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Corporate Governance and Organizational Behavior Review / Volume 6, Issue 3, 2022
120
THE IMPORTANCE OF INTERNAL AUDIT
IN INCREASING PERFORMANCE OF
MICROFINANCE INSTITUTIONS:
THE CASE OF THE DEVELOPING
COUNTRY
Krenare Shahini-Gollopeni *, Donat Rexha **, Medain Hashani ***
* South East European University, Tetovo, North Macedonia
** Corresponding author, Faculty of Economics, AAB College, Pristina, the Republic of Kosovo
Contact details: AAB College, St. Elez Berisha, No. 56 Fushë Kosovë Industrial Zone 10000, Pristina, the Republic of Kosovo
*** Faculty of Economics, AAB College, Pristina, the Republic of Kosovo
Abstract
How to cite this paper:
Shah ini-Gollopeni, K., Rexha, D., & Hashani, M.
(2022). The importance of internal audit in
increasing perfo rmance of microfinance
institutions: The case of the developing
country. Corporate Governance and
Organizational Behavior Review, 6(3), 120–127.
https://doi.org/10.22495/cgobrv6i3p11
Copyright © 2022 The Authors
This work is licensed under a Creative
Commons Attribution 4.0 International
License (CC BY 4.0).
https:// creative common s.org/ license s/by/
4.0/
ISSN Online: 2521-1889
ISSN Print: 2521-1870
Received: 28.09.2021
Accepted: 09.08.2022
JEL Classification: G32, M42, M48
DOI: 10.22495/cgobrv6i3p11
The study aims to explore the role and importance of internal
audit in increasing performance in microfinance institutions in
Kosovo. The operation of microfinance institutions in Kosovo is
a necessity to meet the demands of the people, households, and
small businesses, who do not have access to financial banking
services (Kupina, 2018). The presence of an internal audit body
in the organization is a need and necessity for good governance
and performance of the organization. This study was conducted
in five microfinance institutions in Kosovo. The study is based
on data collected from the field through a questionnaire
(N = 80) conducted face to face with respondents, with both
genders represented in microfinance institutions in Kosovo.
The data collected from the field were systematized and
analyzed in the SPSS program. Of the total number of
respondents, 64% were male and 36% were female. Most of
the respondents were economists (88%), lawyers (4%), IT (6%),
and other professions (2%). The results of the study (96.3%)
show that an internal audit is necessary for the organization.
Also, from the findings of the study, we learned that (66.3%)
internal audit positively affects good governance and
performance of the organization.
Keywords: Audit, Internal Organizations, Performance, Kosovo
Authors’ individual contribution: Conceptualization — K.S.-G., D.R.,
and M.H.; Methodology — K.S.-G. and D.R.; Data Curation —
K.S.-G.; Writing — Original Draft — K.S.-G., D.R., and M.H.;
Writing — Review & Editing — K.S.-G. and D.R.
Declaration of conflicting interests: The Authors declare that there is
no conflict of interest.
1. INTRODUCTION
To enhance and protect organizational value, risk
mitigation advice and analysis should be provided
and long-term objectives should be established.
For an internal audit function to be considered
effective, all principles must be present and function
effectively.
Microfinance is frequently considered both as a tool
for fighting poverty in developing countries and as
a tool for post-conflict reconciliation. Many
countries have employed and created conditions
for microfinance, especially after the 1990s, as
a resource and additional capital for poverty
reduction (Ahmeti, 2014).
Corporate Governance and Organizational Behavior Review / Volume 6, Issue 3, 2022
121
The internal audit profession evolved steadily
with the advancement of management science after
World War II. It was conceptually similar in many
ways to financial auditing by pub lic accounting
firms, quality assurance, and banking compliance
activities. While some of the audit techniques
contained in internal auditing are derived from
management consulting and the public accounting
professions, the theory of internal auditing was
primarily conceived by Lawrence Sawyer (1911–2002),
often referred to as the father of modern internal
auditing. An internal audit is a critical su mmary of
all aspects of the organization.
