Redefining Internal Audit Transformation in Philippine Local Government Units: EEIS Framework, Challenges, and Governance Implications

This study investigates the extent of internal audit transformation in municipal governments in the Philippines using a descriptive-correlational research design anchored on the Efficiency, Effectiveness, Impact, and Sustainability (EEIS) framework. The research responds to the growing need for empirical evidence on how the internal audit function (IAF) transforms in decentralized local government units. Data were gathered through a structured survey of 50 purposively selected stakeholders involved in internal audit functions, including local executives, internal auditors, department heads, and MLGOOs. Findings revealed moderate to high levels of internal audit transformation across all four EEIS dimensions. Effectiveness is associated with defined roles and accountability measures. Efficiency was generally associated with organized internal audit systems. Impact implies the initiation of change and the achievement thereof. Sustainability is related to the institutionalization of the IAF. Correlation analysis showed a significant negative relationship between internal audit transformation and challenges. There exists a moderate positive correlation between the transformation of internal audit and the improvement of local governance. These findings support the theoretical relevance of agency theory, state-centered theory, and governance theory in framing internal audit reform in the public sector. The study concludes that internal audit transformation plays a critical role in strengthening local governance. To sustain transformation, addressing the challenges and development of human resources, institutional capacity, and legal frameworks is necessary. This study contributes to the limited literature on internal auditing in local governments and provides policy recommendations for enhancing IAF as a strategic tool for good governance.