Influence of the Internal Audit Function Towards Zakat Performance

Abstract

Zakat institutions play an important role in Malaysian socioeconomics. The ability of zakat institutions to collect zakat has been undoubtedly proven by the increasing collection amounting to millions recorded every year. However, Zakat institutions are still largely being critiqued by society over its transparency and efficacy in zakat distributions. Thus, it seems very crucial for zakat institutions to maintain a gold standard of governance and good practice in order to overcome the issue of deteriorating public trust. One of the important components involved in achieving good governance of service, is through the provision of effective internal auditing. By taking into account four constructs for measuring the internal audit function which are organizational status, scope of work, top management support and competency, this research attempts to investigate the relationship between internal auditing and zakat performance. A quantitative method is used for this research. A set of questionnaires were developed and sent to the internal auditors (operation/quality auditors) of all zakat institutions in Malaysia. 94 questionnaires were returned from a total of eight zakat institutions. Results from the multiple regression analysis carried out concludes that organizational status and competency are a significant predictor for zakat performance. Organizational status seemed to be the strongest unique contributor towards zakat performance, followed by competency of internal auditors.