How internal auditing impacts governance mechanisms in small and medium-sized businesses

Small and medium-sized businesses (SMEs) use internal auditing (IA) as a key tool to start governance processes in their organizations. SMEs can gain several advantages from IA, such as identifying and managing risks, creating a strong control environment, ensuring compliance, improving operational efficiency, and aligning their strategies with their objectives. By using IA, SMEs can build a solid foundation for success and adapt to today's changing business environment. SMEs encounter specific challenges in initiating governance processes because they lack the resources and infrastructure that larger organizations have. Integrating IA into a company's management process can be difficult for smaller businesses, so they need to make full use of IA. Therefore, this study aims to examine how IA influences the activation of governance mechanisms in SMEs. The study uses the design science method (DSM). The results show that IA significantly affects the activation of governance mechanisms in SMEs. IA helps identify and manage risks, improve internal controls, ensure regulatory compliance, and address issues of concern. Effective IA functions can enhance corporate governance practices, promote ethical decision-making within the organization, and improve the overall effectiveness and success of the organization. (c) 2024 The Authors. Published by IASE. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).