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Theoretically, the internal audit function exists to help members of an organization to improve the performance of their activities. But the findings from in-depth interviews conducted in the middle of 2004 with internal auditors from a total of 40 federal government ministries, departments and agencies in Malaysia revealed a number of serious shortcomings that far outweigh the few virtues identified during these interviews. These shortcomings are that many internal audit units face staff shortages, and staff lacking in internal audit competence. In addition, a majority of the audit units, most of which operate in outdated audit modes, have failed to get the right level of support and assistance from the Treasury and other parties. Worse, their effectiveness and efficiency are further threatened by the high-handed actions of the National Audit Department which shifts its cadre staff in and out of the internal audit units at will. Despite all these problems, these internal auditors are quite optimistic about the future of internal audit in Malaysia. But, according to the politics of accountability theory and the fact that Malaysian social context is replete with cases of the lack of transparency and public accountability from its major actors, the internal audit’s future does appear bleak. Keywords - internal audit, federal government organizations, indepth interviews, Malaysia

This paper is part of the third and final study conducted on the state of internal audit in the public sector of Malaysia. The first study was concerned with the internal audit operations in the state and local governments found in  Peninsular Malaysia (Azham et al 2007a), while the second study was concerned with internal audit in the nation’s federal government ministries, departments and agencies (Azham et al 2007b). This third study covers 47 organizations at the federal government level, comprising 27 statutory bodies and 20 government-linked companies. From the face-to-face interviews conducted with internal auditors over the three year period 2005 to 2007, several notable audit features emerged as common to all 47 organizations. Some are depressing, while a few others are encouraging. All in all, however, the internal audit function in a majority of the organizations still leaves much to be desired. Also, it is notable that these findings are very much like those of the previous two internal audit studies (Azham et al 2007a; 2007b), and to make sense of the dismal state of the internal audit function in the public organizations, there is perhaps a need to look at the bigger context within which the internal audit function is found.

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