Recognizing the role and importance of
internal audit, microfinance institutions in Kosovo,
from the very beginning of their existence, have
established internal audit departments operating
under the International Standards for Professional
Practice of Internal Auditing to increase
the performance of the organization.
The important positive co ntribution that
an internal audit can bring to in governance and
operations of an organization depends on
the effective implementation, functioning, and
management of the internal audit function, which is
possible only under the conditions of maintaining
and strengthening its credibility (Zinca, 2016).
Internal audit has arisen as a need of managers
to have a means of assessing the adequacy of work
performed for the business, but also for the honesty
of employees. The first signs of the development of
internal audit appear in the early 2000s, whic h
according to the law on internal audit is conceived
as an independent activity, which provides objective
assurance and advice to management designed to
add value and improve the activities of subjects
(Central Bank of the Republic of Kosovo [CBK], 2020).
Performance is the act of measuring the firm’s
efficiency and effectiveness and transforming its
complex reality into organized symbols that can be
related and transmitted under the same
circumstances to manage its corporate and functional
strategies (Koufopoulos, Zou mbos, Argyropoulou, &
Motwani, 2008).
However, every organization needs to change/
supplement new internal audit strategies, which will
help increase the perfor mance of the organization.
In this case, this study aims to come up with new
findings and recommendations that will help
microfinance institutions, increase value and
improve the performance of the organization.
The objectives of this study start from
the description and analysis of multi-dimensional
theories of the role of internal audit in increasing
performance in microfinance institutions and
the operation of internal audit under the International
Standards for Professional Practice Internal
Auditing. The objectives of the study are focused on
the importance of an internal audit and the role and
importance of an internal audit in the good
governance of microfinance institutions in Kosovo.
This study provides answers to how internal audit
affects microfinance institutions.
The importance of the study lies in the fact of
gaining and providing new knowledge to researchers
and practitioners in the field of internal audit for
general professionals in particular on the experiences
and role of internal aud it as a key pillar for
governance and good performance of microfinance
institutions.
The paper is structured as follows. Section 1
describes the main purpose of the stud y including
the objectives of the study. Section 2 reviews
the relevant literature. Section 3 provides methods
used to collect the data. Section 4 presents the results
of the study. Section 5 discusses the findings and
Section 6 concludes the paper.
2. LITERATURE REVIEW
The origins of auditing go back to slightly longer
times than accounting. Whenever the progress of
civilization brought about the necessity of one man
to believe to some extent in the wealth of another,
the counseling of some kind of control over
the loyalty of the former would beco me apparent
(Mautz & Sharaf, 1961).
Internal audit through the activities performed
adds value to properly evaluate the internal control
system as well as the risk analysis related to
the auditable activities and recommendations
recorded in the reports prepared and submitted to
achieve the objectives of the organization (Munteanu
& Zaharia, 2014). Oussii and Taktak (2018) also show
a positive effect of an internal audit on the quality of
the internal control system.
The need for internal audit is making it
an integral part of modern business. There is not
any big business that exists without it. If they have
not received it now, they will have to have it sooner
or later, and if events unfold as they currently do,
they will have to have it sooner (Hald, 1944).
One of the key trends recently identified
internationally showed that we are now facing a very
high interest in measuring and evaluating internal
audit performance, which will lead to more attention
in choosing those methods to reveal the real level of
performance achieved by internal audit, both
quantitatively and qualitatively (Boţa-Avram, Popa, &
Ştefănescu, 2011).
To improve risk management and internal
control processes, internal auditors need to convince
auditees of the quality of their work as well as
persuade executives to implement their
recommendations.
According to Roussy (2013), an internal audit
has two roles: a protective and ancillary role.
