Internal audit function worldwide has received increasing attention, as an important component of public internal financial control and as a management tool for improving public sector performance. As a number of changes are currently taking place in the local governance in Albania, there is no doubt that internal audit function within municipalities, has to increase its profile in the coming years. The purpose of this paper is to provide an analysis of the effectiveness of internal audit within the local government, based on four determinants of effectiveness of this function: management support, independence, professional qualification and the quality of the audit reports. Findings of this paper indicate that strengthening internal audit function will be a challenge for the municipalities, as the benefits from this function are not yet well understood at the management level. The paper is concluded with the main issues to be addressed and practical solutions are provided.
Key words Municipalities, public sector, internal audit.
JEL classification H7, H8, M4
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