FACTORS INFLUENCING THE EFFECTIVENESS OF INTERNAL AUDITING IN STATE-OWNED ENTERPRISES DURING DIGITAL TRANSFORMATION

Internal auditing is increasingly recognized as a vital mechanism for fostering transparency and accountability within the public sector, particularly in emerging economies like Vietnam. However, the rapid onset of digital transformation is fundamentally altering organizational data flows and risk landscapes, necessitating a re-evaluation of the determinants that drive audit success. Grounded in Institutional Theory and the Resource-Based View (RBV), this study investigates the critical factors influencing internal audit effectiveness (IAE) within Vietnamese state-owned enterprises (SOEs) during this technological shift. Data were gathered through a structured online survey administered between October and November 2024 to 150 practitioners, including internal auditors, external auditors, and department heads. The analytical framework employed descriptive statistics, Cronbach’s alpha for reliability, exploratory factor analysis (EFA) with Varimax rotation, and multivariate OLS regression to test the proposed hypotheses. The empirical findings identify five significant predictors of IAE: top management support, professional competence, integrity and objectivity, IT capability, and the quality of coordination with external auditors. The regression model demonstrates robust explanatory power, accounting for approximately 74.6% of the variance in audit effectiveness (USD R^2 \approx 0.746, p < USD 0.001). Notably, top management support and professional competence emerge as the most profound drivers, confirming that executive sponsorship and specialized expertise remain the bedrock of governance in SOEs. Furthermore, IT capability and collaborative assurance with external auditors contribute significantly to audit quality, highlighting that data-driven approaches, such as continuous auditing and data analytics, are essential in a high-velocity digital environment. The study provides actionable recommendations for SOE leaders to reinforce managerial commitment, accelerate the adoption of automated auditing tools, and establish structured ethical frameworks to navigate the complexities of digitalization. The paper concludes with an improved framework for public sector leaders to navigate digital risks, emphasizing the necessity of integrated technological and ethical safeguards.