Reassessing Determinants of Internal Audit Effectiveness: The Primacy of Organizational Culture and Interpersonal Trust-Building in Israeli Local Government

Abstract

This study investigates the impact of structural and cultural factors on internal audit effectiveness (IAE) in Israeli local authorities, with a particular focus on the roles of organizational culture, top management support, and interpersonal trust-building by internal auditors. The research adopts a predominantly quantitative approach, utilizing survey data collected through questionnaires completed by chief internal auditors in a representative sample of Israeli local authorities. Effectiveness was measured as the percentage of audit recommendations implemented, while independent variables were assessed using validated Likert-scale instruments. Results indicate a significant positive relationship between the strength of organizational culture and IAE, as well as between top management support and IAE. Interpersonal trust-building acts as a mediating variable, strengthening management support and thereby enhancing audit effectiveness. No significant relationship was found between auditor independence and audit effectiveness. Strengthening organizational culture and emphasizing interpersonal trust-building can enhance internal audit effectiveness. These findings support the development of targeted professional development and policy strategies for local governments. This study contributes to the internal auditing literature by empirically demonstrating the primary roles of organizational culture and interpersonal trust-building in local government audit effectiveness, while revealing that traditional emphasis on auditor independence may be overstated in this context.