Statistical Analysis of the Role of Internal Audit in Promoting Good Governance in Public Institutions in Kenya (original) (raw)
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Phelician, 2019
ABSTRACT There has increasingly been pressure from donors, government and other official agencies for nongovernmental organizations to show accountability, managerial competence and strong internal control system. The concerns are that they are actually behaving in unaccountable manner as regards their utilization of the fund budgeted by the donors, which is eroding their transparency, as a key requirement for good governance and successful feedback systems. Despite the extensive academic literature on internal audit function the non-governmental organization sector, there limited literature on internal audit as a tool for ensuring good corporate governance, a knowledge gap then needed to be filled, hence the present study. The study used descriptive research and at least 1883 senior audit officers and other key personnel of the non-governmental organizations in Nairobi as target population. The study as sample size of the 15% of the target population. The selection of respondents done was through random sampling. Data was collected from the respondents using a structured questionnaire administered using drop and pick method. It will be analysed using descriptive statistics and presented in tables and figures. Use multiple regressions to estimate a study model. The study concluded that corporate governance status of Kenyan non-governmental organizations, which was very high, was very highly influenced by; competence of internal auditors, follow-up mechanisms, and independence of internal audit function. There was a significant relationship between Competence of internal auditors (p-value = 0.000), followup mechanisms (p-value = 0.018), and independence of internal audit function (p-value = 0.050) and the corporate governance. Any increase in; competence of internal auditors, follow-up mechanisms, and independence of internal audit function would lead to an increase in corporate governance and vice versa. The study concludes that 39.50% of change in corporate governance in the Kenyan non-governmental organizations, explained by the competence of internal auditors, follow-up mechanisms, and independence of internal audit function. The study recommends that the Kenyan non-governmental organizations and the related stakeholder such as non-governmental organization board and the National parliament should review the existing regulatory framework to widely address the issues of corporate governance and relate to accountability and transparency. Other policies and regulations should be implemented by the non-governmental organization to ensure that the internal audit function staff make follow up of the internal audit function standards to ensure the independence of the internal audit functions of the Kenyan non-governmental organizations.
In attempting to sufficiently discharge their responsibilities, internal auditors often find themselves in a deviating position. For instance, they appeal to senior management within the organization, but they are anticipated to evaluate the conducts and effectiveness of the management in objective manner. While internal audit can be used in order to assist management in order to instill a strong ethical tone in the entire organization, a poor attitude by the management can make it hard for the internal auditor to support ethical behavior. Disagreements in different internal auditing roles in promoting public financial management have not gone away with contradicting opinions on how internal audit is expected to perform some activities, with some citing a positive effect and some saying it has very minimal effect if any. The objective of this study was to investigate the roles of internal audit in public financial management in the public sector in Kenya with special focus on the County Government of Vihiga. A descriptive cross-sectional design method was preferred for this study. The target population of this study was the finance department employees of Vihiga County Government where a sample of 53 employees was used. The study collected primary data on the current state of affairs of the County Government. The main instrument for data collection was by use of organized questionnaires. The research was qualitative in nature. This insinuates that descriptive statistics was used. The study found that internal control had the greatest effect on public financial management within Vihiga County Government followed by risk management internal audit independence complemented the two roles. The study suggested that in order for the county government to be effective in its operation and service delivery they should acknowledge contribution of internal auditing. Additionally, the study suggested that for the County Governments to be able to effectively lessen risks they should put in place a strong internal auditing function in its operation. The study also recommended that all County Governments should institute internal controls in its operation to curb various financial losses and enhance optimization of revenues collected. In a similar manner, the study suggested that county governments to endure internal auditing as a tool for effective internal controls so as to realize their objectives set with ease.
The study sought to examine the impact of auditor independence on the calibre of the auditor's report, the impact of auditor capacity on the quality of the audit report, and the impact of risk assessment on the quality of the audit report in state corporations in the ministry of water, sanitation, and irrigation in Kenya. The study was based on three theories: fraud theory, risk-based internal audit theory, and audit quality theory. The study used a description-based causal research approach. The 48 internal auditors made up the study's target population. 43 respondents were used for the research objective after a pilot study with 5 respondents at a scale of 0.7 was completed. In the study, descriptive and inferential statistics were both used. All respondents were given questionnaires to complete. Regression analysis and Cronbach's alpha statistic were used to test the hypothesis. The study found that risk-based internal audits affected the quality of internal audit reports. The study also found that internal auditors’ independence, skills and competence and risk assessment quality of audit reports were positively and significantly correlated. The study concluded that internal auditors’ independence, skills and competence and risk assessment all had a very favourable impact on the quality of the audit report in state corporations in the ministry of water, sanitation, and irrigation. The study recommends that internal auditors should have independence since it allows them to make the objective decisions necessary for the appropriate conduct of engagements, internal auditors should have the necessary skills and be competent due to the fact that they assist the business's financial, operational, compliance, control, and governance activities, state corporations should carry out risk assessment since it is essential to audit planning and analyze the risks of significant misstatement at the financial statement and related assertion levels, whether due to mistake or fraud. The study is important for auditors and academics interested in general knowledge since it could serve as a foundation for future research.
2014
The study analyzed the role of internal audit in Enterprise Risk Management (ERM) by providing empirical Evidence on the Kenyan public sector firms. The study examined the impact of Involvement in ERM by auditors and internal auditors’ willingness to report a breakdown in risk procedures and whether a strong relationship with the audit committee affects willingness to report. The study also investigated the use of ERM and the role of internal audit in ERM. The study was carried out as a cross-sectional survey where the study population was 99 respondents from nine state corporations operating under the State Corporations Act. From the findings, the study concluded that management of State Corporation needs to create an environment that will harness commitment and support to internal audit if it is to effectively perform its responsibility of giving assurance that organizational risks are managed effectively. This will only be possible if individuals within organizations are aware of...
