The Application of International Internal Audit Standards by Licensed Commercial Banks in Sri Lanka

Compliance with the International Internal Audit Standards (IIASs) is obligatory to ensure the credibility of the audit reports. In Sri Lankan context, the extent of IIASs application by the financial institutions is still unclear as no formal investigation has been performed so far to address the same. Thus, the purpose of the present study was to assess the application of IIASs by the commercial banks of Sri Lanka. A quantitative research was carried out to reach the research objective. A field survey of population aided in deriving the empirical evidences. Unit of analysis was Licensed Commercial Banks (LCBs) in Sri Lanka. Closed-ended, self-administrated questionnaire was distributed among the internal auditors of LCBs. Opinions of respondents were solicited using a five-point Likert scale ranging from 1 to 5. Regression model was used to analyse data with the support of SPSS statistical package. Results suggested a moderate level application of IIASs by LCBs. However, the extent of IIASs application found significantly vary among three categories of IIASs. The attribute standards seemed the heavily applied IIASs category by Sri Lankan LCBs compared to performance standards and implementation standards. The least level of application was evidenced with respect to performance standards. Theoretically, findings appear significant as there is a short of research work carried out in internal auditing, particularly on IIASs in the global context as well as in Asian context. As managerial implications of this research, it can be noted that LCBs should pay much attention in raising the application of IIASs where performance standards principally need much attention relative to other two standards.