA table demonstrates that the regression model is statistically significant (F (1,257) = 75.622, p < 0.000), suggesting that the predictors (monitoring and control activities) significantly contribute to explaining the variance in the performance of local governments in Oyo State. Examining the coefficients, monitoring and control activities (β = .477, p < 0.000) have statistically significant positive effects on performance of local governments in Oyo State. This indicates that an increase in the monitoring and control activities is associated with a higher the performance of local governments.

DISCUSSION OF THE FINDINGS

The findings of this study established that the quality of internal auditors significantly influences the performance of local governments in Oyo State, Nigeria. This finding aligns with previous studies, which have emphasized the critical role of internal auditors in evaluating internal controls, assessing risks, and providing independent assurance on the efficiency and effectiveness of organizational operations (Ouda & Al-Htaybat, 2017). Specifically, Ouda and Al-Htaybat (2017) found that auditor qualities such as competence, objectivity, and integrity significantly enhance internal auditors’ ability to identify issues, recommend improvements, and contribute to organizational success. Similarly, Kasztelnik and Gaines (2019) revealed that internal audit quality variables—such as internal audit competence (COMP), internal audit objectivity (OBJEC), internal audit challenges (CHAL), and internal audit performance (PERF)—had a positive and statistically significant relationship with financial controls in public sector entities. Another study corroborated these findings, indicating that the internal auditing function positively and significantly impacts the business growth of small and medium-sized enterprises (SMEs) (Titilayo & Promise, 2022).

The findings of this study also established that internal auditor independence affects the performance of local governments in Oyo State, Nigeria. This finding is consistent with previous research, which has demonstrated that internal audit independence, risk-based internal auditing, and coordination between internal and external auditors are positively and significantly related to financial reporting quality (Ta & Doan, 2022). Abiola, Arogundade, and Abiola (2018) further supported this by finding that auditor independence has a significant positive impact on organizational performance in the public sector. Independent auditors are better positioned to identify control deficiencies, detect fraud, and mitigate risks, thereby enhancing governance effectiveness and financial stewardship (Abiola et al., 2018). Additionally, evidence suggests that internal auditor independence and management support positively influence internal audit effectiveness, although the competence of internal auditors and the quality of internal audit work may not have a significant effect (Singh et al., 2021).

Furthermore, the findings of this study established that monitoring and control activities significantly impact the performance of local governments in Oyo State, Nigeria. This finding aligns with previous studies, which have highlighted the importance of monitoring and control activities in continuously assessing organizational processes, performance metrics, and compliance with regulations and policies (Sari, 2018). Rahman, Meah, and Chaudhory (2019) found that monitoring systems positively affect businesses’ financial performance, enabling them to achieve their objectives more effectively. Additionally, research has demonstrated a positive relationship between the implementation of monitoring and control mechanisms and organizational performance (Akintoye, Aluko, & Abidoye, 2019). Another study concluded that all components of the internal control system collectively have a significant effect on accountability in public parastatals (Nerantzidis et al., 2022).

CONCLUSION AND RECOMMENDATIONS

The findings conclude that internal auditing plays an essential role in enhancing the performance of local governments in Oyo State, Nigeria. Internal auditor quality, independence, and monitoring activities were all identified as significant contributors to improved governance, resource allocation, and service delivery. Among these, auditor independence emerged as the most impactful factor, reflecting its importance in promoting transparency, accountability, and effective decision-making. These results highlight the need for continued investment in strengthening internal audit functions to support the effective management and performance of local governments.

Based on the findings, the following recommendations are proposed:

To enhance the performance of local governments in Oyo State, Nigeria, it is essential to prioritize the development of internal auditor quality. Local governments should invest in ongoing training and professional development programs to equip auditors with the necessary skills and competencies to improve governance and service delivery effectively. Enhancing their expertise will enable them to better address the challenges faced by local governments.

Strengthening internal auditor independence is equally critical. Local governments should establish clear policies and frameworks that minimize external influences and safeguard the objectivity of internal auditors. Ensuring their autonomy will foster greater transparency, accountability, and effective decision-making processes, which are vital for achieving sustainable performance improvements.

Additionally, robust monitoring and control mechanisms should be implemented to optimize resource allocation and program execution. Regular evaluations of these processes can help identify gaps and weaknesses, enabling continuous improvement.

Lastly, a holistic approach to internal auditing should be adopted, integrating quality, independence, and monitoring activities into a unified framework. Establishing clear benchmarks and performance metrics will allow local governments to assess and enhance their audit effectiveness continuously.

Limitations of the Study

This study provides valuable insights into the role of internal auditing in enhancing local government performance but has certain limitations. First, the focus on Oyo State, Nigeria, may limit the generalizability of findings to other regions or countries with differing institutional structures. Second, reliance on self-reported data from auditors and officials introduces potential biases or inaccuracies. Third, external factors such as political interference, economic instability, and cultural dynamics were not considered, despite their potential influence on audit effectiveness. Lastly, the cross-sectional design restricts causal inferences and the ability to track performance changes over time.

Suggestions for Future Research

Future research should address these limitations and explore additional dimensions of internal auditing in local governments:

Broader Geographic Scope: Expand studies to multiple states or developing countries to enhance generalizability and provide a comprehensive understanding of internal auditing across diverse contexts.

Incorporating External Factors: Investigate how external factors like political interference, economic conditions, and cultural dynamics affect audit effectiveness for a more nuanced perspective.

Technological Integration: Explore the role of technology, including data analytics, AI, and blockchain, in enhancing audit efficiency and effectiveness within local governments.

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