Internal Audit Practices and Financial Management Reforms: The Case of Payroll Accounting System in the Tanzania Public Sector

Abstract

Several initiatives as part of the public sector financial management reforms to improve the payroll system in Tanzania were introduced. Despite such initiatives, different cases of fraudulent were reported which raised the need for examining the influence of internal audit practices on the payroll accounting performance. The article involved 240 respondents from 321 public institutions. Stratified sampling technique and questionnaires were used as sampling technique and data collection instrument respectively while structural equation model (SEM) and Mean were used in data analysis. Focusing on the institutional theory and contingency theory, the results revealed that control environment had significantly positive influence on payroll record processing while risk-based internal audit had significantly positive influence on payroll reconciliation. Internal auditors’ professional competence had significantly positive influence on payroll reconciliation, payroll record processing and payroll accounting system coverage. Furthermore, internal audit work performance had significantly positive influence on payroll reconciliation and payroll accounting system coverage. Among others, the article recommends that managers should consider internal audit function as a strategic function and not operational to strengthen the payroll accounting system.