Internal Audit Function and Corporate Governance Code in Libya

This report examines the internal audit function and its influence on corporate governance, specifically within the context of Libya. The study explores the rationale for research in this area, outlining specific objectives, including assessing the efficacy of internal audit in promoting good governance and identifying factors contributing to its effectiveness. The research employs a secondary research methodology, utilizing government reports, academic journals, and case studies. The report details the research onion framework, philosophical underpinnings (Interpretivism), and a deductive research approach. It also covers the research technique (mono method) and descriptive research design, analyzing the impact of internal audit on corporate governance. The report aims to understand how internal audit can be improved to promote good corporate governance in Libya, and how this impacts the financial management of corporations.

Running head: RESEARCH METHODS
Internal Audit Function & the Development of Corporate Governance Code
University Name
Student Name
Authors’ Note

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Table of Contents
Section 1: Rationale for research in this area.............................................................................2
Section 2: Specific Objectives...................................................................................................4
Section 3: Research Methodology.............................................................................................4
Section 4: Research Problems..................................................................................................13
References................................................................................................................................14

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Project Title: Internal Audit Function and the development of corporate governance
code in Libya
Section 1: Rationale for research in this area
The study can help in comprehending internal control structures and the role played by
internal auditors that can add to the value and enhance business functions. The current
research study can help administration in appreciating the specific role played by internal
auditing operations in the business concerns and comprehend the challenges they encounter
in undertaking roles and aid in solving them. It can help in comprehending whether their
investment is worthwhile. Governing units as well as senior management in the firms have
the requirement for services of internal audit in order to be effective as well as efficient.
Simultaneously, Eulerich et al. (2015) suggests that legitimacy of particularly internal audit
action along with missions have the need to be understood and upheld by senior management
of firms for enhancement of efficacies in promoting good governance, systems of control as
well as risk management.
Context of the study
Taking into consideration the background of my academic qualification, I intend to become a
professional and specialized accountant in future. All professions have the need to acquire
requisite and relevant knowledge, necessary skills for undertaking the tasks. Further, in each
professional field it is essential to possess required personal excellence. Founded on the
current study, it can be hereby stated that individual attributes as well as necessary qualities
include honesty, level of integrity as well as honesty.
Accounting can be considered to be a very dedicated and specialized section in which
accounting professionals have the requirement to show evidence of great amount of potential

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in their own trade. Drogalas et al. (2016) recommend that accounting professionals can get
influenced together with the overall quality of financial information utilized and different
qualitative facets. Even if there are various approaches and tactics of accounting profession,
efforts have been made for the purpose of designing an outline of scientific investigation in
the areas of auditing functions
Proper considerations have the requirement to be on the overall quality of financial
information presented in financial pronouncements of different reporting entities. However,
this also elucidates illustratively that professional accountants have the need to be adequately
competent and need to possess specific know-how and proficiency for maintaining higher
quality financial reporting. Eulerich et al. (2015) suggests that overall quality of accounting
service relies on the competence level of different professionals for preparing and presenting
financial pronouncements. This sequentially enhances the performance of internal audit
functions that can help on monitoring and promoting proper governance system in a specific
corporation. Internal audit can be regarded to be an integral section of the corporate
governance in both public as well as private segments and is necessarily a crucial component
of financial management and is a tool for enhancing the performance.
Section 2: Specific Objectives
Research Objectives
The main purpose of the current study is as presented below:
- To examine efficacies of internal audit function in the process of promoting good
governance with special emphasis on developing nation such as Libya.
- To institute different factors that contribute to the efficacy of the internal audit
function of firms that in turn affects corporate governance methods in Libya.

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- To deliver an understanding along with appreciation of various factors that are
necessary to make the Internal Audit Function to be effectual and the way the function
can be improved for the purpose of promoting good corporate governance in Libya.
Research Hypothesis: H 0: Internal audit function in business concerns exerts influence
on corporate governance of firms
H 1: Internal audit function in business concerns does not exert influence on corporate
governance of firms
Section 3: Research Methodology
Internal auditing includes use of systematic research methodology for the purpose of
assessing various business procedures or else organizational issues and suggesting solutions.
The current chapter sketches the research design, target population, size of the sample along
with procedures that were utilized for selection of the sample elements (McCusker and
Gunaydin 2015). In essence, this covers all the research instruments and the processes for
collection of primary data and illustrates all the mechanisms that are used for analysing data.
Type of Research
The researcher intends to implement secondary research in this specific study that
corresponds to the topic of the research on internal audit and its consequences on good
corporate governance code. The learner intends to utilize secondary data for the purpose of
carrying out the current study (McCusker and Gunaydin 2015). Secondary data indicates
towards the data that was acquired previously by someone other than the current user.
Secondary data can be assimilated from various government reports, official websites, books,
journals as well as newspapers on internal audit and corporate governance of particularly
Libya. So, the learner can acquire requisite data from government records, organizational

