Empirical Evidence of the Moderating Effect of Effective Audit Committee on Audit Experience in the Public Sector: Perception of Internal Auditors

Researches that focus on the moderating effect of effective audit committee within the public sector setting are very scanty or no attention has been given at all. Therefore, the objective of this study is to empirically examine the moderating effective of effective audit committee on the relationship between audit experience and internal audit effectiveness in the public sector using the perception of internal auditors. Data of the study were collected through research assistant employed, in which 300 questionnaire were sent to internal auditors in the North West geo-political zone local government in Nigeria. The study used simple random sampling technique; data were analyzed using Statistical Package for Social Science (SPSS) version 21. Descriptive statistic, factor analysis, correlation matrix and finally, hierarchical multiple regression analysis were carried out. The result findings of the analysis revealed that, audit experience has a significant positive relationship with internal audit effectiveness and effective audit committee were significantly moderates such relationship. Finally, conclusion was provided and the direction for future research was also provided. DOI: 10.5901/mjss.2014.v5n10p176


INTRODUCTION
within the world.That is why they finally recommend Internal auditors within the public sector are very effectiveness.significant tools that demand full consideration due to the Audit experience has become one of the factor to be effective role play in organizational survival.They review consider when it comes to internal audit effectiveness the activities of organizational operation with the aim of issues, because it enable the achievement of good quality ensuring their compliance with relevant organizational auditing and thereby leads to the provision of good policies and standard and thereby making good recommendation.In fact, experience auditor has the ability recommendation for their improvement.Nevertheless, of identifying the right information that will aid his within the past few decades, researches that focused on judgment [8].In line with this, audit experience has been the explanation of the current functions of the internal suggested as one of the auditing research area [9].audit within the world are very scanty [1,2].Despite the Therefore, future research isrequired to conduct research fact that it is very important to have an effective and on such audit experience [10].Even [11] calling for the efficient function of internal audit within an organization validation of such relationship empirically.Therefore, it [3].Because internal audit functions that are well perform, is important to empirically conduct research on the serve as an effective means for monitoring and promoting implication of audit experience on such audit system of good governance in any organization [4,5].
effectiveness.But then, such internal audit are been revealed by One of the essential aspects for ascertaining the literatureas not effective within the public sector effectiveness of internal audit is the nature of reporting organization [6,7].Even [2] acknowledged that, only few structure which required reporting to the audit committee studies conducted on such internal audit effectiveness directly [12][13][14][15].Audit committees are encouraged to more research to be conducted on internal audit perform essential functions so that internal auditor meets size that attained symposium in Malaysia.The study the required professional standard of independence, revealed thatshortage of audit staff is categorized as the integrity and objectivity [16].That is why, such audit major problem faced by internal auditors in conducting an committee are required to support their internal audit effective internal auditing and at the end they departments by way of ensuring conformity with IIA recommended more research on internal audit standards; setting clear performance expectations; making effectiveness [33].Equally conducted an empirical study sure all essentials resources are supplied to the on the effectiveness of internal auditing in Israeli department of internal audit so that to effectively organizations.The study employed the following discharge their responsibilities.Hence, internal audit variables in examining the internal audit effectiveness; functions that have full support of audit committee are sector -private versus public, professional proficiency of probable to be of highly objective and thereby enable internal auditors, quality of audit work, organizational good objective achievement of the internal auditors independence, career and advancement and finally top [2,17,18].management support.The study revealed that, support of Most of the research that has been conducted on management is almost crucial to the operation and effective audit committee give their concerned at private success of internal audit.And other determinants of sector, such as their implication with regard to financial internal audit effectiveness derive from support of top statement or audit fees [19][20][21][22][23][24].Even the limited study that management.The study recommended more research to focused on such moderating effect of effective audit be conducted on internal audit effectiveness.committee give concentration to such moderating effect [36] Carried out an empirical study on the on earnings management [20,25,12,16].However, effectiveness of internal audit as instrument of improving ignoring to study the moderating effect of such audit public sector management in Nigeria within the Kano state committee within the context of public sector, while public sector organization.The study finally showed that, concerned has been given that future research should pay internal audit can effectively check fraud and fraudulent maximum consideration on the operation of audit activities in the public sector and that public sectors in committee in the organizational and institutional Kano state have significant numbers of internal audit contextsand its interaction with other internal structures departments to function effectively.Likewise, [37] of an entity.In fact it should be primary subject of future conducted a literature review conceptual paper on the research [24,[26][27][28].Also [27] realized that only limited strengthening of internal audit effectiveness in Iran and research been conducted on the effect of audit committee finally the study concluded that most of the companies on internal control system, internal audit and risk measure and quantify the performance & effectiveness of management.However, it is important to empirically their business activities.In addition, [2] conducted examine the moderating effects of effective audit another conceptual study on internal audit effectiveness: committee [16].
