Internal audit is important for public enterprises to achieve their goals. Auditors need to be skilled in areas like risk analysis and financial analysis. Having an ethical environment is crucial for internal audit to be effective. Lack of trained manpower and professional independence hinders internal auditing in public enterprises. The effectiveness of internal audit is influenced by resources, scope, and interaction with management. In Nekemte city administration, only six out of sixteen public enterprises were studied. The competence of internal auditors, including education and experience, affects the effectiveness of internal audit.