The Role of Internal Audit in Evaluating the Financial Performance at

Sudanese Banks (Case Study in Omdurman National Bank)

Dr. Abubkr Ahmed Elhadi Abdelraheem
Accosiate Professor - Department of Cost & Management Accounting – College of Busieness
Studies - Sudan University of Sciences &Technology - Sudan.
Dr. Mohammed Elnair Mohamedain Khogly
Assistant Professor - Department of Accounting - College of Busieness Studies - Sudan
University of Sciences &Technology - Sudan.
Dr. Badreldin Elhadi Ahmed Serajeldin
Associate Professor - Department of Accounting - Faculty of Managerial and Financial Sciences
- Peace University – Sudan.
Dr. Musa Eisa Mohammed
Accounting Associate Professor, West Kordofan University. Faculty of Managerial Sciences,
Accounting and Finance Department. Sudan, Khartoum.
Abstract
The study aimed at; concluding whether there is statistical relationship between the
internal audit and the evaluation of the financial performance, identifying whether there
is a statistical relationship between the internal audit and the quality of the financial
analysis, identifying the role of the internal audit on the control of preparing of planning
budgets, and identifying the impact of internal audit on the control of the cash flow,The
problem of the study was represented in, the misunderstanding of the internal audit role,
limiting its role only in auditing the accounting, and neglecting its consultant role on
evaluation of the financial performance.The study tested the following hypotheses: there
is statistically significant relationship between the internal audit and the evaluation of the
financial performance, there is statistically significant relationship between the internal
audit and the quality of the financial analysis, the internal audit has a role on the control
of preparation of the planning budgets, the internal audit has an impact on the control of
cash flow.The study adopted the historical method to review the previous studies that
related to issue of the research, the inductive method to determine the aspects of the
research and formulate the hypotheses, the deductive method to test the hypotheses, and
the analytical descriptive method for the case study. The study arrived at several findings
the most important include: the internal audit helps in evaluation the financial
performance efficiently and effectively, the internal audit increases the quality of the
financial analysis, the internal audit performs an effective controlling role on the
preparation of the planning budgets, the internal audit affects positively the cash flow.The
study recommended to: the internal audit should be independent and its personnel should
be qualified scientifically and practically, the internal audit should supervise the financial
analysis process, consultancy should be taken from the internal audit when preparing the
planning budgets, and finally the internal audit should control the cash inflows and cash
outflows.
Keywords (Internal audit, Evaluating the Financial Performance)
Introduction
The development and large-scale business of companies has led to internal audit as a
means of control to assist the Department in carrying out its various duties and
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responsibilities. The study aimed to arrive at the outcome of the statistical relationship
between internal audit and financial performance. The problem of the study was the
erroneous understanding of the role of internal auditing and its role only in auditing the
accounts while neglecting its advisory role in evaluating financial performance. The
problem of the study is as follows: Is there a statistically significant relationship between
internal audit and financial performance evaluation? Is there a statistically significant
relationship between internal reference and financial analysis? Is there a role for internal
audit on preparing planning budgets?. Is there an impact of internal audit on cash flow
control? The hypotheses of the study were as follows: There is a statistically significant
relationship between internal audit and financial performance evaluation, there is a
statistically significant relationship between internal audit and the quality of financial
analysis, there is an internal audit role in the control of the preparation of planning
budgets, there is an impact for internal audit of cash flow control.
Theoretical framework
(Zein El Abidine,2011, Study)the study examined the role of internal audit in
improving financial performance,The study aimed to measure the impact of the internal
control system on improving financial performance and to determine the correctness of
information provided by the various sections and comply with procedures, laws and
regulations that have a role in improving the financial performance of commercial
companies, The problem of the study as following : the almost complete absence of the
internal audit systems of the Sudanese pharmaceutical company and the lack of sufficient
expertise on the pharmaceutical company's auditors. The study found several results
including: the lack of internal audit planning does not exist scientifically and in practice,
the lack of an integrated network in the internal audit process and the stimulation of
Auditors by senior management provides confidence in the performance of internal
auditors .
(Mohammed, 2011, Study) The study examined the role of internal auditing in assessing
the efficiency of financial performance in private sector enterprises .The study aimed to
ensure that internal audit sections are efficient in their missions by assessing the
efficiency of financial performance in private sector organizations and reversing the role
internal audit of upgrading the financial and accounting performance within different
units and reassuring them of the accuracy of data and information They responded by the
administration and ensure that the regulations and laws are followed in full .The problem
with the study was that some financial units did not respond to internal audit observations
contained in the reports submitted by the internal audit in a timely manner and there was
a slow implementation, which would have an impact on the achievement of the objectives
of the establishment. The study selected the following hypotheses: Internal audit reports
are an indicator of the commitment of the units to the accounting and internal audit laws
and regulations that assist in measuring and increasing the efficiency of accounting
performance and internal audit reports that are sufficient to reflect the real financial,
accounting and management performance In units of measurement, The study result as
following :the internal Audit Department achieves its objective of assessing financial
performance with sufficient independence and allowing it to be able to meet its objective.
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 Internal Audit Concept
Internal audit represents an independent evaluation function established within the
designated organization for the purpose of examining and evaluating the activities carried
out by this organization. The internal audit aims to assist individuals within the
Organization to carry out their responsibilities to a high degree on through the provision
of analysis, assessment, recommendations, advice and information on the activities to be
reviewed (Abdelfattah,2004).Many of the functions and processes performed by the
auditors in the Government are similar to those performed through the accounting firms.
The legal expression of the financial statements, however, the services performed by the
internal auditors (amin ,2011).Internal audit is an independent evaluation activity within
the facility aimed at checking, evaluating and verifying the accounting, financial and
other aspects operational by an independent internal body of the facility's management to
provide assurance and assurance to management on the adequacy of procedures and
internal controls and the adequacy of the implementation Policies developed,
performance measurement and evaluation of the effectiveness and adequacy of the design
of internal procedures and means(Abdullah,2009).Internal auditing is defined as a
separate function created within the bank to examine and evaluate all its activities
whether financial or administrative to help all employees in to accomplish the duties
assigned to them, through analysis, assessment and advisory guidance on the different
actors in Established, and ensure optimum use of resources and capabilities consistent
with the bank's overall policies(Khaled,1998).There are several factors that have helped
in the emergence and development of the internal audit profession,These factors can be
summarized as follows ( Fathi,2003):
- Management's interest in the results of the work and the fairness of the lists and
statements.
- the decentralization of administration and the consequent distribution of
responsibilities .
- Increasing the number and distribution of beneficiaries of the project and its
information to stakeholders.
Internal audit objectives are divided into (Ahmed,1990) : -
1. Periodic evaluation of accounting and financial policies and all related matters and
make sure that they go according to plan without deviation .
2. Periodic evaluation and feedback on management policies and operational
procedures for the purpose of improving and developing them and achieving the
highest administrative efficiency
Financial Performance Evaluation
The concept of financial performance evaluation: the financial performance evaluation
means providing valuable resources to manage the natural, physical and financial
resource available to manage the organization and to respond to the following and
absence of its various parties and to assess the financial performance of an organization
in order to measure results achieved or expected in the light of predetermined criteria, the
procedures and methods of measurement are defined to determine what can be measured