An approach proposition to develop the theoretical In view of the above issues, the objective of this framework.The study concluded that sufficient theories study is to empirically examine the moderating effect of should be used toward supporting the internal audit effective audit committee on the relationship between effectiveness (the study utilized three theories, agency, audit experience and internal audit effectiveness in the institutional and communication theories).Finally, the public sector via the perception of internal auditors.study observed that only limited studies been conducted Section two of the paper presents the literature review and on internal audit effectiveness all over the world and hypothesis development, section three provides research thereby stressed the need for more future studies on such methodology, section four present the results and internal audit effectiveness.discussion and finally the conclusion.

Literature Review and Hypothesis Development
given due consideration for a longer period of time Internal Audit Effectiveness: As indicated above that [39].Even in the recent period, such research on audit only limited studies conducted on internal audit experience keeps receiving researchers concerned [40,41].effectiveness, take for instance among the recent one [29, This shows the important of audit experience, due to the 30, 31, 32, 33, 34, 35, 36, 37, 38, 11 and 2].For example, [29] fact that auditors that have well experience enable the conducted an empirical study on the effectiveness of provision of good quality audit findings and thereby internal audit in Malaysian public sector using few sample enable good recommendations.This is in line with [42] Audit Experience: Research in audit experience has been which observed that, various researches on experience Effective Audit Committee: More researchers concerned and expertise recommend that, an individual's knowledge are increasing recently on audit committee as one of the changes as experience broaden [43].Equally realized that, components of corporate governance [52,53,19].This is this knowledge advantage was as a result of the ability to because audit committee especially if they are effective, generate more likely explanations for audit findings.This plays important role in reducing corporate inefficiency led the earlier researchers on audit experience suggested [15].Even though is been argued that such audit that, when an auditors gain experience, it is an indication committee are unsuccessful in the protection of corporate that; they know more about errors; they have more failures as well as corporate irregularities [54].But then, accurate knowledge on error; they know more occasional consideration must be given toward encouraging their errors and the causes of errors [40][41][42][43][44][45].
effectiveness so that to enable corporate effectiveness As auditors gain experience, their knowledge and thereby enhance the effectiveness of internal structures become well developed [43,46,8].That is why auditors.Due to the fact thataudit committee can be seen even the public sector organizationsare required to recruit as a body that can be used to bring changes in an more experience auditors [47].Auditors that have well organization setting [15].Audit committee is effective experience are usually engage in different assignment and when they meet the goals for which they were established decision making [43].This indicates that audit experience which include the improvement of the entity's overall is an important factor to be considered by public sector governance [55].organization in determining the effectiveness of their Due to relevance of audit committee generally, internal audit effectiveness.
several countries have promulgate the establishment of Previous studies that have been conducted on audit audit committee in their various private and public experience focused on the effect of such experience on sectors in order to ensure effectiveness of activities [27].error discovery in the financial statement [e.g.48,44,8,43 Even Institute of Internal Auditors in their effort on and 49].While for the recent one that has been conducted improving the effectiveness of internal auditor, release a include [46, 45,40,41 and11]did not empirically investigate statement title the audit committee in the public sector in the effect of such experience on the effectiveness of 1991 which stipulate that:All public sector entity should internal auditors predominantly within the public sector have an establish audit committee that will ensure the setting.That is why [11] are even calling for the empirical effectiveness of internal auditors [14].The effectiveness validation of such relationship in different countries.
