Volume 5 Issue 15 (June 2023) PP. 01-21 DOI 10.35631/AIJBAF.515001 Copyright © GLOBAL ACADEMIC EXCELLENCE (M) SDN BHD - All rights reserved 1 ADVANCED INTERNATIONAL JOURNAL OF BANKING, ACCOUNTING AND FINANCE (AIJBAF) www.aijbaf.com BUILDING A CONCEPTUAL MODEL FOR INTERNAL AUDITING: THE PERSPECTIVE OF ABSORPTIVE CAPACITY THEORY Yaser Ibrahem Almodallah 1 , Suhaily Shahimi 2* , Anna Azriati Che Azmi 3 1 Graduate School of Business, Faculty of Business and Economics, Universiti Malaya, Malaysia Email: Cva180017@siswa.um.edu.my 2 Department of Account, Universiti Malaysia Kelantan, Malaysia Email: suhaily@um.edu.my 3 Department of Account, Universiti Utara Malaysia, Malaysia Email: annaazriati@um.edu.my * Corresponding Author Article Info: Abstract: Article history: Received date: 16.03.2023 Revised date: 10.04.2023 Accepted date: 02.05.2023 Published date: 01.06.2023 To cite this document: Almodallah, Y. I., Shahimi, S., & Che Azmi, A. A. (2023). Building a Conceptual Model for Internal Auditing: The Perspective of Absorptive Capacity Theory. Advanced International Journal of Banking, Accounting, and Finance, 5 (15), 01-21. DOI: 10.35631/AIJBAF.515001. This work is licensed under CC BY 4.0 The purpose of this paper is to present a conceptual model for internal auditing based on absorptive capacity theory. Internal auditing effectiveness is influenced by an organization's capacity to identify, assimilate, and apply new knowledge, according to the model. It has been determined that absorptive capacity is positively associated with innovation, performance, and competitiveness, making it a central concept in the literature of organisational learning. This study contends that internal audit functions contribute significantly to an organization's absorptive capacity by providing valuable knowledge, expertise, and perspective on internal control systems, risk management, and governance. An organisation can identify and learn from internal and external knowledge sources, including best practises, regulations, and industry developments, if its internal audit function is proactive and provides value-added services. In addition, a well-aligned internal audit function with the strategic objectives and culture of the organisation can facilitate the assimilation and application of new knowledge. The model suggests that internal audit functions can be improved by employing a risk- based approach that focuses on the organization's most significant risks and opportunities. This strategy can assist internal auditors in identifying and prioritising areas where new knowledge is required and in delivering more targeted and pertinent services. In addition, the model proposes that internal audit functions can be improved by leveraging digital technologies, such as data analytics and information technology, which can assist internal auditors in accessing and processing large quantities of data and delivering more efficient and effective services. This paper emphasises the significance of