This research is an attempt to study and report on the contribution of internal auditors in fraud detection in a Tanzanian parastatal organization, the case of Dar es Salaam City Council. The study is aimed at finding out the role and function of internal auditing as a tool and professional practice in detecting, preventing and controlling various forms of fraud in an organization. The study has been conducted due to the increasing use of information technologies, complexity of business transactions and business risks, which necessitate the roles of internal auditors as a part of the company’s control system, in assessing the efficiency, effectiveness, economy, and fairness of the realization of tasks. Internal auditor’s role provides consulting services to the organization’s management, and promotes the effectiveness of risk management with the aim of creating added value and enhancing business and organization activities. Objectives: The purpose of this study is to assess on the contribution of internal auditors in fraud detection in a Tanzanian Parastatal Organization, by looking at the roles and functions of the internal auditors and the normal internal audit practices available at the parastatal organization necessary for discovering irregularities, frauds, and unintentionally miscalculations, which are likely to happen and so to explore the possible strategies preferred for eradicating and reducing inefficiency in a Tanzanian parastatal organization. Realization: In order to fulfill those objectives, a descriptive approach was used on which primary data were collected through self-administered questionnaires and interviews. Some secondary data were taken and analyzed from selected books, journals and published auditing reports. Both quantitative and qualitative analyses of data were done. Comparisons, explanations, tabulations, pictorial representations and matching data pattern were utilized as methods of data analysis. The study attempted to reveal that auditing has a role to play in controlling organizational fraud in Tanzania. Findings: Results have shown that internal auditors have a role to play in providing health status of financial statements by detecting, preventing and reporting any form of frauds to the management. Recommendations: Conclusively, it is recommended that to AUASB needs to have special auditing standards for Parastatal Organization. But this standard should meet the needs and requirements of Tanzania. However, Management should not underscore the degree of independence of the internal auditors and should raise awareness through education and training. In particular, attention should be paid to employees who are working in high risk areas, such as procurement and finance, and to those personnel who have a role in preventing and detecting of fraud in the organizations, for example human resources. Finally, the government, the owners and management of these Tanzanian parastatal organizations and auditing practitioners should make efforts and take immediate actions to ensure compliance.

A Dissertation Submitted to Mzumbe University, Dar Es Salaam Campus College in Partial Fulfillment of the Requirements for the Degree of Masters of Science in Accounting and Finance (MSc. A&F) of Mzumbe University