of audit committee needs to be evaluated from time to time Therefore, this study extends the previous studies by by various public sector organizations [56].In this vein, empirically examining such relationship within the public many governments established audit committee in order sector settingusing the perceptions of the internal to strengthen their internal audit and external audit auditors.
functions, financial management, financial reporting, Several researches has postulate that audit internal controls system and overall governance [55].experience can have impact on the of internal audit issues Hence, internal audit functions which have full [50, 8, 49, 51, 45, 10, 41 and 39].For example, auditors with concentration of audit committee are probable to be of more experience have a good comprehension of decision greater objective and thereby enable good objective process and placed greater reliance on the net income achievement of the internal auditors [2,17,18].variable [48].Likewise, earnings quality of both public and Most of the previous studies that has been private companies is increasing in auditor experience [51].
conducted on such audit committee concentrated on the In addition, [50] also noted some of the factors that impact of such audit committee on audit fees and error influence internal audit effectiveness include; experience, discovery in financial statement in the private sectors training, education and professional qualifications.such as companies [21,24,23,57,26,19,22].Even the one [43]Found that experience auditors have the ability to give that focused on the moderating effect of such audit more explanations of audit findings.Therefore, in view of committee concentrated on the moderating effect of such the above theoretical presumptions, the following committee on management earnings [12,20,16,25].There hypothesis is developed; by given limited or no attention to the moderating effect H1: Audit experience is significantly related to predominantly on internal audit effectiveness, while internal audit effectiveness in the public sector concerned has been given that future research should organization.
pay maximum consideration on the operation of audit of such committee in the public sector setting committee in the organizational and institutional The theory also contributes in the identification of contextsand its interaction with other internal structures relationship that is complex among variables i.e. examining of an entity.In fact it should be primary subject of future moderating or mediating effect of variables [63].This is in research [24,[26][27][28].Also [27] realized that only limited line with [64] which affirmed that moderating variables is research been conducted on the effect of audit committee the one which has strong contingent effect on the on internal control system, internal audit and risk relationship between independent and dependent management.However, it is important to empirically variables.Equally, the theory has been employed by examine the moderating effects of effective audit previous researchers in explaining some of the research committee [16].
variables [12].Even with regard to audit effectiveness the Therefore, in view of the above issue, this study theory has equally employed by previous researchers [9], extends the previous studies through investigating the as contingent variables can also differ [65].Therefore, this moderating effective of effective audit committee on the study posit that internal audit effectiveness in the public relationship between audit experience and internal audit sector organization is contingent upon the contingency effectiveness in the public sector using the perception of variables of; audit experience and the moderating effect of internal auditors.In this vein, literature made presumption effective audit committee on such relationship.that needs validation empirically particularly, that effective audit committee may strength the audit MATERIALS AND METHODS experience toward achieving better internal audit.For examples, [53] posited that audit committee should The data for this study were obtained through a strength both head of internal audit and internal audit survey questionnaire administered to the internal function in achieving a high level independence and auditorswithin the North West geo-political zones in objectivity, qualification and experience.Similarly, audit Nigeria.The population of the study is the entire local committee should continue monitor and ensure that government in the North West geo-political zones in internal auditors have required skills that might improve Nigeria.There are 186 local government in the North West their respective roles and responsibilities [18].Hence, geo-political zones in Nigeria, based on this population, internal audit functions which have full concentration of the sample size is 127 [66].To reduce the sample error in audit committee are probable to be of greater objective order to take care with non-response problem, the sample and thereby enable good objective achievement of the size has been increase to 300 [67].It is also recommended internal auditors [2, 17 and 18].Therefore, in view of the that the larger the sample size, the better [68].The above issues, the following hypothesis is formulated.
sampling technique was simple random sampling, in which H2: Effective audit committee seems to moderate the selected as a sample, it has least bias and offer the most relationship between audit experience and internal audit generalizability [64].The data were administered and effectiveness in the public sector organizations.