Internal audit, on the other hand, has the role of
protecting senior managers from any pitfalls or
obstacles and keeping secrets in addition to
supporting organizational performance and
providing guidance when new rules apply in the role
of assistance. Thus, having a close relationship
between the audit co mmittee and internal audit
improves governance.
The internal audit function is a major
component of good corporate governance and its
role has been emphasized as critical for promoting
the achievement of corporate objectives (Salia, Addo,
& Adoboe-Mensah, 2019).
Several theories can explain the need for
an audit. Some of them are well-known and based on
scientific research, while some others are based on
perceptions (Ittonen, 2010; Hayes, Dassen, Schilder,
& Wallage, 1999). An internal audit should be more
future-oriented and focus on the new requirements
of the co mpany and the content of the fulfillment of
its tasks (Lindner, 2003). Co mpanies need to
accelerate their change, while an internal audit is
Corporate Governance and Organizational Behavior Review / Volume 6, Issue 3, 2022
122
challenged to integrate into this process and adapt
to current environmental requirements (Tapestry
Networks & Ernst&Young, 2013).
The operation of microfinance institutions in
Kosovo is a necessity to meet the requirements of
a part of the population, households, and small
businesses, who do not have access to financial
banking services (Kupina, 2018). Microfinance
institutions in Kosovo started operating immediately
after the war, in 1999, as financial assistance and
micro-credit programs in support of small b usiness
initiatives in Kosovo. Their co ntribution has been
important to start economic growth in the post-war
period when the financial sector was almost
non-existent (Association of Microfinance Institutions
of Kosovo [AMIK], n.d.). Today, microfinance
institutions co ntinue to meet the needs of
the Kosovo market by lending to small businesses
and individual entrepreneurs, including farmers.
The situation of microfinance institutions in Kosovo
has improved and there is a stable financial sector.
Microfinance institutions affect broader economic
and legal aspects, and as such, they seem to have
had a positive impact on the overall economic
situation in Kosovo (Ahmeti, 2014).
According to Hegazy and Farghaly (2021),
internal auditors possessed significant levels of
knowledge and skills needed to fulfill their
responsibilities, and most internal audit activities
are still focused on financial audit and internal
control activities.
To better meet the needs of Kosovo’s small
businesses and micro-business sector as well as to
facilitate industry growth, in 2002, some
microfinance institutions in Kosovo decided to
establish a formal association called the Association
of Microfinance Institutions of Kosovo (AMIK). Its
mission is to advance the microfinance sector to
support financial and social inclusion and economic
development by providing a strong shared platform
and excellent services. The main purpose of
microfinance for a number of practitioners is to
“improve the well-being of the poor” says Schreiner
(2002, p. 591), noting that not everyone agrees on
how to achieve this goal.
The fact that while there are opinions and
divisions in terms of the role of microfinance,
according to Duvedack et al. (2011), creates
the separation of two theories on microfinance.
The first created the literature which addresses the
problems of poor people who do not have access to
affordable financial services as a result of a lack of
collateral. The second explores the ways and impact
of microfinance on enterprises, households, and
individuals.
3. RESEARCH METHODOLOGY
The study of each social phenomenon can be carried
out from different perspectives, and to create
a more co mprehensive picture of what is happening,
different methods can be used to gather different
types of data (Matthews & Ross, 2010, p. 144).
The research can be done in two ways, one way is to
conduct a survey with the key employers and
the other way is to collect data through
questionnaires. This study is based on data collected
from the field through a questionnaire (N = 80)
conducted face to face with respondents, with both
genders represented in microfinance institutions in
Kosovo. The age of the respondents varies from 21
to 50 years. Of the number of respondents, 64% were
male and 36% were female. The majority of
respondents were eco nomists (88%), lawyers (4%), IT
(6%), and others (2%).
The data were analyzed through the SPSS
program, the descriptive analysis and correlations
between variables are done, which have enabled us
to understand the relationship between variables.
