The Impact of Digital Transformation on the Quality of Internal Audit in the Libyan Banking Sector

Abstract

This study investigates the influence of Digital Transformation (DT) on the quality of the Internal Audit (IA) function in Libyan commercial banks. Employing a quantitative, descriptive-analytical methodology, data were collected from 158 audit professionals across major Libyan commercial banks. Multiple linear regression analysis revealed a robust, statistically significant positive effect of DT adoption on overall IA quality (R² = 0.616, p < 0.001). The most pronounced effect was on the Efficiency of Audit Execution (β = 0.785), followed by the Quality of Planning (β = 0.512), and the Development of Professional Competencies (β = 0.490). These findings demonstrate that DT, facilitated by technologies such as Robotic Process Automation (RPA) and Big Data Analytics, facilitates a shift from traditional, sample-based auditing to a proactive, continuous, and risk-oriented paradigm. Nonetheless, the analysis underscores persistent challenges related to infrastructure deficiencies and skills gaps. Recommendations include prioritizing investments in automation tools and establishing dedicated digital audit units within Libyan banks, alongside modernizing regulatory frameworks by the Central Bank of Libya to align with technological progress.