A Research Report Submitted in Partial Fulfillment of the Requirements for the Award of the Degree of Master of Business Administration in Corporate Management (MBA-CM) to Mzumbe University.The study focuses on assessment of the effectiveness of internal audit in fostering financial discipline in social security funds in Tanzania a case study of Parastatal Pension Fund. The objectives were to determine the influence of internal audit in fostering financial discipline and its role in the organization, also determine the need for external auditors and suggests the area for improvement in PPF internal audit department. In the study the data was collected by questionnaires whereas 18 were administered in various department of PPF that regularly interact with internal audit department. Results were such that, it was unclear whether the functions of the internal audit department are clear or not with internal audit charter known to only 54.5% of respondents. Moreover it was observed in the study that the PPF management support the internal audit by provision of various facilities as well as implementing recommendations needed when department raises any queries and was agreed by 100% respondents. The PPF had strong financial discipline as agreed by 88.9% of the respondents and achieved this by preventing the money embezzlement and misuse of finance sources of the institutions through continual audit of revenue and expenses of the institution regularly on weekly, monthly and annual bases and fosters the financial discipline as agreed by 94.4% of respondents. The study recommends that management should keep up the support to internal audit department by giving it powers to make its own decisions, where possible to educate PPF workers on objectives of internal audit department.