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and thus reveal their importance to management as well as for the following
reasons(Munir,2008):
1- Determine the level of achievement of objectives by measuring and comparing
results, allowing for effective judging.
2- Determining the relevance of the results and the resources used to allow for
inefficient governance.
Methods of evaluating financial performance: the proposed methods are generally
considered to be applied methods based on a theoretical basis from the raties ratios,
which are often quatitative, rarely qualitative and depend on the information collected
from the targets towards implementation.
Results & Discussion:
The study sample includes Sudanese Banking - Khartoum State. The researcher
distributed (70) questionnaire forms among some of the workers in the field selected
randomly (62) Forms were collected as 89%. (SPSS) used for analyzing the relevant data.
The researcher used statistical methods following: median, and Chi-Square test the
hypothesis.
Table (1): Through table (1), the level of significance Chi-Square test (.000) less than the
significance level 0.05, This shows that There is a statistically significant relationship
between internal review and the financial performance calendar, therefore the
hypothesis(1) is achieved.
Table (2): Through table (2), the level of significance Chi-Square test (.000) less than the
significance level 0.05, This shows that: There is a statistically significant relationship
between internal audit and financial analysis, therefore the hypothesis(2) is achieved.
Table (3): Through table (3), the level of significance Chi-Square test (.000) less than the
significance level 0.05, This shows that: There is a role for internal audit in monitoring
the preparation of planning budgets, therefore the hypothesis(3) is achieved.
Table (4): Through table (4), the level of significance Chi-Square test (.000) less than the
significance level 0.05, This shows that :There is Internal audit affects on cash flow,
therefore the hypothesis(4) is achieved.
Table (1)
Median Explanation Chi- Asymp.
Phrases
Square Sig
There's a correlation between the 5 211.001 .000
independence of the Internal audit Strongly
department and the quality of the bank's Agree
financial performance
Scientific and practical qualification of 4 Agree 152.040 .004
internal auditors performs bank
financial performance
There's a correlation between an 5 238.100 .000
Strongly
effective internal audit system and an
Agree
evaluation of the financial performance

