TRANSFORMING LAPSES INTO STRENGTHS: IDENTIFYING KEY ORGANIZATIONAL DRIVERS OF INTERNAL CONTROL EFFECTIVENESS

Abstract

This study examines the organizational motivation behind internal control systems where the effectiveness of internal control in universities in the public sector is determined in the influence of leadership, resource, employee consciousness and motivation. Considering the intricacies of the regulatory compliance and resource limitation, the proposed research would reveal the most important factors which determine the effectiveness and soundness of the internal control systems in the state-owned institutions. A quantitative research design was applied, the data collected was in form of surveys conducted on the employees in various public sector universities, which included administrators, financial managers, auditors, and compliance officers. Three hundred and sixty-four respondents took part, and the analysis was done through PLS-SEM.

The results indicated that transformational leadership is an important factor in encouraging employees and increasing the effectiveness of internal controls. Furthermore, the allocation of resources and employee awareness and training have turned out to be some of the vital requirements that make the compliance easier and enhances the effectiveness of internal audits. Intrinsic and extrinsic motivation among employees was identified to have an important role in the conformity to internal control procedures. Also, the research found that positive control environment has a significant moderation effect on the connection between leadership and internal control effectiveness. The weaknesses in internal control were found to be major obstacles and the study emphasizes the necessity of constant modifications in the leadership practice as well as resource management stemming out of these weaknesses.

The theoretical contributions of this research are based on the Social Exchange Theory and Transformational Leadership Theory and focus on the effects of organizational supports and leadership practices on the performance of employees and internal control efficiency. In practice, the study has practical implications to policy makers, organizational executives and auditors, as the researchers claim that the best possible response would be an improvement in the leadership styles, training and resource distribution that may be of much benefit to the internal control practices. The research gives a more refined insight of the overlapping of leadership, employee engagement, and management of resources in order to enhance internal controls within universities in the public sector.