Internal auditing which is now being implemented in local administrations after the adoption of the Law No. 5018 on Public Financial Management and Control is a practice that would ensure econornical, effective, influential and quality service by the local administrations, and facilitate the decision making processes of local administrators. The purpose of this study is to analyze the functioning of the internal auditing system in the local administrations and to offer solutions for ongoing problems and deficiencies of the system. Survey method was picked as the research method. The research findings reveal that the general structure of internal auditing was properly perceived by the internal auditors. However, the study also shows that internal auditing is not paid adequate attention in local administrations by top management and that the internal auditing process is not fully implemented in all units. The intention of the present study is to facilitate the implementation by identifying the current situation and problem areas and proposing solutions thereto.