Shifting the Role of the Government Internal Auditors,

How to Achieve It?

Sri Rahayu, Yudi and Rahayu

Accounting Department, Jambi University, Jambi-Muara Bulian KM 15, Jambi, Indonesia

Keywords: Internal Auditors, Qualitative, Watchdog, Consultant.

Abstract: This study aims to explore a shift in the role of the government internal auditor. Informants of this research

are the internal auditors from different governmental organizations. Data was gathered by using in-depth

interview technique. The qualitative method used in the study to analyze the data started from filtering data,

identifying the theme, linking among the theme, and stating the conclusion. The results show the role of

internal auditors in the governmental organization has no longer been dominated the role of watchdog, but it

has shifted to the role of consultants, although it has not yet reached a catalyst. The key factor of the role-

shifting is the commitment of the chairman and the quality and quantity of internal auditors.

1 INTRODUCTION

The practitioners and academics agreed by saying

good governance (GG) is important (Cyrus and

Marques, 2016) for private organization as well as

the government (Rahayu and Rahayu, 2016). The

application of GG in Indonesia is higher after the

economic crisis of 1997. Crisis of Asia was caused

by many parties, and one of them the failure of

applying Good Corporate Governance (GCG)

principles. This includes increasing the company's

performance through monitoring the work of

management and management accountability against

other stakeholders. According to the regulatory

framework and basic regulations, accountability is at

the heart of the implementation of GCG (Kaihatu,

2006)

GCG and GGG mutually support to reach

success, like two sides of the coin that cannot be

separated (Rahayu and Rahayu, 2016). Susilawati

and Soetjipta (2013) stated that GCG is only applied

in the government environment where the state

bureaucracy has implemented GGG. On the other

hand, GGG probably cannot be realized without the

support of GCG.

GGG is a set of responsibilities of the practice of

policies, and this includes the procedure that has

been carried out by an agency. The goal is to provide

strategic direction which ensures that the purpose

can be achieved. The source of its power is

accountability. The good practice of administration

can manage resources so that it can provide public

service that is of high quality. The basic principle of

good governance on influential government

organizations is participation, accountability,

transparency and integrity (edb.gov. 2010).

Accountability is one of the GGG that continues

to be evaluated. An indicator of government

performance includes reaching a sufficient level of

accountability. Every year, the ministry of

administrative state apparatus and bureaucratic

reform evaluate the performance of accountability

government agencies. Each government agency

must develop and report a performance report of the

government agencies based on Peraturan Presiden

Nomor 29 Tahun 2014 (Presidential Regulation

Number 29 Year 2014) on the performance report of

the governmental agencies and Peraturan Menteri

Pendayagunaan Aparatur Negara dan Reformasi

Birokrasi Nomor 53 Tahun 2014 (Ministry of

Administrative and Bureaucratic Reform Regulation

Number 54 Year 2014) on technical guidelines

agreement performance, performance reporting, and

review procedures on reporting the performance of

government agencies.

The accomplishments regarding the

accountability performance of municipal/city scores

in 2017 in Indonesia was published by MenPANRB

at Yogyakarta on 15 February 2018. There is still

303 (63,80 %) of municipal/city that obtains the

predicate of CC (50-60) or below. Government

agencies that achieved a score of accountability

276

Rahayu, S., Yudi, . and Rahayu, .

Shifting the Role of the Government Internal Auditors, How to Achieve It?.

DOI: 10.5220/0008491802760281

In Proceedings of the 7th International Conference on Entrepreneurship and Business Management (ICEBM Untar 2018), pages 276-281

ISBN: 978-989-758-363-6

below 70 have the potential as well as other factors

but have plenty of inefficiencies in its state budget.

The higher the accomplishments achieved regarding

accountability performance of the higher the levels

of efficiency of the budget.

Efficiency can be seen in the form of saving the

budget spent on activities. The budget should be

used to support the priorities, which are

development goals. The budget is used largely to

give benefits to the community. Hence, to achieve

efficiency of the use of government funds, there

needs to be high integrity of the organization of the

government.

The effectiveness of good governance is

influenced by the internal control system of

organizations. The integrity of the application of the

system is indicated by an internal control in the

organization concerned. Internal control provides

protection for the entity against human weakness. In

addition, the probability of errors from all that is in

accordance with the regulations can also be

minimized. The process of internal control system is

integral to the action and activities undertaken in a

continuous manner by the leader of all the

employees to give sufficient confidence over the

achievement of the aims organization through

activities that are effective and efficient, the

reliability of financial reporting, security state assets,

and obedience of regulation (PP 60/2008, Bab I Ps. 1

butir 1). This includes five control system elements

set internally by the bank control environment, risk

assessment, the activity of control, information and

communication and monitoring (INTOSAI, 2010).

