Influence Of Internal Control Systems On The Financial Performance Of Classified Hotels In The Nairobi County

Abstract

Over the past five years, there has been an upsurge of hotels around Nairobi County. They have, however, had difficulties with internal controls. The rising fraud in Nairobi's well-known hotels is evidence of this. The goal of this study was to evaluate how internal control systems affect the financial success of hotels in Nairobi County. The study specifically aims to appraise the impact of detective controls, preventive controls, and corrective controls on the financial performance of hotels in Kenya. It also aims to assess the impact of preventative controls and detective controls on the financial performance of hotels. The study utilized a descriptive research design. The study focused on 45 hotels in the county of Nairobi (five-star, four star and three star). Employees in the hotels' internal audit and accounting and finance departments formed the target population of this study. All 45 hotels were included in the study because they are convenient for access. A sample of 90 respondents was drawn from each hotel's finance and internal audit managers for the study. The personnel who took part in the study were chosen via purposeful sampling. Questionnaires was used by the researcher to gather data. Pilot study was conducted in Kiambu County from the five hotels. The supervisors assessed the instruments to determine their validity and recommend any necessary adjustments. STATA generated the Cronbach alpha value based on the results of the pilot research to determine the reliability of the surveys. The information found in the gathered surveys was analyzed using descriptive and inferential statistics using STATA software. Tables and graphs was used to present the data. The study concludes that hotels in the Nairobi County use a variety of corrective, detective, and preventative controls based on the descriptive data. The study comes to the further conclusion that asset value and profitability are the major metrics used by Nairobi County hotels to gauge financial performance. The study deduces from the model summary that there is a significant correlation between corrective, detective, and preventative controls and the financial performance of categorized hotels in Nairobi County. The study also comes to the conclusion that the main elements affecting the financial performance of hotels in Nairobi County are corrective, detective, and preventative controls. The study draws the conclusion that corrective, detective, and preventative controls significantly improve the financial performance of hotels in Nairobi County based on the regression coefficients. Due to this, it was determined that internal control systems had an advantage over the financial performance of hotels in Nairobi County. The report suggests installing preventive control systems at hotels in Nairobi County to improve performance. The hotels should also have objective, independent, and active audit committees while also making sure that valuable information is only accessible to the staff with the consent of senior management. This would prevent their staff from having access to valuable information without the permission of senior staff. The hotels should also have organizational asset identification and protection capabilities built into their security systems. For them to improve financial performance, the hotels need set up detective internal control systems. Periodically, the hotels should conduct internal evaluations of their internal controls. In order to prevent instances of stock out and associated expenditures, the businesses should also maintain a regular stock of their stocks. To improve financial success, the hotel departments should also routinely evaluate their budgets. The study suggests that hotels in Nairobi County implement corrective measures. The hotels should implement corrective measures to deal with firm-wide issues that would improve financial performance. The administration of hotels should also create and implement everyday procedures in their establishment. The hotels should also adopt and set up financial reporting software that is frequently updated, as well as regular reviews of reporting standards and procedures. It is advised that future study employ similar experiments with diverse sectors and variables.