Internal Audit Effectiveness in the Public Sector: Contrasting Mediation Pathways of Information Technology Utilization and Auditee Engagement

Abstract

This study examines the determinants of internal audit effectiveness in a central government internal audit institution in Indonesia, integrating a structural-technological pathway and a behavioral-communication pathway within a single model. It tests the effects of top management commitment and audit communication on internal audit effectiveness, both directly and through the mediation of information technology utilization and auditee engagement. Using structural equation modeling with partial least squares (SEM-PLS) on 139 usable responses from 214 targeted auditors (a 64.95 percent response rate), the study finds that five of the eight hypotheses are supported. Top management commitment significantly affects both effectiveness and technology utilization; technology utilization is the strongest direct driver of effectiveness and significantly mediates the effect of top management commitment (complementary mediation). In contrast, audit communication has no direct effect on effectiveness, auditee engagement has no effect, and the mediation through auditee engagement is absent (no-effect nonmediation). Effectiveness is therefore driven by an intact structural-technological pathway rather than a broken behavioral-communication pathway. The findings empirically explain the paradox in which the high administrative completion of audit recommendations coexists with recurring findings, and contribute by demonstrating two parallel mediation pathways that yield opposite conclusions.