INTERNAL AUDIT AND STRATEGIC RISK MANAGEMENT OF LISTED MANUFACTURING COMPANIES IN NIGERIA

Abstract

The study focused on the relationship between internal audit and strategic risk management of listed manufacturing companies in Nigeria with emphasis on internal audit quality, independence and identification, risk assessment. The study was based on Agency Theory which has explained the significance of monitoring mechanisms in minimizing information asymmetry and the potential conflict between organisation managers and the stakeholders. Based on the above, a model specification of 2 by 2 was used, that is, internal audit quality and internal audit independence as explanatory variables were placed in the first row and the second row, respectively, with risk identification and risk assessment as dependent variables. Primary Data was collected with the help of questionnaires, which were distributed 109 and received back 98, giving a response rate of 89.91%. Descriptive statistics were used for data analysis, in addition to Ordinary Least Squares regression, Breusch-Pagan-Godfrey and Ramsey RESET tests were used to check relevant model diagnostics. The results showed that the relationship between internal audit quality and risk identification was positive but not statistically significant, while the relationship between the internal audit independence and the identification of risk was positive and statistically significant. Internal audit quality also had a positive but statistically insignificant relationship with risk assessment, with internal audit independence having a positive and statistically significant relationship with risk assessment. The results indicate that internal audit independence has significant relationship with the implementation of the strategic risk management practices of listed manufacturing firms in Nigeria. The study suggests that the independence of internal audit, professional competence and resources of internal audit and incorporation of the findings of internal audit in strategic risk-management processes be strengthened.