The government internal control system is the

responsibility of top management. It is implemented,

and needs the commitment of all elements for it.

Internal control is not one scene or the state of being,

but a course of action that is applied in every activity

entity. The act of being systemic across the entire

operating entity is done in an inherent and

sustainable manner (INTOSAI, 2010).

Supervision against the implementation is in

accordance with its internal control system which

also expected the authorities to become one of the

tasks involving all stakeholders namely supervision

internal the government (APIP). Indonesia is facing

problems that had occurred in APIP in terms of

quantity and quality. In the year 2014, in accordance

with its internal auditor, the central government, the

regions, state enterprise BUMN and other influential

government organizations, there were a total of

12.755 or (27,94 %) out of a total of its national

demand 46.560 so they were suffering from a lack of

33.805 auditors. The government has projected in

the year 2019 that it expected a total of 20.255

auditor or 43,50 % of its national demand (BPKP,

2015).

One of the strategies taken from the government

with limited resources and professional demands use

new paradigms for APIP role. Dadang, deputy head

of the BPKP said that in the regional financial of

supervision there is a need to undertake

transformation internal government supervisory

authorities (APIP).

Transformation is change of internal auditor role

(form a way, properties, function, and others)

needed because:

 An organization cannot have duties and function

optimally

 Challenges a new assignment

 An intense competition

 Technological development

 Expectations from stakeholders

Changes in the role of the internal auditors in the

government will increase the quality of performance.

The main change from the role of the internal

auditors in the government is from watchdog to

consultants and catalyst. Attitude of auditor changed

as with some guard line or police partner for clients.

The approach that was used are in nature preventive

(should issues). Focusing their job as watchdog is a

weakness/deviation, but rather as consultants and

catalyst more focused on the constructive (Hery,

2017).

Discourse changes in the role is being done from

1990 but have changed since last year. Influential

government organizations also begin to focus on the

changes in the role of this in improving the good

governance. In connection with the management to

support the most reform from traditional to new the

public which had dropped their demand for payment

in connection with the management according to

good financial management that is more accountable

and quite transparent. The achievement APIP owns

capabilities to reach the level of 3 are one factor

which becomes the main incentive. In accordance

with its internal, an auditor charged against is

required to take on the job as increasingly active in

his eyes upon their organization. Associated research

shift occurred in the role of an internal auditor to

organizations such as the Iraqi government has not

been widely practiced. This study aims to uncover

the reality of a shifting of the role of an internal

auditor of influential government organizations.

Shifting the Role of the Government Internal Auditors, How to Achieve It?

277

2 RESEARCH METHOD

Shifting the role of the internal auditors in the

government is still finding many obstacles and

problems. Exploring the role of the perspective of

actor has an in-depth and contextual need to be done

to open the reality. Quantitative research could not

reveal this reality. Quantitative approach is not

suitable for this study because it uses only a

hypothesis test. Complexity shifts the role and can

only be understood through entanglements.

Therefore, the researchers chose a qualitative

approach. A qualitative approach provides flexibility

and opportunity for researchers to dig deeper on the

issues investigated.

The qualitative method used in the following

analysis is from the results of qualitative data. The

qualitative data analysis is referring to these stages

(Rahayu, dkk, 2015a): 1) filtering the data; 2)

reaching an agreement on fixing the theme; 3)

determining the linkages to the relationship between

the themes, and 4) processing to determine the

conclusion. Data that are not tampered with

qualitative are tested using triangulation.

Triangulation of is the way of testing of qualitative

data. (Rahayu, dkk, 2015b).

Data collection methods used in this study are

observation, in-depth interviews, and document

analysis. Purposive procedures and snowball

sampling are used to determine the informants.

Purposive procedure is most commonly used in

qualitative research (Bungin, 2011, p. 107; Rahayu,

2016).

Informants’ criteria are as follows:

1. Actively participating in the internal audit

process.

2. Having experience (minimum two years) in the

internal audit process.

Researchers assume that two-year period is enough

for someone to reveal the practical process of audit

internal, because the person has passed the stage of

mandatory assignment monitoring from planning to

reporting. Two-year period involved in the audit

process has also been considered adequate for

informants to be able to understand and unravel the

process of the role shifting auditor.

Based on the above criteria, participants of this

research are internal auditors of government

organization of various agencies, the internal auditor

of universities, BPKP, and internal auditors of local

governments. Strengthening the results of the study

was done by implementing an audit interview of

these various agencies.

Triangulation is a technique to check the data

validity by something else outside the data for

comparison against the data. This research uses four

triangulations as examination techniques, which are

sources, methods, investigators and theories

(Creswell, 2007; Bungin, 2011). Researchers use a

triangulation of sources and methods. Data

verification is done by cross-checking oral and

documentation information.

