Valuation of the internal audit mechanisms in the decision support department of the local government organizations using mathematical programming

Abstract

The importance of internal audit and its impact on the organizations’ effectiveness raised public interest. This study focuses on the internal control mechanisms in the local government organizations (LGO). Specifically, the level of implementation of internal corporate control mechanisms in the Decision Support Department (DSD) of the LGOs is explored. On the basis of data analysis and processing of the results of the study, in which 93 civil servants took part, it is evident that the degree of the added value of internal audit in public organizations depends on the degree of its independency. Also, findings suggest that it is inversely proportional to the degree of compliance with procedures of the DSD. The analysis is extended by incorporating mathematical programming techniques for subset variable selection in order to minimize error values. Decision variables of the proposed models indicate which of the variables will be included in the regression model, to increase adjusted R2.