ABSTRACT The research was based on Internal Audit Systems and Ferfbrmance ofLocal Governments in Uganda. The purpose ofthis study was to establish the effrctiveness of internal Audit systems in the financial performance of local governments in Uganda. The study involved secondary sources qf data where the research related his study to dUferent author ‘s work and authentication and afterwards he made conclusions. The study used a descriptive research design in which both qualitative and quantitative techniques were used. The target population was all employees at the district in different departments. The study therefore used a sample of sixty eight people (68) respondents from allover the district. It employed a stratified probability sampling technique to avoid bias in data presentation. This study used both primary and secondary sources which all involved data from the field and literature already written by other authors. Due to limited time the researcher used questionnaires (respondent ‘s fill-in what they knew about the topic in regard with the formulated questions) and interviews (face to face narration). After data collection, it was ethically analyzed by use offrequency tables andpercentages. The findings revealed that male participated more in the study with a percentage of 58and 42% for female respectively, people aged 30 — 35 participated more in the study with a 35% response, married respondents participated more with a percentage of 68%, most ofthe respondents had diploma awards with a 52% response and most of them were civil servants (5 7.5%,). The study findings depicted that financial performance (95%,) is related to internal audit. Further Internal audit system is mostly characterized by having well trained and competent auditors. Objective two analyzed that internal audit in accountability ofpublic funds mostly ensures effective and efficient use of public resources (30) and the internal audit system is challenged by less developed human capacity(28.8%), limited competence resulting from professionalization hardships (17.8%) and limited communication between auditors and managers(20%). The study therefore concluded that political interference, corruption, conflict of interest, inadequate skills, inadequate ii’~formalion, inadequate funds, and improper communication flow are the major challenged faced by internal audit andfinancial performance of Sheema local government. Therefore the study recommended that local governments’ employees should always follow the drafted workplan in the departments ifthe auditing is to be effective.

TABLE OF CONTENTS

DECLARATION

APPROVAL ii

DEDICATION iii

ACKNOWLEDGEMENT iv

LIST OF FIGURES ix

ABSTRACT x

CHAPTER ONE 1

INTRODUCTION 1

1.1 Background of the study 1

1. 2 Statement of the problem 7

1.3. Purpose of the study 7

1.4 Objectives of the study 7

1.5 Research questions 8

1.6 Scope of the study 8

1.6.1 Geographical scope 8

1.6.2 Content scope 8

1.7. Significance of the study 8

1.8 Conceptual framework 10

CHAPTER TWO 11

LITERATURE REVIEW 11

2.0 Introduction 11

2.1 The concept of Internal Audit 11

2.2 Relationship between Internal Audit and performance in local government 11

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2.3 The Nature of Internal Audit and performance in local governments 12

2.4 Challenges to internal audit and performance in local government 15

2.5 Measures to the challenges faced by internal audit and performance of local governments

16

CHAPTER THREE 18

METHODOLOGY 18

3.0 Introduction 18

3.1 Research Design 18

3.2. Study Variables 18

3.3. Study Population 18

3.4 Sampling method 19

3.5 Instruments of data collection 20

3.5.1 Documentation!secondary data 20

3.5.2 Questionnaire 20

3.6 Data Analysis and presentation 20

3.7 Validity and Reliability of the Questionnaire 21

3.8 Limitations of the study 21

CHAPTER FOUR 22

PRESENTATION, ANALYSIS AND INTERPRETATION OF FINDINGS 22

4.0 Introduction 22

4.1 Biographic data of the respondents 22

4.2 Respondents opinions on whether financial performance is related to internal audit 25

4. 3 Nature of internal audit and performance in local government 27

4.4 Other responses of respondents on the role of internal auditing 29

4.5 Challenges of internal auditing in promoting accountability of public funds 32

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4.6 Other challenges identified 33

4.7 Policies used to solve the challengesfaced by internal audit on the financial performance

of Sheema local government 34

4.8 Satisfaction of respondents on the way auditing is done in Sheema local government .... 35

CHAPTER FIVE 38

DISCUSSION, CONCLUSION ANDRECOMMENDATIONS 38

5.0 Introduction 38

5.1 Discussion of the findings 38

5.2 Conclusions 40

5.3 Recommendations of the study 41

5.4 Recommendation for further research 42

REFERENCES 43

APPENDICES 45

Appendix i: Respondents’ questionnaire (employees) 45

APPENDIX II: Répondents’ Interview Guide 49