Modeling the implications of internal audit effectiveness on value for money and sustainable procurement performance: An application of structural equation modeling

Figures & data

Figure 1. Research framework.

Note: IA = Internal Audit

Table 1. Respondent’s demographic characteristics

Variables	Freq. (%)
Gender
Male	72(53.3%)
Female	63(46.7%)
Age
20–29	30(22.2%)
30–39	55(40.7%)
40–49	38(28.1%)
50+	12(8.9%)
Education Qualification
Bachelor’s Degree	77(57.0%)
Diploma/HND	11(8.1%)
Masters’ Degree	47(34.8%)
Years worked in the Public Sector
1–5 years	54(40.0%)
5–10 years	35(25.9%)
Less than one year	20(14.8%)
More than 10 years	26(19.3%)
Job Designation
Accountants	14(10.4%)
Finance Officer	33(24.4%)
Internal Auditors	47(34.8%)
Procurement officers	41(30.4%)

Source: Authors estimation

Table 2. Descriptive statistics

Variable	Indicator	Mean value	Composite Mean	Standard Deviation	Min	Max
TMS	TMS1	3.015	3.198	1.430	1.000	5.000
	TMS2	2.978		1.374	1.000	5.000
	TMS3	3.089		1.363	1.000	5.000
	TMS4	3.467		1.240	1.000	5.000
	TMS5	3.444		1.423	1.000	5.000
Competency of Internal Audit	COM1	3.941	3.829	1.024	1.000	5.000
	COM2	3.778		0.916	1.000	5.000
	COM3	4.000		1.135	1.000	5.000
	COM4	3.600		1.123	1.000	5.000
External Auditors Role	EAR1	3.926	3.946	0.875	2.000	5.000
	EAR2	3.770		1.128	1.000	5.000
	EAR3	3.911		0.839	1.000	5.000
	EAR4	4.222		0.786	3.000	5.000
	EAR5	3.904		1.025	1.000	5.000
Internal Audit Effectiveness	IAE2	3.593	3.701	1.231	1.000	5.000
	IAE4	3.689		1.092	1.000	5.000
	IAE1	3.807		1.151	1.000	5.000
	IAE3	3.719		1.052	2.000	5.000
Independency of IA	IND1	4.044	4.037	0.842	2.000	5.000
	IND2	4.444		0.717	3.000	5.000
	IND3	4.037		0.954	1.000	5.000
	IND4	3.622		1.160	1.000	5.000
Sustainable Procurement	SP1	4.356	4.134	0.672	2.000	5.000
	SP2	4.052		0.846	2.000	5.000
	SP3			0.760	3.000	5.000
	SP4	4.178		0.769	3.000	5.000
	SP5	4.333		0.760	2.000	5.000
	SP6	3.889		0.900	1.000	5.000
Value for Money	VFM1	3.548	3.661	1.287	1.000	5.000
	VFM2	3.696		1.117	1.000	5.000
	VFM3	3.563		1.030	1.000	5.000
	VFM4	3.837		1.110	1.000	5.000

Source: Authors Estimation Using Smart PLS

Table 3. Scale validation-reliability and validity Fornell–Larcker criterion

	CA	CR	AVE	COM	EAR	IIA	IAE	SP	TMS	VFM
COM	0.820	0.880	0.648	0.805
EAR	0.776	0.849	0.531	0.351	0.728
IIA	0.697	0.816	0.527	0.238	0.462	0.726
IAE	0.901	0.931	0.772	0.394	0.663	0.499	0.879
SP	0.835	0.880	0.554	0.605	0.558	0.686	0.551	0.744
TMS	0.917	0.937	0.748	−0.101	−0.052	−0.122	−0.227	−0.179	0.865
VFM	0.802	0.870	0.631	0.281	0.673	0.578	0.743	0.550	−0.254	0.794

Source: Authors Estimation Using Smart PLS: Note: Italics values in the diagonal row are square roots of the AVE CA = Cronbach Alpha; CR = Composite Reliability; AVE = Average Variance Extracted; COM = Competency of IA; EAR = External Auditors Role; IIA = Independence of Internal Audit; IAE = Internal Audit Effectiveness; SP = Sustainable Procurement; TMS = TMS; VFM = Value for Money; Italics values in the diagonal row are square roots of the AVE

Table 4. Heterotrait-monotrait test ratio using Henseler et al., 2015)

Constructs	CIA	EAR	IIA	IAE	SP	TMS	VFM
Competency of IA
External Auditors Role	0.454
Independency of IA	0.391	0.640
Internal Audit Effectiveness	0.439	0.776	0.623
Sustainable Procurement	0.711	0.674	0.592	0.619
TMS	0.146	0.187	0.188	0.234	0.222
Value for Money	0.352	0.540	0.730	0.764	0.646	0.289

Source: Authors Estimation Using Smart PLS: CIA = Competency of IA; EAR = External Auditors Role; IIA = Independency of Internal Audit; IAE = Internal Audit Effectiveness; SP = Sustainable Procurement; TMS = TMS; VFM = Value for Money

Figure 2. Path coefficients showing T-values.