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records as well as data that were originally acquired by the investigator/examiner undertaking
the research. In addition to this, specific cases of Harouge Oil Operations can also taken into
consideration and data are collected from official website, company literature and prior
articles on the same.
Research Onion
As rightly put forward by Matthews and Ross (2014), the research onion delivers an effective
advancement way by means of which a specific research methodology can be formulated by
the learner. The usefulness of the research onion is mainly the adaptability for any kind of
methodology of research and necessarily can be utilized in different context. For the purpose
of the present study, the learner too intends to follow the research for formulating the
methodology of the current research under consideration.
Figure 1: Research Onion
(Source: Flick 2015).

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Philosophical underpinning of the adopted research
As rightly indicated by Jaggar (2015), there are necessarily three different types of
philosophies of research namely positivism, realism as well as Interpretivism.
Figure 2: Research Philosophy
(Source: Flick 2015).
Positivism indicates towards acquirement of scientific as well as validated data or else
positive facts gathered from various sources referred to as empirical evidences. The research
philosophies particularly take into consideration the society that includes the physical world
functioning as per the general regulations. Bryman and Bell (2014) suggests that positivism
refers to specific positive knowledge that is entirely founded on natural phenomenon, features
as well as associations.

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Again, Interpretivism can be considered to be a social approach that falls under social science
and is quite opposite to that of the positivism approach. This specific philosophy of research
can be applied for the purpose of undertaking qualitative research. Basically, the qualitative
research can be regarded as a mechanism of inquiry in the field of social science together
with other associated disciplines simultaneously (Choy 2014). This approach is a specific
school of thought in current philosophy. In this connection it can be said that Interpretivism
can be considered as a research philosophy in which learners can interpret and analyse
specific components of the study and assimilate human interests into the particular study
under consideration. Again, realism refers to a particular philosophy of research that depends
upon independence of thoughts and different ideas regarding reality. In essence, this research
philosophy can be said to be founded on suppositions of a specific scientific approach to the
work of development of knowledge (Neuman and Robson 2014).
For the purpose of the present study, the learner intends to use Interpretivism philosophy that
can fittingly adapt to the current research study. The learner can follow this Interpretivism
philosophy for the qualitative research. This philosophy gets related to the philosophical
situation of idealism and can be utilized by the entire group and takes into consideration
social constructivism (Panneerselvam 2014). According to this specific approach, it is
necessary for the learner as a specific social actor to fittingly appreciate variances that exist
between individuals.
Research Approach

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Figure 3: Research Approach
(Source: Flick 2015).
As rightly put forward by Gast and Ledford (2014), deductive research approach can be said
to be associated to development of hypothesis founded on subsisting themes and formulating
a strategy of research for examining given hypothesis. However, it can be observed that this
deductive research approach replicates the reasoning criterion from different general facts.
This approach can be considered as one of the research designs that help in examining
associations otherwise links that can be gathered from generic conditions (Smith 2015). Thus,
it can be hereby said that deductive approach can help in deducting hypothesis from the
present theory. The themes can help in formulating hypothesis in functional terms and
examine proposed associations between two given variables.

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Figure 4: Steps in Deductive Research Approach
(Source: Silverman 2016).
Again, inductive approach refers to a specific approach of research that deduces broader and
wider generalizations and notions from particular and specific observations. Particularly, this
specific approach essentially starts from specific observations along with dimensions and
thereafter and identifies patterns (Silverman 2016). As such, this research approach primarily
designs certain tentative research hypothesis, examines and explores and consequently
deduces general conclusions else wise theories as well as notions.

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Figure 5: Steps in Inductive Research Approach
(Source: Silverman 2016).
For the purpose of the present study, the learner intends to implement the deductive approach
as that primarily concentrates on assessing the notions of development of internal audit and
good corporate governance code in a developing nation such as Libya are valid enough. In
this case, the learner intends to construct research hypothesis on prior concepts and test the
validity of the same by comparing the same with various secondary sources of data. In
addition to this, this deductive research approach can also help in the process of directly
formulating hypothesis and thereafter designing a strategy of research for examining of
hypothesis. Essentially, deductive approach starts with anticipated pattern in which it is
examined against observations (Flick 2015).
Research Technique