3 RESULT AND DISCUSSION

The results of the analysis of qualitative data that

have been undertaken to form several includes the

following:

3.1 Internal Auditors’ Current

Condition: Watchdog or

Consultant?

The results of the analysis of qualitative data form

some internal auditor the government prosecuted

transformation with oriented into the future. Focus

work was not merely intended to audit, but also to

monitor and evaluate, and provide consideration in

decision-making (Republika. 28 Agustus 2018).

This research result indicates that internal auditor

of the government at this time has had a role as a

consultant, although this did not leave the role of the

watchdog. It is recognized both by the auditors and

auditee. Informants from financial management said

the auditor’s inspectorate place we will take

suggestion, if there are any problems, they will come

for discussion there. An auditor has to be very open

to receive them not only as an examiner. This

proved that there has been a shift in the role of

watchdog toward the consultants.

The demands of the position as the consultant

made many internal audit institutions provide units

of consulting service. One of the most powerful

internal auditors of transport and communications

has stated “We have opened our hand to anyone who

wants to consult”. Consultation is granted in order to

prevent early possibilities of inaccurate financial

management. Consultation has yet to be fully

developed by all work units. There is still a unit that

tended to wait for them, if it has not been active.

The form of the prevention is a result of

commonly done as institutions that have, in

accordance with the government internal auditor to

socialize, workshop, and provide technical

assistances and training. The main obstacle to shift

ICEBM Untar 2018 - International Conference on Entrepreneurship and Business Management (ICEBM) Untar

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the role of an auditor to financial difficulties is in

accordance with its internal which is still unfamiliar

with the quality and the limitations of an auditor.

An auditor that has made a concerted effort to

shift occurred in the role of carrying out surveillance

in a more comprehensive way. Picket (2010)

explained the strategy of application of the new role

of internal auditor which includes watchdog and

consultant so we must add focus of supervision the

following:

1. From Hard Control increased with Soft Control

2. From Control Evaluation increased with Self

Assessment

3. From Control increased with Risk

4. From Detective increased with Preventive

5. From Audit Knowledge increased with Business

Knowledge

6. From Operational Audit increased with Strategy

Audit

7. from Independence increased with Value

Additional focus is to be made using more

comprehensive monitoring.

Additional focus will be made as more internal

supervision, comprehensive auditor, catalysator role,

because the auditors provide consultancy services in

a passive manner. This means that the auditors were

not an actor who initialize and be active to move a

change. The auditors will still be waiting, as

consultation is given to the auditee who came to

internal auditor office. This indicates the evaluation

of risk management organization have not yet been

optimally carried out.

3.2 Proximity Developer by Mutual

Trust

The role of new internal auditors will not be able to

position themselves as watchdog but as a partner

(Rahayu dan Rahayu, 2016). The internal auditors

must be able to give advice for the prevention of

deviation and long-term solutions for auditee. The

auditors participate actively by assisting

management in taking the act of repairing. Besides,

as a consultant, the new role auditor is a catalyst.

Catalyst is engaged in the formation of value, moral

and cultural organization which is long-term

(Astuty, 2007).

The auditors can only be consultants and

catalysts when having proximity to auditee.

Informants capture the relationship as familiar and

trust so they can independently consult and are not

afraid to consult to the internal auditors. Auditee

who changes in the role of the auditors, made the

auditors like a companion, not an examiner. The

arrival of the auditors to a unit of work do not

consider finding fault, but as an early precaution.

The incompatibility found by the internal auditors

can be repaired before being sustainable. Hence,

auditees who understand this are consulting when it

matters. The auditors are asked to help in the

resolution of problems.

A unit of work does not yet have similar

perceptions. They still found a unit of work which is

not understood as the shift occurred in the role of an

auditor. We still found auditee concern to be

investigated over possible involvement in and

consultation to an auditor in accordance with

internal auditors. Auditee who is kind like this is

because they do not have emotional proximity and

the kind of trust to an auditor. For that reason, there

needs to be a way for the socialization to be widely

associated to the new role of an auditor to all

auditee.

3.3 Internal Auditor as Consultant:

Still Independent?

Head of BPK RI stated their auditor respond to

financial monitoring in accordance with its internal

rules to play a critical role and will continue to run

for institutions that have been effective. The internal

auditors including the director in the end benefit a

lot of people (Republika. 30 Agustus 2018).

However, internal auditor still has to work in

accordance to the codes of conduct of internal

auditor’s needs to sustain the independent attitude of

the auditor.

The independence of an auditor increase the

value of informing the results of the supervision of a

juvenile. In addition, the independence also must be

implemented in the process of an audit. This

includes being independent of the government in the

planning, independent in the performance of the job

of its open square, and independent in the reporting.