The questionnaire was conducted in the field, visiting
different headquarters and branches of microfinance
institutions in Kosovo. The administration time of
the questionnaire lasted 15–20 minutes. After
conducting the questionnaires in the field, all of
them were checked for accuracy separately and were
systematized in the SPSS database.
Completion of the questionnaires was
anonymous, but each participant had his/her number
with which he/she submitted the questionnaire.
The data is confidential, and participation was
voluntary.
4. RESULTS
Based on the theories of audit in general and
internal audit in particular, however, the principles
of auditing, the latter has special importance in
fulfilling the principles and regulations of
the country and internationally. To understand to
what extent microfinance institutions meet these
legal requirements and audit principles in general,
the study goes further to find out and understand
whether internal audit takes place in these
institutions. In the question posed to the
respondents: “Does the internal audit take place in
the organization w here you work?”, the results show
that all (100%) of microfinance institutions in
Kosovo conduct an internal audit. In one form or
another, this result confirms the fact that
microfinance institutions have a priori understood
the role and importance of an internal audit for their
organization. But, to understand in essence
the acceptability, role, and importance of an internal
audit, the study is further deepened by asking
the question to the respondents such as: “Do you
think that an internal audit is necessary for
the organization where you work?”. And, from
the results obtained we understood that 96.3% of
respondents stated that an internal audit is
necessary for their organization. See Table 1 below.
Table 1. Do you think an internal audit is necessary
for the organization where you work?
Frequency
Percent
Valid
Yes
77
96.3
I do not know
3
3.8
Total
80
100.0
Of the total number of respondents, only 3.8%
of respondents answered that they simply do not
know whether or not an internal audit is needed in
their organization, while others stated that it is
necessary to conduct an internal aud it in
the institution where they work.
On the other hand, this study also focuses on
the role and importance of good governance and
performance enhancement in the organization that
has an internal audit, and how well informed are
Corporate Governance and Organizational Behavior Review / Volume 6, Issue 3, 2022
123
the employees in microfinance institutions. To
understand and have more information on this issue,
we ask the respondents the question: “For good
governance and performance enhancement in
the organization where you work, how often do you
think that an internal audit would be good to develop
in your organization?”. From the results (see
Figure 1), we understand that 57.5% of respondents
think that an internal audit should be performed at
least once a year.
Figure 1. How often do you think an internal audit would be good to develop your organization?
An internal audit is perfor med based on
an internal audit plan of the organization which is
created based on risks to determine the priorities of
internal audit activities for good governance and
increase the performance and goals of the institution,
but for verification of these defined goals,
the employees of microfinance institutions were
asked in what time period they think that
the internal audit should be carried out in their
institution. More than half of the respondents
(57.5%) state that an internal audit should be
performed once a year, 28.8% of them state that
an internal audit should be performed once in two
years, 7.5% of the respondents think that they
should have an audit in a longer period of time, i.e.,
once in three years, while 6.3% do not have any
position on what period of time an internal audit
should be performed in their work organization.
An internal audit plays an important role in
terms of evaluating the effectiveness of the
functioning of internal control. To understand how
much an internal aud it affected the functioning of
internal control in microfinance institutions in
Kosovo, we asked the respondents the question:
“How do you assess the effect of an internal audit on
the functioning of internal control in the organization
where you work?”. From the results (see Figure 2),
we understood that more than half of
the respondents highly appreciate the effect of
an internal audit on the functioning of internal
control in the organization.
Figure 2. How do you assess the effect of an internal audit on the functioning of internal control in
the organization where you work?
The results show that more than half of
the respondents (56.3%) stated that they highly
appreciate the effect of an internal audit on the
functioning of internal control in the organization,
37.5% stated that they evaluate on average the effect
of an internal audit on the functioning of internal
control, 3.8% of respondents do not evaluate
the effect of an internal audit, while 1.3% of
respondents do not have an attitude.
