ABSTRACT

The general objective of the study was to examine the relationship between internal auditing and the financial performance of local governments in Uganda, a case study of Mbarara District Local Government and the specific objectives were to: find out the role of internal auditing in the financial performance of local governments in Uganda, examine the role of internal auditing on non~ financial performance of local governments in Uganda and assess the role of internal auditing on the managerial performance of Local governments in Uganda. The results indicate that there is a significant relationship between internal auditing and financial performance, non-financial performance and managerial performance. Therefore, Local governments should carry out internal auditing in order to improve their financial, non-financial and managerial performances and the entire performance in general. The findings of the study also revealed that there is a strong positive correlation of 0.75; this means that internal auditing has a strong positive impact on the overall performance of local governments in Uganda and the regression analysis gave evidence that there is a positive change in the performance of local governments in that a unit change in internal auditing improves the performance of local governments by 85%. The study recommended that more emphasis should be put on internal auditing as results indicate that it promotes organizational performance, there is a need to recruit more human resource personnel in the field of internal auditing to improve the performance of the entity since internal auditing promotes organizational performance and that there is need to emphasize on the budget and planning for departments to control measures and enable proper financial reporting in Local governments.