An internal auditor as the keeper fumbled into

his own line of public compliance with regulations

which gave more of an impression compared to that

in the independence of the government’s role as the

consultant and catalyst. An auditor as the consultant

and catalyst took active part toward assistance for

auditee both in the provision of policy determination

as well as the monitoring activities that are to be

implemented. At least a part of an audit or internal

member who was an informant in this research if I

am admitting, the leaders of various institutions

often consult with government officials for the

determination of all policies taken.

Shifting the Role of the Government Internal Auditors, How to Achieve It?

279

To increase the involvement of an auditor

internally within for policy making and

implementing activities that have only been

accompanied to safeguard the program

implementation. They are not technically directly

involved. The determination of policy and decision

making are done by fixing the authority to press

ahead as institutions who have been meeting leader

city council speaker. An internal auditor and not

decision makers just wanted to show consideration

and recommendations about such things as.

An auditor to be worthy in accordance with its

internal regulations are independent according to

various parties, because of its engagements that are

too far apart in the activities of the operational costs

of the well as institutions. An auditor had to be able

to continue to maintain the independence because it

will be granted services of the encumbrance of the

last and the implementation of an organization

policy. As well as technical difficulties and to

increase the involvement would make an auditor as a

watchdog to work on his own. The results of

supervision have the potential to cause bias and to be

subjective.

3.4 Main Key for Role Shifting

An internal auditor and auditee member who was an

informant expressed two key factors a supporter of

the occurrence of obvious shift of own capabilities

commitment on the part of the council leaders and

the auditors. It is like what was carried out by one

informant “There are two which are the key to the

leader who commit an audit and professional

auditors; others went along on the course”. The

other factors include a style of leadership that we are

doing, much of the best work culture and the use of

an integrated information system. Others made the

decision rather than just waiting to become factors in

support. The whole factors are in support of going to

be able to increase further after two key factors to

alter the decisions.

A leader who has a high commitment from the

internal audit process will be open and not resistant

to the process of changing. The leaders’

commitment to application of the internal system’s

organization control such as the structure of the

organization properly, the creation of conducive

work culture, a good example, and the budget

allocations adequate to internal audit. The

government shall determine one indicator of the

implementation quality as the budget is 1 % of the

total budget the year. Most institutions’ internal

audit has not yet received allocation of a sufficient

budget.

Commitment leaders will determine capabilities

of auditor in an organization. In general, capabilities

often are defined as competence describing the

ability. Capabilities are actually the skills of more

specific, procedure, and the process that can turn the

resources into competitive advantage and control the

capabilities of point weakness.

APIP capability can be evaluated through

internal auditing capability model (IACM)

consisting of 5 levels, namely the levels of 1: initial,

level 2: infrastructure, level 3: integrated, level 4:

managed, and level 5: optimizing. Based on the

evaluation of APIP, 60 % of Indonesia still is on the

level 1, 23 % on 2 and only one percent on level 3

(inspektorat.jatengprov, 2016). The condition

capabilities of government APIP are still dominantly

on the first level and have not been able to guarantee

the implementation of governance, nor has it been

able to detect corruption. The target of the

government is to increase APIP capabilities to the

level of 3 in 2019, and it can implement it to

training.

Capabilities are not only technical, but also non-

technical. The internal auditors are an example in

rule enforcements in the organizations. The internal

auditors have to show high integrity. One senior

auditor of the local government said, “An auditor it

was sort of like a broom, the Bromo must be clean

before it's used to clean a place”. This is

meaningful, because an auditor who will not be able

to apply moral and value and high integrity, will not

have the power to carry out surveillance.

An internal auditor is again not only focused on a

system of routine related to an audit, review and

monitoring related to adherence to rules. The

number of similar findings was the indicators of the

quality of the degree of success. An internal auditor

was actively involved in assistance to financial

management activities and provided services for

consultation in order to resolve issues that are faced

by auditee.

4 CONCLUSIONS &

LIMITATION

A conclusion that can be drawn from this research is

as follows:

1. The role of the internal auditors of the

government has no longer become a watchdog,

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but the role is capable of being the consultant,

even though it has not reached as catalyst.

2. The role of the consultants can be done and be

effective if there was mutual trust between the

auditors and auditee. Trust was obtained from the

closeness and emotional relationship awakened

by long-term interactions.

3. The role of consultants and catalyst does not

diminish the independence of internal auditors.

The judiciary should keep running assurances

function.

4. Two important factors shift the role of the

auditors namely commitment of leader and

capabilities of internal auditor.

The limitation of this research is the use of

qualitative methods that make the results of this

study not generalizable. Further research can use

concepts that have been presented to be tested with

quantitative methods. In addition, the informants of

this study are internal government auditors, so the

results of the study do not necessarily reflect the role

of internal auditors in private organizations.

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