Table 5. Cross-loadings

	COM	EAR	IIA	IAE	SP	TMS	VFM
TMS1	−0.138	−0.032	−0.113	−0.251	−0.265	0.847	−0.151
TMS2	−0.106	−0.135	−0.099	−0.275	−0.204	0.889	−0.281
TMS3	0.011	−0.039	−0.162	−0.156	−0.075	0.924	−0.266
TMS4	−0.122	−0.033	−0.098	−0.130	−0.115	0.828	−0.206
TMS5	−0.092	0.105	−0.024	−0.103	−0.073	0.832	−0.146
COM1	0.764	0.241	0.189	0.262	0.380	−0.156	0.136
COM2	0.794	0.300	0.108	0.303	0.547	−0.135	0.167
COM3	0.808	0.296	0.120	0.287	0.404	−0.045	0.253
COM4	0.852	0.293	0.311	0.392	0.579	−0.018	0.315
EAR1	0.435	0.773	0.336	0.494	0.556	−0.136	0.433
EAR2	0.139	0.759	0.372	0.480	0.371	−0.024	0.519
EAR3	0.195	0.707	0.261	0.385	0.191	−0.033	0.438
EAR4	0.421	0.818	0.352	0.589	0.543	−0.039	0.511
EAR5	0.070	0.773	0.347	0.435	0.327	0.039	0.536
IAE2	0.405	0.670	0.487	0.897	0.567	−0.259	0.656
IAE4	0.398	0.538	0.440	0.874	0.494	−0.130	0.729
IEA1	0.209	0.458	0.393	0.821	0.362	−0.238	0.552
IEA3	0.344	0.638	0.428	0.919	0.489	−0.176	0.658
IND1	0.539	0.380	0.702	0.398	0.758	−0.087	0.360
IND2	0.070	0.379	0.831	0.465	0.584	−0.034	0.392
IND3	0.138	0.447	0.799	0.264	0.422	−0.158	0.455
IND4	−0.035	0.144	0.761	0.310	0.229	−0.084	0.473
SP1	0.440	0.455	0.490	0.434	0.689	−0.205	0.424
SP2	0.412	0.394	0.680	0.452	0.762	−0.264	0.387
SP3	0.373	0.460	0.545	0.415	0.803	−0.066	0.430
SP4	0.636	0.470	0.616	0.510	0.882	−0.036	0.451
SP5	0.357	0.236	0.373	0.263	0.708	−0.106	0.369
SP6	0.447	0.444	0.305	0.342	0.789	−0.136	0.393
VFM1	0.287	0.432	0.013	0.498	0.266	−0.131	0.799
VFM2	0.198	0.671	0.693	0.634	0.511	−0.154	0.857
VFM3	0.126	0.470	0.431	0.543	0.315	−0.321	0.841
VFM4	0.299	0.534	0.516	0.666	0.574	−0.214	0.852

Source: Authors Estimation Using Smart PLS: COM = Competency of IA; EAR = External Auditors Role; IIA = Independency of IAE = Internal Audit Effectiveness; SP = Sustainable Procurement; TMP = TMS; VFM = Value for Money

Table 6. Output of variance inflation factor (VIF) test

	VIF
TMS1	2.669
TMS2	2.924
TMS3	1.602
TMS4	3.356
TMS5	3.303
COM1	1.628
COM2	1.664
COM3	1.798
COM4	1.800
EAR1	1.855
EAR2	1.281
EAR3	1.547
EAR4	1.979
EAR5	1.409
IAE2	3.101
IAE4	3.043
IAE1	2.247
IAE3	4.071
IND1	1.706
IND2	1.955
IND3	1.314
IND4	1.318
SP1	1.557
SP2	1.813
SP3	2.089
SP4	2.742
SP5	1.457
SP6	1.628
VFM1	1.347
VFM2	2.261
VFM3	2.222
VFM4	1.868

Source: Authors Estimation Using Smart PLS: COM = Competency of IA; TMS = TMS; EAR = External Auditors Role; IAE = Internal Audit Effectiveness; IND = Independency of Internal Audit; SP = Sustainable Procurement; VFM = Value for Money