Overall, the internal control system is designed
to provide reasonable assurance regarding
the achievement of objectives relating to operations,
reporting, and compliance. Therefore, an internal
audit is effective in each of those categories of
objectives when the board of directors and
management take the assurance that the company’s
objectives are managed and the published financial
statements are reliable (Koutoupis & Pappa, 2018).
The role of an internal audit as elaborated in
the definition of an internal audit above includes
the responsibility to evaluate and improve
governance processes as part of providing security,
57.5
28.8
7.5 6.3
0
10
20
30
40
50
60
70
Once a year Once in two year Once in three year Others
56.3
37.5
3.8 1.3 1.3
0
10
20
30
40
50
60
I appreciate it
highly
I appreciate it
average
I do not
appreciate
I have no
attitude
Others
Corporate Governance and Organizational Behavior Review / Volume 6, Issue 3, 2022
124
and to validate such a definition, 66.3% of
respondents stated that an internal audit positively
affects good governance of the institution and
the organization where they work, 32.5% of them
think that an internal audit has an impact o n good
governance o n average, while only 1.3% of
respondents think t hat internal audit has little
impact on good governance of the institution where
they work. See Table 2 below.
Table 2. Does an internal audit positively affect
the good governance of the organization?
Frequency
Percent
Valid
High
53
66.3
Average
26
32.5
Less
1
1.3
Total
80
100.0
From the results obtained we clearly
understand that an internal audit positively affects
the good governance of the organization and as such
is essential. Thus, the result of the study provides
an answer to the research question raised: “Does
an internal audit positively affect the good
governance of the organization?”. An internal audit
seems to make the enterprise staff more accountable
and in particular the management to be more
accountable in their actions in the organization and
others related to the organization, making a positive
impact on the good governance of the organization.
On the other hand, an internal audit assists
management and staff in general through
professional advice and constructive criticism aimed
at the good governance of the enterprise. Therefore,
from the results of t he study and other studies,
however, we clearly understand that an internal
audit in the enterprise is not o nly a need and
positively affects the good governance of
the organization, but an internal audit is also
a necessity for the enterprise to have good
governance.
Implementation of internal audit
recommendations in the enterprise is of particular
importance for good governance and effectiveness
of the enterprise. Actions taken by management to
improve existing processes and controls are key
indicators of effective governance. From various
studies in the field of internal audit, there is
a diversity of attitudes of those who have pro and
contra attitudes regarding the fulfillment or
implementation of reco mmendations arising from
internal audit. The findings of our study show that
internal audit recommendations are widely accepted
and implemented in microfinance institutions in
Kosovo. The results of the study (see Figure 3) show
that the internal audit recommendations are
accepted and implemented (93.8%) at a very high
percentage.
Figure 3. Are the internal audit recommendations implemented?
From the findings of the study, we learn that
microfinance institutions tend to implement
the internal audit recommendations, only 1.2% state
that the internal aud it recommendations are not
implemented in the institutions where they
work, while 5% of respondents state that
the recommendations are sometimes implemented
or even have a different position on this issue.
The cases when the internal audit recommendations
are not implemented or are implemented very
little are mainly the imple mentation of the
recommendations t hat are mostly related to
the problems that arise when the findings are
related more to interpretations than to the concrete
and fact-based conclusions. These situations can
sometimes lead to dissatisfaction and recoveries
which lead to non-compliance with the implementation
of internal audit reco mmendations.
Viewed and analyzed both theoretically and
practically, numerous researchers have shown
that the implementation of internal audit
recommendations has a positive impact on
performance enhancement. To understand how
positively the internal audit recommendations affect
the performance of the organization, the study
starts with the question for the respondents:
“Do the internal audit recommendations have
a positive effect on increasing the performance of
the organization?”. From this, we understand that
the results are positive and most respondents have
a positive attitude in terms of increasing
the performance of the organization by meeting
the recommendations of an internal audit. See
Table 3 below.
