Internal Audit in the Federal Government Organizations of Malaysia: The Good, The Bad and The Very Ugly?

Theoretically, the internal audit function exists to help members of an organization to improve the performance of their activities. But the findings from in-depth interviews conducted in the middle of 2004 with internal auditors from a total of 40 federal government ministries, departments and agencies in Malaysia revealed a number of serious shortcomings that far outweigh the few virtues identified during these interviews. These shortcomings are that many internal audit units face staff shortages, and staff lacking in internal audit competence. In addition, a majority of the audit units, most of which operate in outdated audit modes, have failed to get the right level of support and assistance from the Treasury and other parties. Worse, their effectiveness and efficiency are further threatened by the high-handed actions of the National Audit Department which shifts its cadre staff in and out of the internal audit units at will. Despite all these problems, these internal auditors are quite optimistic about the future of internal audit in Malaysia. But, according to the politics of accountability theory and the fact that Malaysian social context is replete with cases of the lack of transparency and public accountability from its major actors, the internal audit’s future does appear bleak.

Keywords - internal audit, federal government organizations, indepth interviews, Malaysia