Effect Of Internal Audit On The Organizational Performance Of State Corporations In Kenya

Abstract

A clear internal audit role is important for good organizational performance. Therefore, the current study sought to establish the effect of internal audits on the organizational performance of State Corporations in Kenya. The study specifically sought to determine the effect of internal audit standards, internal audit independence, internal audit professional competency and internal controls on the organizational performance of state corporations in Kenya. The study used a descriptive research technique and to evaluate the performance of the state corporations, using a cross-sectional approach. The sample size was 131 state corporations obtained using Yamane’s formula at the confidence level of 95%. The data collection was aided by the use of a questionnaire. Descriptive statistics that provide a summary of the data in frequencies, percentages (%) among others were used while the inferential statistics with the help of correlation analysis (R-value) and regression analysis (beta coefficients, R2 & p values) determined the causality between the variables. The collected data was analyzed with the help of SPSS version 25.0 and Excel and presented using tables and figures for ease of understanding and interpretation. The findings were compared with the findings of similar studies to determine whether there is consistency. The findings revealed that internal audit standards (β = 0.482, p=0.000), internal audit independence (β= 0.134, p=0.083), internal audit professional competency (β= 0.214, p=0.000) and internal audit controls (β= 0.125, p=0.039) have a positive and significant effect on organizational performance of state corporations in Kenya. This implies that improvement in 1 unit of internal audit standards, internal audit independence, internal audit professional competency, and internal audit controls lead to an improvement in the organizational performance of state corporations in Kenya by 0.482 units, 0.134 units, 0.214 units and 0.125 units respectively. The study, therefore, concludes that internal audit standards, internal audit independence, internal audit professional competency and internal audit controls have a significant and positive effect on the organizational performance of state corporations in Kenya. The study recommends consistent and professional internal monitoring and evaluation of the audit department for transparency and accountability. This is based on the fact that the study has established that professional internal audits standards have the strongest contribution to organizational performance. Likewise, for improved performance of the auditors and their professional competence, the study recommends frequent on and off job training of the internal audit staff. This helps to build up their skills and expertise on matters internal auditing. Likewise, to ensure continuity of professionally performing internal audit department, the study recommends training and equipping young staff into the field for the sustenance of improved performance of the internal audit department.