The Extent to Which the Application of International Internal Auditing Standards Contributes to Reducing Risks in Libyan Commercial Banks

Abstract

This study aims to measure and assess the extent to which the application of internal auditing standards contributes to reducing risks in commercial banks and their branches operating in the city of Misurata. The study relies on the International Standards for the Professional Practice of Internal Auditing issued by the Institute of Internal Auditors (IIA), according to the latest updates. These standards include attribute standards—such as independence, objectivity, professional competence, and audit quality—and performance standards related to planning, managing activities, follow-up, and information determination.  The study adopted the descriptive–analytical approach. Data were collected through a questionnaire distributed to audit, credit, and risk managers, as well as bank supervisors and their assistants. A total of 33 valid questionnaires were analyzed. The findings revealed that Libyan commercial banks face significant risks, most notably exchange rate fluctuations and the weakness of economic feasibility studies submitted by clients, which adversely affect the effectiveness of internal auditing. The results further indicated that applying international internal auditing standards clearly contributes to enhancing audit quality and improving the ability to reduce banking risks. In light of these results, the study recommends adopting an integrated risk management system and activating risk-based internal auditing, in addition to improving the professional competence of staff through training programs and workshops and benefiting from international expertise in this field. These measures would strengthen the effectiveness of internal auditing, improve banking performance, and reduce risks.