Internal auditing as a corporate governance mechanism : a comparison between public sector and private sector functions

Abstract

Internal auditing has progressively gained prominence as a corporate governance mechanism. There are some important differences between internal audit practices in the private sector and their counterparts in the public sector, but changes in the public sector have arguably reduced these differences, especially with regard to governance. This study compares specific dimensions of a public and a private sector internal audit function as a component of a more comprehensive corporate governance mechanism, in the context of public sector reforms, including the adoption of governance and management frameworks originating in the private sector. The study is based on primary and secondary data, drawing on the views of similar stakeholders. The findings of the study support the view that even though internal audit functions in South African national departments are perceived to be valid corporate governance mechanisms, they are not yet as well established as those of the listed companies in South Africa selected for this study. The elements where the internal audit functions of the public sector were found to be lacking highlight areas where improvements are needed to achieve a well-established internal audit function as an effective public sector corporate governance mechanism.