Table 7. Structural model and hypotheses testing

Hypothesis			Path	Beta	Sample Mean	Standard Deviation	T-statistics	P-value	Decision
Direct Effect
H1			CIA -> IAE	0.151	0.156	0.064	2.353	0.019	Supported
H2			EAR -> IAE	0.504	0.500	0.084	6.010	0.000	Supported
H3			IIA -> IAE	0.211	0.294	0.062	4.706	0.000	Supported
H4			TMS -> IAE	−0.159	0.218	0.097	2.185	0.029	Supported
H5			IIA -> VFM	0.223	0.223	0.081	2.763	0.006	Supported
H6			EAR -> VFM	0.292	0.323	0.150	2.118	0.035	Supported
H7			TMS -> VFM	−0.119	0.409	0.072	5.723	0.000	Supported
H8			IAE -> VFM	0.411	−0.160	0.052	3.073	0.002	Supported
H9			IAE -> SP	0.318	−0.117	0.049	2.443	0.015	Supported
H10			VFM -> SP	0.314	0.320	0.142	2.205	0.028	Supported
Indirect Effect (IAE As a Mediator)
H11			CIA -> IAE -> VFM	0.062	0.064	0.029	2.133	0.033	Supported
H12			IIA -> IAE -> VFM	0.087	0.089	0.044	1.987	0.047	Supported
H13			TMS -> IAE -> VFM	−0.065	−0.065	0.025	2.606	0.009	Supported
H14			EAR->IAE->VFM	0.207	0.204	0.050	4.142	0.000	Supported
Indirect Effect (VFM As a Mediator)
H15			IAE->VFM->SP	0.129	0.128	0.059	2.186	0.029	Supported
H16			IIA->VFM->SP	0.070	0.077	0.051	1.376	0.170	Not Supported
H17			EAR->VFM->SP	0.092	0.092	0.044	2.097	0.036	Supported
H18			TMS->VFM->SP	−0.037	−0.037	0.022	1.678	0.094	Not Supported

Source: Authors Estimation Using Smart PLS: CIA = Competency of IA; EAR = External Auditors Role; IIA = Independency of IAE = Internal Audit Effectiveness; SP = Sustainable Procurement; TMP = TMS; VFM = Value

Table 8. Construct cross-validated redundancy

	SSO	SSE	Q^2 (=1-SSE/SSO)
Competency of IA	540.000	540.000
External Auditors Role	675.000	675.000
Independency of IA	540.000	540.000
Internal Audit Effectiveness	540.000	324.043	0.400
Sustainable Procurement	810.000	659.635	0.186
TMS	675.000	675.000
Value for Money	540.000	323.730	0.400

Authors Estimation Using Smart PLS

Table

Indicate your Gender	[] Male; [] Female
(2) Indicate your Age	[]<20; [] 20–29; [] 30–39; [] 40–19; [] 50+
(3) Indicate your highest education qualification	[] Diploma/HND; [] Bachelor’s Degree; [] Masters’ Degree []
(4) How long have you been working in this position	[] Less than one year; [] 1–5 years; [] 5–10 years; [] More than 10 years
(5) What is your current Job Designation	[] Accountants; []Finance Officer; [] Internal Auditors; [] Procurement Officers

Table

Statements	1	2	3	4	5
Internal audit staffs are sufficiently independent to perform their professional obligations and duties.
(2) The internal audit department has direct contact with senior management other than the finance director
(3) Internal auditors rarely face interference by management while they conduct their work
(4) Internal audit staff have free access to all departments and employees in the organization

Table

Statements	1	2	3	4	5
(1) Senior management provides the needed encouragement to the internal audit to perform its duties and responsibilities
(2) Internal audit unit has the required number of staff to successfully carry out its duties and responsibilities
(3) Senior management are involved in the internal audit plan
(4) The response to internal audit reports by the senior management is reasonable
(5) Management provides assistance and encouragement for training and development for Internal Audit staff

Table

Statements	1	2	3	4	5
(1) Internal auditors are proactive
(2) The professional knowledge of internal auditors is high
(3) Internal auditors are considered as professionals
(4) There is communication between internal and auditors and auditees

Table

Statements	1	2	3	4	5
(1) External auditors are friendly and supportive
(2) External auditors have a good attitude towards internal auditors
(3) External auditors are willing to give internal auditors an opportunity to explain their concerns
(4) External and internal auditors consult on the timing of work in which they have a mutual interest
(5) External auditors discuss their plans with internal audit

Table

Statements	1	2	3	4	5
(1) Internal audit is performed in accordance with the IIA Standards
(2) Internal audit develops a risk-based annual plan
(3) Internal audit communicates timely the engagement results
(4) Internal audit improves the effectiveness of internal control process

Table

Statements	1	2	3	4	5
(1) We have taken action to develop procurement policies that consider sustainability
(2) Our organization favor suppliers that rate highly on sustainability during the tender process
(3) We have a written procurement policy stating our commitment to purchasing sustainable goods & services
(4) My organization has integrated sustainability into its procurement process
(5) My organization specifies sustainability criteria in its contract notices
(6) We have made our suppliers aware of our sustainable procurement policy and practices

Table

Statements	1	2	3	4	5
(1) There are criteria for the selection of suppliers set and agreed by all the parties
(2) There is regular procurement audits and monitoring for compliance with procurement activities in the organisation
(3) There is strong or consistent enforcement of the prevailing rules and regulations
(4) There are punitive sanctions to procurement officials who fail to comply with the procurement activities in the organisation

Henseler, J., Ringle, M. C., & Sarstedt, M. (2015). A new criterion for assessing Discriminant validity in variance-based structural equation modeling. Journal of the Academy of Marketing Science, 43(1), 115–135. https://doi.org/10.1007/s11747-014-0403-8

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