collected through research assistant employed so that to Contingency Theory: Contingency theory of [58] is been questionnaire and equally to provide high responds rate.employ as the underpinning theory for the research due Therefore, out of 300 questionnaires distributed, 230 were to the fact that, the theory isone of those theory that are fully completed and returned which represent 77% recently been employed in the research area of responds rate.A response rate of 30% is acceptable for management accounting and auditing [59,60].Even survey [67].though, the use of theory may have different effect and equally it effectiveness depend upon the field that is been Measurement of Research Variables proposed [61].Nevertheless, contingency theory enables Dependent Variable: a researcher to systematically introduce factors to explain Internal Audit Effectiveness: Internal audit effectiveness or predict expected phenomena [62].The theory enable is the ability of the internal auditors to achieved hypothesize a conditional relationship between two or established objective of the internal audit function.This more independent variables with a dependent variable and variable is the dependent variable; the variable is subject it to an empirical validation [61].
measured by 9 items adapted with some modification [69].every element in the population has equal chance of been facilitate quick retrieval of completed research Audit Experience: Is the independent variable and it RESULT AND DISCUSSIONS refers to different kind of knowledge and skills which the auditor obtains as a result in length of tenure on the job Descriptive Statistic: Table 1.0 present the background practice in the auditing professions which enhance his information of the respondents, the result revealed that effectiveness.Therefore, this variable is measured with 5 74.8% of the respondents are male while 25.2% of the items as adapted with some modification [70].
respondents are female; this implies that the male Effective Audit Committee: Is the moderating variable and Descriptive statistic result indicated that 27.4% of the it refers to the ability of the audit committee to achieve respondents are within the age of 30 -35 years old which established objective as well as strengthen the audit implies that the majority of respondents are within the experience toward the achievement of internal audit productive age of the entire population which their effectiveness.Therefore, this variable is measured with 6 responses can equally be fair.With regard to highest items as adapted with some modification [55,25,57].
school qualification, the result showed that majority of the Thus, five -point type rating scale, ranging from respondents are within diploma/ NCE certificates which strongly agree to strongly disagree has been used in represent 47.4%.Majority of the respondents have no measuring the responses of the entire questions.This is professional certificate as revealed by descriptive statistic because several researchers has make used of this scale result with 78.7%.Finally, the result equally displayed that due to its easier for respondents to understand, hence, majority of the respondents have enough working responses from five point scale are probably to be reliable experience as showed in table 1.0 which represent 32.2% [22, 35 and71].Face and content validity of the instrument Table 2 above provided the results for both factor was carried out through meeting with the expert on the loadings and Cronbach alpha.It can be seen from the field in order to ensure that those items that contain in the Table that the factor loading of the variables range from instrument actually belong to that particular instrument.0.60 -0.95.Hence, it is an indication of construct validity The expert contacted consisted of academic staff in [67].The cronbach alpha value indicates the constructs Nigerian Institutions, Auditor General for Local reliability because the value range from 0.71 -0.80.Hence Government in Nigeria, internal auditors at state and local is indicating that scales of all measures appear to produce government in Nigeria, so that to improve the validity of internally consistent results [67]. the instrument.To this end, after taking note on the expert The correlation analysis of the variables under study observation, a revised version of the instrument was made was subjected to a two-tailed test of statistical which result to some questions were re-worded in order to significance at two different level; significant (p<0.01) and measure the constructs appropriately, so that to enable significant (p<0.05).Table 3 above shows that clear understanding by the potential respondents, which correlations between all variables under study are thereafter administered for pilot study.The reliability of statistically significant at (p< 0.01) respectively.It can the pilot study was all above 0.7 which indicate the also be seen from the same Table 3 that the correlation of reliability of the measurement [67].