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of the Bank.
There is a correlation between the 5 100.320 .001
Strongly
internal audit planning process and the
Agree
efficiency of financial performance.
Electronic operation of Internal audit 5 Strongly 89.903 .000
helps to assess financial performance. Agree

Table (2)
Median Explanation Chi- Asymp.
Phrases
Square Sig
There is a statistically significant 5 276.398 .000
Strongly
relationship between internal audit and
Agree
activity ratio analysis
There is a statistically significant 4 Agree 155.020 .000
relationship between internal review
and the accuracy of profitability ratios
Internal audit helps improve liquidity 5 Strongly 297.013 .001
ratios Agree
Internal audit contributes to the quality 5 Strongly 155.120 .003
of accounting information Agree
Internal audit helps to analyze the 5 Strongly 88.150 .000
accuracy of debt ratios within the bank. Agree
Table (3)
Median Explanation Chi- Asymp.
Phrases
Square Sig
Internal audit contributes to preparing 5 Strongly 157.164 .000
planning budgets well Agree
Internal Audit agrees with the planning 4 Agree 122.078 .000
budgets that both are considered as a
control tool by detecting deviation from
the plan
Internal audit helps to control the 5 233.012 .000
Strongly
preparation of cash balances through data
Agree
auditing
Internal audit affects overall budget 5 Strongly 104.130 .000
preparation Agree
Internal audit affects the preparation of 5 88.509 .000
the balancing of wages and workers Strongly
through their access to and review of Agree
Labour
Table (4)
Phrases Median Explanation Chi- Asymp.
5
 Square Sig
There is a relationship between internal 5 212.010 .000
Strongly
audit and cash flow list preparation in
Agree
the liquidity disclosure
nternal audit helps to rationalize cash 4 Agree 174.014 .000
flow through expenditure control
Internal audit affects the preparation of 5 Strongly 221.038 .000
operational activities Agree
Internal audit affects the preparation of 5 Strongly 144.012 .000
investment activities Agree
Internal audit affects the preparation of 5 Strongly 93.198 .000
funding activities Agree
Results:
• Internal audit helps to assess financial performance efficiently and effectively .
•The independence of the internal audit department increases the quality of the bank's
financial performance .
•The scientific and practical rehabilitation of internal auditors helps to assess financial
performance well .
•An effective internal audit system that performs well .
•The internal audit planning process increases the efficiency of financial performance .
Recommendations:
•The need for independent management of internal audit and the practical and scientific
rehabilitation of its personnel .
•Internal audit should oversee and identify financial analysis processes .
•Internal audit advice should be taken when preparing planning budgets .
References: -
- Zein El Abidine Abdul Baki al Tayeb, internal audit role in improving financial
performance (unpublished master thesis, accounting and finance, Graduate school,
Sudan University of Science and Technology, 2011)
- Ammar Mohammad Tom Hathen, the role of internal auditing in assessing the
efficiency of financial performance in private sector institutions, an unpublished
master's thesis, in Accounting and finance, Graduate School of Sudan Science and
Technology University, 2011
- Abdelfattah Mohammed al-Dish and Fathi Rizq al-Souafeary, Internal oversight and
review, (Alexandria: University House – 2004), p. 229-P. 230
- amin saied Ahmed, management review and Performance evaluation) (Alexandria:
University Centre, 2011 (p. 65) (
- Abdullah Ahmad Swailem, internal control and audit of the Information Technology
Environment (Oman: – Dar Al Rai 2009), p. 58
- Khaled Amin Abdulla, auditing and supervision at the Bank (Amman: Dar Wael
Printing & Publishing 1998) p. 118

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- Fathi Rizq Sawafeary, one Abdel Malek Mohammed, studies in internal control and
auditing, (Alexandria – University of Publishing and Distribution – 2003 – 2002)
- Ahmed Saleh Al Omran, internal review theoretical framework and behavioural
content (Amman: Dar al-Publishing, 1990), p. 25
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