Along with the trend of applying business governance in Vietnamese public higher educationinstitutions, agency problems become an important issue that the public higher educationinstitutions have to face with. There are many ways to reduce agency problems, and one of themis to take advantage of the internal audit system. The study reviews the literature on therelationship between agency theory and internal audit in public higher education institutions,which is quite rare, and from that analyze to the case of Vietnam, a country where the universitygovernance system has had a lot of changes in recent times with the promotion of autonomymechanism. The research raises the role of internal audit in university governance and providespolicy implications for regulators and universities’ administrators in implementing internal auditfunction to reduce the agency problems.

Keywords: Agency theory, Corporate governance, University governance, Internal Audit, Publichigher education institutions, Vietnam.