93.8
1.2 50
0
10
20
30
40
50
60
70
80
90
100
Yes No I do not know Others
Corporate Governance and Organizational Behavior Review / Volume 6, Issue 3, 2022
125
Table 3. Do internal audit recommendations have
a positive effect on increasing the performance of
the organization?
Frequency
Percent
Valid
Yes
64
80.0
No
1
1.3
Some times
12
15.0
Others
3
3.8
Total
80
100.0
The results of the study make us understand
that 80% of respondents have a positive attitude
regarding t he increase in performance from
the fulfillment or implementation of internal audit
recommendations. While, 15% of respondents think
that fulfilling the recommendations so metimes has
an impact on increasing performance, but not
always. Negative attitude or disagree (1.3%) with
the fact that the fulfillment of internal audit
recommendations affects the increase in the
organization’s performance and 3.8% of other cases,
therefore, have different attitudes. Therefore, as can
be seen from t he results of the study, it is clear that
the fulfillment or implementation of internal audit
recommendations by the management and staff of
the organization has a positive impact on increasing
the value and performance of the organization.
Monitoring is a follow-up process, during which
internal auditors evaluate the appropriateness,
effectiveness, and timeliness of actions taken by
the organization’s management to address each
internal audit recommendation. Monitoring or
monitoring the implementation of reco mmendations
is considered to be of particular importance.
To learn more about monitoring internal audit
recommendations in microfinance institutions in
Kosovo, we asked respo ndents the question: “Are
the fulfillment or implementation of internal audit
recommendations monitored in the organization
where you work?”. Of the total number of
respondents interviewed, 81.3% admit that
the fulfillment of reco mmendations is monitored in
their organization, and also admit that
recommendations are monitored and reported on
a regular basis. See Table 4 below.
Table 4. Are the fulfillment or implementation of
internal audit recommendations monitored?
Frequency
Percent
Valid
Yes
65
81.3
No
2
2.5
Some times
7
8.8
Others
6
7.5
Total
80
100.0
However, the results also show that 2.5% of
respondents deny that monitoring or follow-up of the
implementation of internal audit recommendations
has ever been done in their organization, 8.8% of
respondents have no knowledge regarding this issue
and 7.5% do not have a position on about monitoring
or following-up on the implementation of internal
audit recommendations in their organization.
5. DISCUSSION
The main focus of this study is to highlight the role
and importance of an internal audit in increasing
the value and performance of microfinance institutions
and to come up with some recommendations that
would increase their performance.
“Audit is an added value for the bank (65%
always answered and 24% usually) and helps
improve processes (70% always answered and 23%
usually) and improves control within the bank (64%
always answered and 28% usually)” (Kristo,
2014, p. 87).
Based on the findings of our study, we found
that 96.3% of respondents stated that an internal
audit is necessary for their organization. The study
shows that 57.5% of respondents think that internal
audit should be performed at least once a year.
While more than half of the interviewed respondents
(56.3%) highly evaluate the effect of an internal audit
on the functioning of internal control in
the organization, 37.5% stated that they evaluate
on average the effect of an internal audit on
the functioning of internal control, 3.8% of
respondents do not evaluate the effectiveness of
an internal audit, while 2.4% of respondents do not
have an attitude.
The results of our study lead us to understand
that 66.3% of respondents interviewed stated that
an internal audit positively affects the good
governance of the organization where they work,
and 32.5% of them think that an internal audit has
an impact on the good governance on average, while
only 1.2% of respondents think that an internal audit
has little effect on the good governance of
the institution where they work.
The results of the study show that internal
audit reco mmendations are accepted and
implemented (93.8%) to a large extent. Therefore,
from the findings of the study, we learn that
microfinance institutions tend to implement internal
audit recommendations, only 1.2% state that
the internal audit recommendations are not
implemented in the institution where they work,
while 5% of respondents state that the
recommendations are sometimes implemented or
even have a different position on this issue.
Implementation of internal audit
recommendations for senior management is
considered an indicator of internal audit
performance (Dumirescu, Bobi, & Costuleanu, 2014;
Soh & Martinov-Bennie, 2011; Ziegenfuss, 2000).
