The mediating role of internal auditors’ ethical conduct in enhancing internal audit effectiveness: evidence from Kano State, Nigeria.

This study examines the mediating role of internal auditors’ ethical conduct in enhancing internal audit effectiveness: evidence from Kano State, Nigeria. Internal audit effectiveness (IAE) is fundamental for accountability and efficient governance in the public sector. In Nigeria, specifically within the ministries, departments, and agencies (MDAs) of Kano State, audit functions are deficient due to several issues, including inadequate auditors’ compensation, insufficient staff competency, inadequate managerial support, ineffective monitoring of control systems, poor fraud detection, and insufficient utilisation of information technology. Although previous research acknowledges these challenges, the function of internal auditors' ethical conduct as a mediating variable is still inadequately explored. This study examines how ethical conduct mediates the relationship between critical determinants and IAE, utilising Resource-Based Theory (RBT), which focuses on competence and organisational resources as effectiveness drivers, and Institutional Theory (IT), which focuses on ethical standards, compliance, and legitimacy pressures. The research sought to evaluate the effects of auditors’ compensation (ACIA), internal audit staff competence (CIAS), information technology utilization (UIT), monitoring of internal control systems (EMICS), fraud detection (DOF), and management support (MSIAD) on internal audit effectiveness (IAE), while also examining the mediating role of internal auditors' ethical conduct (IAEC). Data were collected from 312 internal auditors in Kano State MDAs from June to August 2023, utilizing a quantitative survey design. Direct and mediating effects were analysed through Partial Least Squares Structural Equation Modelling (PLS-SEM). The findings demonstrate that ACIA, UIT, MSIAD, and CIAS significantly enhance IAE, with IAEC acting as a partial mediator in these relationships. Proper compensation serves to motivate internal auditors while simultaneously promoting ethical conduct and independence. DOF and EMICS demonstrated reduced direct effects, suggesting systemic gaps in institutional frameworks. This study integrates RBT and IT to clarify audit effectiveness by examining resources, ethics, and institutional compliance. It advocates for the strengthening of ethical codes, increased compensation for auditors, and resource-based capacity building to improve audit outcomes in Nigeria's public sector.