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According to Lewis (2015), the research technique indicates towards the procedures that can
be employed to attain research objectives. Research technique comprises of the blueprint for
the purpose of collection, enumeration along with evaluation of data. The learner intends to
utilise the research design known as mono method for the current secondary research that
counts only the qualitative research design. Qualitative design of research takes into
consideration an approach that is both systematic as well as subjective. This can be utilized
for illustrating practical experiences and delivering significant connotation (Mackey and Gass
2015). Furthermore, the learner intends to undertake the study on development of internal
audit and its impact on corporate governance after acquirement of qualitative data on the
same. Thus, the learner intends to gather qualitative data from prior reports, documents,
government reports, academic articles, journals, documents, prior case studies and many
others.
Research Design
As correctly indicated by Taylor et al. (2015), there are essentially three different types of
research design namely explanatory, exploratory as well as descriptive research design. ()
suggests that exploratory research deign is a specific design in which the researcher
investigates the selected problem and the said situation that in turn helps in delivering
insights into the research study. Again, descriptive study is yet another type of design of
research in which researcher attempt to explore and at the same time explain supplementary
information on areas related to the topic of research (Mackey and Gass 2015). In addition to
this, explanatory design of research indicates towards a specific design in which the
researcher intends to relate various ideas for establishing the cause and effect associations.
Essentially, this research design helps in explaining the way things unite and thereafter
interact.

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For the purpose of the present study, the learner intends to utilise the descriptive design of
research since it helps in fittingly utilizing secondary data and undertaking evaluation of
previously acknowledged facts. Implementing the descriptive research can help the learner to
undertake investigations of the acknowledged facts and thereafter drawing conclusions by
means of thematic evaluation.
Sampling technique
The technique of sampling that can be utilized for the present study is utilizing the secondary
data and using thematic evaluation in which data as well as information can be generated
from previously published academic body of literature, books, and journals along with
official websites (Flick 2015).
Methodology for collection of data
For the purpose of the present study, the learner intends to gather data from current published
journals, official websites, case studies, academic reports, journals and articles, published
government reports and many others (Silverman 2016). The technique here is mainly
thematic that takes data from the above mentioned sources.
Proposal to analyse the evidence
The learner has the intention to undertake thematic analysis of qualitative data collected as
the current research is mainly founded on secondary data. Essentially, thematic evaluation is
a widely utilized qualitative data evaluation method that the researcher can use for the present
purpose. Fundamentally, this method can be considered to be one of the clusters of various
methods that primarily concentrate on recognizing the meaning of identified patterns in a
provided set of data (Choy 2014). Furthermore, the learner intends to adopt a specific type of

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thematic analysis where things are carried out in a deductive manner and where the process
of development of theme is mainly directed by subsisting notions as well as thoughts. As
such, it is the case in which researchers can implement and utilize prior information from
diverse sources and consequently draw conclusions by establishing their point and validating
the stated research objectives. Essentially, it concentrates on specific reality and thereafter
aims at deducing and deriving conclusions out of the studied reality so that positive result can
necessarily be generated.
Section 4: Research Problems
With the globalised nation, internal audit can be instituted as an imperative way for the
appropriate management of any business economic resources. Concurrently, corporate
governance necessarily has accepted wide attention in current years both in practice as well
as in academic research due to major accounting scandals as well as large scale corporate
failures. Current corporate scandals together with earnings restatement have led to an
augmented stress on the requirement for strong corporate governance to make certain high
quality of financial reporting by reporting entities (Drogalas et al. 2016). However, the
question that is left unanswered is whether internal auditors need to be among individuals that
need to be blamed at the time when corporations are at the verge of crumpling.
Internal auditing can be considered as an extremely dynamic and significant subject and is
presently at a crucial stage of development since there is a rising demand for various audit
services. The current study intends to institute a positive association between broad elements
of corporate governance and that of internal auditing. However, a primary limitation of this
current study is that it is not concentrated on any particular industry, size of the organization
or else any specific sector. Therefore, scholars can in future take all these limitations into
consideration for further research work. For this purpose, it is suggested further research to

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undertake a focussed approach by assessing different matters in diverse areas of industry
segments and size of organizations and analyse the development of different individual
component and stages of the approach. In addition to this, the current study also does not take
into consideration the conceptual structure of national as well as international level, relation
to International Audit Standards, principle postulates, regulations and norms and diverse
technical instruments.
The research study might encounter different limitations that are likely to hinder access
information that the study requires. The current study might also face the limitation of
incapability to take in factors that are outside the purview of developing nation such as Libya.
Appropriate management can be considered to be an important issue of concern in
particularly developing nations

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corporate governance, internal audit and audit committee: Empirical evidence from
Greece. Corporate Ownership and Control, 14 (1), pp.569-577.
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