1.1 PROBLEM STATEMENT:

In recent years, corporate accounting scandals coupled by an outcry for transparency and integrity in financial reporting have given rise to internal audit skills in resolving this corporate accounting scandals and failures.KLYNVELD PEAT MARWICK GOERDELER(KPMG) has identified a series of business failures and corporate scandals to be as a result of weak internal control and audit systems. The famous failure of Enron in 2001 was as a result of weak internal control and internal audit systems. In respond to this, the Sarbanes Oxley Act(SOX) was created in 2002 to restore public thrust in corporations. The intention of SOX was to protect investors by improving the accuracy and reliability of corporate disclosures in financial statements and other documents, as well as strengthen internal control and audit committees. In order to ensure a strong auditing system, Statements Of Auditing Standards (SAS) 70, prepared by the American Institute Of Certified Public Accountants (AICPA) have provided guidance to auditors when evaluating internal control of service organizations.

However, despite all these control and standards set by international and national body, there is still continuing scandals and failures in many companies around the globe {for examples; WorldCom, and Volkswagen} show that the issue of risk and how  to mitigate it through internal control and auditing  efforts is far from resolved. It is against this study that the researcher will seeks to examine the effect of internal audit quality on financial performance.

1.2 RESEARCH QUESTIONS:

1.2.1        Main Research Question:

What is the effect of internal audit quality on financial performance of commercial banks in BUEA municipality?

1.2.2        Specific Research Questions:

• What is the relationship between internal audit quality and financial performance?
• How does the competence of internal auditors influence financial performance?
• What role does internal audit independence play in financial performance?

1.3           Research Objectives:

1.3.1        Main Objective:

To examine the effect of internal audit quality on financial performance of commercial banks in BUEA municipality.

1.3.2        Specific Objectives:

• To determine the relationship between internal audit quality and financial performance.
• To assess how competence of internal auditors influence financial performance.
• To analyze the role internal audit independence plays in financial performance.