Managers and officials must decide whether
and how to implement the internal audit
recommendations. Therefore, in the end, t he effect
that internal auditors have on the achievement of
corporate objectives is influenced by the extent to
which managers utilize the work of internal
auditors. In such a perspective, the relationship
between internal auditors and managers (auditees)
becomes a critical issue (Arena & Azzone, 2009).
The findings of the study make it clear that
80% of respondents have a positive attitude in terms
of increasing performance by fulfilling or
implementing internal audit recommendations,
while 15% of respondents think that fulfilling
the recommendations sometimes has an impact on
increasing performance, but not always. Negative
attitude or disagree (1.3%) with the fact that
the fulfillment of internal audit recommendations
affects the increase in performance of the organization
and 3.8% of other cases, therefore, have different
attitudes.
Corporate Governance and Organizational Behavior Review / Volume 6, Issue 3, 2022
126
One of the main components which tells us
about the implementation of the recommendations
and the increase in performance is the monitoring
or follow-up of the implementation of the
recommendations which is considered to be of
special importance.
6. CONCLUSION
From the findings of this study, we co nclude that
microfinance institutions in Kosovo have
understood the role and importance of an internal
audit and see it as a need and necessity for good
governance and performance of the organization.
Determining performance indicators is of great
importance to determine the extent to which
the audit function achieves its objectives, following
quality practices and standards (Zinca, 2016).
From the above, we conclude that for
the performance and good governance of the
organization, an internal audit should be performed
at least once a year and should be performed based
on an internal audit plan of the organization which
is drafted on the basis to determine the priorities of
internal audit activities to better govern and increase
the performance and goals of the institution, but to
verify these goals, employees of microfinance
institutions were asked in what time period they
think that internal audit should be performed in
their institution.
Also, based on the findings of the study we can
conclude that an internal audit has a positive effect
on the functioning of internal control of
the organization.
An internal aud it, as elaborated in
the definition of an internal audit and the findings
of the study, involves the responsibility to evaluate
and improve governance processes as part of
providing assurance and validate such a definition.
From this, we can conclude that an internal audit
positively affects the good governance and
performance of the organization. Therefore, from
the results obtained we can conclude that
an internal audit positively affects the good
governance of the organization and as such is
necessary. An internal audit makes the staff of
the organization more accountable and in particular
the management to be more accountable in their
actions in the organization and others, making
a positive impact on the good governance and
performance of the organization. An internal audit
assists management and staff in general through
professional advice and criticism, which have
a positive impact on the good governance and
performance of the organization.
Based on the findings of our study we conclude
that internal audit reco mmendations are widely
accepted and implemented in microfinance
institutions in Kosovo. Thus, internal audit
recommendations are accepted and implemented
(93.8%) on a large scale.
According to the CBK (2021), during the first
quarter of 2021, the sector recorded a quarterly
increase in lending, positive financial performance
as well as a low level of non-performing loans.
The microfinance sector closed the first quarter of
2021 with a profit. The financial performance of
the sector was also reflected in the two profitability
indicators, return on average assets (RAA) and
return on average capital (RAC), which marked
a significant increase in the first quarter of 2021.
Based on the results of our study we conclude
that the implementation and fulfillment of internal
audit recommendations have a positive impact on
increasing the performance and good governance of
the organization.
Also, monitoring or following up on the
implementation of the recommendations from
internal auditors, but also the organization, is of
particular importance and has a positive impact on
the performance and good governance of
the organization and is present in microfinance
institutions in Kosovo .
In conclusion, an internal audit is
an independent activity to provide objective
assurance and advisory activity, designed to add value
and improve the operations of the organization.
An internal audit assists the organization in meeting
objectives, fostering a systematic and disciplined
approach to assessing and improving effectiveness
in risk management, co ntrols, and governance
processes.
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