Factors Determining Effectiveness of Internal Audit in Commercial Banks: The Case of Study (Commercial Banks of Herat-Afghanistan)

Abstract

Internal audit plays a major role in enabling an institution to achieve its goals when properly implemented, operated, and managed. To take corrective measures and strengthen procedures, companies that implemented, operated and managed internal auditing successfully became more able to recognize their business threats and inefficiencies in the system. The overall goal of the paper is to recognize factors influencing the effectiveness of internal audit in commercial banks of Herat-Afghanistan. At the moment, 13 banks are operating in Afghanistan including DAB (Central Bank of Afghanistan) DAB (2020), three state-owned banks (Bank Millie Afghan, Pashtany Bank, New Kabul Bank), seven private or commercial banks (Azizi Bank, Afghanistan International Bank, Islamic Bank of Afghanistan, Maiwand Bank, Afghan United Bank, The First MicroFinance Bank, Ghazanfar Bank) and two branches of foreign banks (Bank Alfalah ltd, National Bank of Pakistan) with the total number of 158 internal auditors. Therefore, internal auditors of Afghanistan commercial banks are the population for this research. 158 questionnaires were allocated to 12 commercial banks for the purpose; the analysis followed a form of research by using quantitative methods of research. The study tool used in quantitative terminology through self-administered questionnaires. These questionnaires were prepared on a 5 point Likert- scale, distributed to the Afghanistan Commercial Banks’ internal auditors and analyzed using the SPSS statistical software. Based on the research results; Management commitment and supports had a positive relationship with the efficacy of the internal audit regarding value-adding, improving departmental performance, and improving organizational efficiency, with clear and statistically significant consequences. In this respect, the only determining factor of the effectiveness of the Internal Audit of commercial banks in Herat-Afghanistan was management support.