Research Journal of Finance and Accounting, 2014
The study examined the role of internal audit in Kenya current corporate governance (CG) system via seeking the views of corporate managers. Despite the fact that the contribution of internal audit has been essential for organizations to achieve their business objectives, very little has been known of corporate managers' perception as to the practical functions of internal audit in the context of CG. Recent events and studies suggest that the benefits of scrutinizing governance extend beyond simply avoiding corporate collapse. Corporate governance is about the way in which boards oversee the running of a company by its managers. The study addressed the following objectives: To assess the auditor's role in corporate governance, to assess the internal audit capacity to achieve its objectives, to suggest how internal auditors' independence can be achieved. The research design used was descriptive design and data collection instrument was questionnaire. The target population was internal audit managers of all the Companies listed at the NSE. The study employed both Stratified and Systematic random sampling procedures where a sample size of 30 companies was selected to represent 50% of the population. Information about audit objectives/functions, accountability, capacity and framework was obtained. Issues relating to and practices of corporate governance and internal audit activities within companies listed at the NSE were examined. It was established that most companies consider internal controls as the most important audit objective and also is the task that takes highest proportion of internal audit time. The study as well found that all respondents strongly agreed that for internal audit to add value to governance process there should be good working relationship, independence, awareness, capacity and professionalism.
Effectiveness of Internal Audits in Public Educational Institutions in Kenya: Rethinking Value
Internal auditing has become a factor of the new accountability and control era. The manner in which public sector entities maintain internal control and how they are held accountable has evolved to require more transparency and more accountability from these organizations that spend investor or taxpayer funds. This trend has significantly impacted how management implements, monitors, and reports on internal control. Although internal auditors can be a valuable advisory resource on internal control, the internal auditor should not be a substitute for a strong internal control system. A system of internal control is the primary response to risks. The role of internal auditing has evolved from an administrative procedure with a focus on compliance, to an important element of good governance. In many cases the existence of internal auditing is mandatory (intosaigov 9140).
EFFECTS OF CORPORATE GOVERNANCE ON AUDIT QUALITY OF PUBLIC FINANCIAL INSTITUTIONS IN KENYA
There is expectation that corporate governance presence improves audit quality but studies that done so far shows no conclusive evidence on how corporate governance influences audit quality. Census survey was applied for the study. Primary data was collected using structured questionnaire, distributed to respondents by researcher in person as well review of available literature covering four year period of 2012-2015. The data collected was summarized using descriptive statistics. Correlation survey design was used to determine relationship between corporate governance and audit quality of public financial institutions in Kenya and the data was analyzed using social package for social sciences software (SPSS). The study found out that in most public financial institutions in Kenya, CEO duality doesn't exist, audit committee and board composition have average of seven members while board independence is composed of less than one percent of outside directors. Furthermore 91.2% changes in audit quality of public financial institutions in Kenya could be due to audit committee, board size, board composition, board independence, board size and CEO duality while only 8.8% were caused by other factors not covered by the study.
Background: Despite complaints from the public and Office of the Auditor General about financial sustainability issues in county governments, most audit reports are either politicized or cancelled as malicious and lacking authenticity; a gap that motivated this study was to examine influence of internal audit standards on financial sustainability in Kericho County Government, Kenya. Materials and Methods: Explanatory survey design was used to explain hypothesized relationship between the variables. The study targeted 109 respondents comprising of mainly auditors, finance officers, accountants, procurement officers, ICT officers working in Kericho county government Kenya. From a target population of 109 respondents, a sample size of 86 was calculated as per Taro Yamane's proportional sampling technique formula; from which stratified sampling technique was applied to select 86 sampled officers to participate in the study. Primary data was collected by means of self-administered structured questionnaires. Pertaining data analysis, collected data was analyzed using descriptive and inferential statistics with the aid of specialized Statistical Package for Social Sciences, version 24. Results: Both descriptive and inferential statistics revealed that internal audit standards significantly influenced the dependent variable (financial sustainability in Kericho County Government). The study revealed that internal audit standards had a positive relationship with financial performance of County Government of Kericho; the study found that a unit increase in internal audit standards would lead to increase in financial performance of county government of Kericho. Conclusion: The study concluded that well monitored internal audit standards can deter deliberate accounting errors and save county government huge finances hence enable them sustain their financial expenditures. The study recommended that county governments should support effective internal audit standards that do not compromise audit quality. The internal audit department should also apply the standards available in the internal audit policy and charter such as performing risk assessments annually and their scope of work should be extended to enterprise risk management process. Moreover, the activity of internal audit should be assessed externally by an independent reviewer as per the company policy
The Influence of Intenal Audit on Financial Management in Marsabit County Government- Kenya
International Journal of Finance, 2021
Purpose: The purpose of this study was to determine the effect of internal audit on the financial management in the County Government of Marsabit. Methodology: The study adopted descriptive survey was adopted for this study. The targeted study population was 63 staff members who are Job group K and above from the department of Finance in the directorate of Accounts, Revenue, Procurement and Internal Audit. The study employed simple structured questionnaires to gather primary data which was analyzed using SPSS. Results: The study revealed that internal audit function had a significant influence on financial management at the county government of Marsabit (r=0.691, p=0.00) Unique contribution to theory, policy and practice: Good financial management is very essential in protecting the public funds. This study encourages good practices of accountability, transparency and wealth creation with public funds. The study is beneficial to not only Marsabit County but other counties in Kenya. ...