the variables ranges from 0.281 to 0.343.Hence, the

Method of Data Analysis:
The data were analyzed using Table 4 above displayed the result of regression SPSS version 21, hence descriptive statistic was carried analysis of the relationship between audit experience and out, factor analysis was equally carried out so that to internal audit effectiveness and the moderating effect of reduce the items into more manageable number [68].After effective audit committee.Audit experience has significant the factor analysis, the items remain for each variable positive relationship with internal audit effectiveness ( certified the requirement of factor analysis, such as KMO =.247, t = 3.100, p =.002).This implies that, the more the >0.5, Bartlett's test of Sphericity p< 0.05 or smaller, experience of the internal auditor the greater his communalities >0.5, factor loading above >0.5 [67].As you effectiveness will be.In other word, those internal can see the factor loadings and the cronbach alpha of the auditors that have auditing experience can easily find it variables in Table 2, correlation matrix has been carried easier to achieve their respective objective.This finding out and lastly, hierarchical multiple regression analysis is in line with the findings of [72] who found that internal was then conducted.
auditors that have more experience have a higher success respondents outweigh the female respondents.
problem of multicollinearity is not there.
Step 1 Step2 Step level in consultant and governance roles than the less experience one.At the same time, in order to achieve effective audit outcomes, audit experience is the main driver & determiner because it has influence on audit effectiveness [45].Hence, H1 is supported Equally,Table 4 above revealed the significant of moderating effect of effective audit committee on the relationship between audit experience and internal audit effectiveness ( = -.157,t = -4.378,p =.000).This finding entails that, organization that have experience auditors would also need a strong support of effective audit committee that would assist toward the effectiveness of internal auditors.This is in line with prior studies, for example, [73] suggested that audit committees are required to support their internal audit departments by way of ensuring conformity with IIA standards; setting clear performance expectations; making sure that the department has all the necessary resources to meet their responsibilities.Equally, the finding of [30] and [2] revealed that, present of an effective audit committee in organization strength the effectiveness of internal auditors.Thus, H2 is supported.

Table 2 :
Results of Measure Validation

Table 4 :
Hierarchical regression result of the moderating effect of effective audit committee on the relationship between audit experience and internal audit effectivenessDependent Variable: IAE of audit experience on the internal (TSE).International Journal of Advances in audit effectiveness and the moderating effect of effective Management and Economics, 2(1): 77-82.audit committee on such relationship.This implies that, 6. Salawu, R.S. and O. Agbeja, 2007.Auditing and for public sector organization to attain the effectiveness accountability in the public sector.International of their internal audit, such audit experience and effective Journal of Applied Economics and Finance, audit committee need to be given due consideration.Some 1(1): 45-54. of the limitation of the study includes; collecting data 7. Emmanuel, O.E., M.A. Ajanya and F. Audu, 2013.An from local government only even though is part of the assessment of internal control Audit on the public sector setting, the research was based on cross-efficiency of Public sector in Kogi State Nigeria.sectional and the finding cannot be generalized due to Mediterranean Journal of Social Sciences, 4(11): different setting of various public sector organization 717-726.internal audits in different countries.8. Bonner, S.E., 1990.Experience effects in auditing: The Despite the above limitations, the study contributed role of task-specific knowledge.The Accounting to internal audit effectiveness by providing empirical Review, 65(1): 72-92.evidence of audit experience and effective audit committee 9. Sudsomboon, S. and P. Ussahawanitchakit, 2009.on internal audit effectiveness, which previous studies Professional audit competencies: the effects On has notempirically investigated in examining the internal Thai's CPAS audit quality, reputation and audit effectiveness.Therefore, more research are require success.Review of Business Research, 9(3): 66-85.to be conducted on internal audit effectiveness 10.Ussahawanitchakit, P., 2012.Audit independence of particularly in the public sector setting because literature tax auditors in Thailand: Roles of ethical orientation, has showed limited study and reporting of internal audit professional responsibility, stakeholder pressure and within the context of various public sector setting.Future audit experience.Journal of Academy of Business studies should incorporate different significant theories and Economics, 12(1): 1-11. in explaining the effectiveness of internal audit.11.Badara, M.S. and S.Z.Saidin, 2013.The relationship