Internal audit public sector capability: a case study

• Date: 01 May 2016
• DOI: http://doi.org/10.1002/pa.1574
• Published date: 01 May 2016
• Author: Philna Coetzee,Jacobus Oosthuizen Janse van Rensburg

■Academic Paper

Internal audit public sector capability: a

case study

Jacobus Oosthuizen Janse van Rensburg

1

and Philna Coetzee

2

*

1

Department of Auditing, University of Pretoria, Pretoria, Gauteng, South Africa

2

Department of Auditing, Tshwane University of Technology, Pretoria, Gauteng, South Africa

Internal auditing is an essential part of governance and can be a valuable asset to public sector institutions. However,

for public sector internal auditing to effectively support management, the internal audit function (IAF) should be

capable. The question arises as to how the capability of public sector IAFs can be measured. The Institute of Internal

Auditors Research Foundation published the Internal Audit Capability Model (IA-CM) in 2009 to provide a capability

self-assessment tool for public sector IAFs. The main objective of the study is to determine whether the IA-CM can be

used successfully to measure internal audit capability levels, and a secondary objective is to determine whether the

tool can be successfully adapted for a specific public sector organisation and/or country. To achieve these objectives,

the model was applied in a South African public sector organisation by means of a case study, where the IAF of the

case was ranked against the key process areas (KPAs) of the model. The ranking was conducted based on a documen-

tary review and interviews with applicable officials within the case. The model was successfully tested in measuring

the internal audit capability level of a South African public sector organisation; however, a total of eight potential

feasibility hindrances or considerations have been identified that could negatively affect the implementation of seven

of the KPAs of the IA-CM. Copyright © 2015 John Wiley & Sons, Ltd.

INTRODUCTION

No nation can function in an orderly manner with-

out an effective government. The citizens of a coun-

try cannot fulfil all their needs in an individual

capacity and are dependent on their government

for many basic infrastructural needs. There are

many critical success factors that should be in place

for a government to be effective, two of which are

sound public administration policies and gover-

nance structures. The core components of sound

governance relate to good leadership, stakeholder

engagement, sustainability and citizenship (OECD,

2004; IOD, 2009; ASX, 2010: 10–12; FRC, 2010: 6–7).

An essential contributor to sound governance is

internal auditing (OECD, 2004: 62; IOD, 2009: 93;

ASX, 2010: 34). In its role as independent evaluator

in terms of the assurance and consulting services

that it provides, internal auditing should be an inte-

gral part of any organisation’s governance structure

(IIA, 2012; IOD, 2009: 17, 93), not only in the private

sector, but also the public sector (Subramaniam, Ng

& Carey, 2004: 87; Khoury, 2011: 45).

For internal auditors to perform their role effec-

tively within the public sector governance arena,

they have to be sufficiently capable in terms of their

mandate and objectives (Van Gansberghe, 2005: 70;

Mihret & Yismaw, 2007: 472; Asare, 2009: 22–23;

IIARF, 2009: 1; Aikins, 2011: 333). Capability is

defined as the measurement of the ability of a de-

partment organisation, person or system to achieve

objectives related to its mission (Mihret & Yismaw,

2007: 471; Businessdictionary.com,2015). As the main

mission of internal auditing is to assist management

in achieving its objectives and to add value by inde-

pendently evaluating the adequacy and effective-

ness of governance, risk management and control

processes (IIA, 2011: 2), the capability of internal

*Correspondence to: Jacobus Janse van Rensburg, Department of

Auditing, University of Pretoria, Pretoria, Gauteng, South Africa.

E-mail: cobus.jansevanrensburg@up.ac.za

Journal of Public Affairs

Volume 16 Number 2 pp 181–191 (2016)

Published online 19 June 2015 in Wiley Online Library

(www.wileyonlinelibrary.com) DOI: 10.1002/pa.1574

Copyright © 2015 John Wiley & Sons, Ltd.