English

Abdikadir Mohamud Isse,Dahir Salad Mahad

doi:10.5897/ajbm2013.7136

Abstract

The purpose of this study was to investigate the relationship between internal auditing and operational risk in Somalia since in my best knowledge there is no study examined the relationship between internal auditing and operational risk in Somalia. Five remittance companies were selected as a sample and self-administered questionnaire was distributed 80 employees of these companies, these employees contained internal auditors, operational managers, and financial mangers. Descriptive statistics was used firstly for the data description of the variable using mean and standard deviation, and then correlations of the variables were presented based on Pearson correlations. The findings of this study include that Somali Remittance Company’s risk identification is weak, weak segregation of duties, no identity of previous incurred risks, reporting behind the schedule and impaired internal audit independence, which highlighted broad operational risk in the remittance companies. As a whole the study found that internal audit and operational risk have significant negative relationship (r=-0.0.15 and P=0.893) with Cranach’s alpha of 0.90 or 90%. Key words: Internal auditing, internal control, Remittance firms, Somalia.

Highlights

Introductions to the variableInternal auditingInternal audit is an independent, objective assurance activity and can provide valuable insight in providing assurance that major business risks are being managed appropriately and the risk management and internal control framework is operating effectively (Gerrit and Ignace, 2006).Operational risk managementOperational risk is the risk of loss arising from various types of human or technical errors (Linsley, 2006)
Of the respondents were female, this indicates that gender balance in remittance companies shifts to men, female groups hold inferior jobs and are less likely persuading jobs by getting the administration of their homes and children, on the other hand male are mostly the bread winner of their families, this causes the tendency of the male to the jobs in Somalia
The respondents were asked to demonstrate their office on work (Table 4). 26.25% of the respondents worked on internal audit office, 61.25% of the respondents worked on finance office, most of the respondents work in fiancé office, they may be accountants, cashiers and counters or other tasks, while the rest of the 12.5% worked on operation office

Summary

Introduction

Internal audit is an independent, objective assurance activity and can provide valuable insight in providing assurance that major business risks are being managed appropriately and the risk management and internal control framework is operating effectively (Gerrit and Ignace, 2006). Operational risk is the risk of loss arising from various types of human or technical errors (Linsley, 2006). The process of managing or reducing risks arising from human and the technical errors is called operational risk management (ibid). Operational risk comes from three areas which are: a) People risk; which includes human error, lack of experts, lack of compliance, and fraud b) Process risk; which includes new products or services as well as insufficient controls c) System risk: it is technological risk (Francais, 2010)

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Conclusion