The Role Of Internal Audit In Promoting Organizational Performance Of Commercial State Corporations In Kenya

Abstract

Many state enterprises in Kenya have recently suffered poor performance patterns, which has jeopardized the sustainability of most of these vital institutions. Some state corporations have a reputation for repeatedly producing poor results, relying excessively on the exchequer, and losing their viability. The study's specific goals were to ascertain the extent to which audit quality affects the organizational performance of commercial state corporations in Kenya, to investigate the impact of audit independence on those organizations’ performance, and to ascertain the impact of audit standards on those corporations' performance. At a 95% level of confidence, a similar number of hypotheses were developed and tested. Three theories served as the study's foundation: the agency theory, the contingency theory, and the auditor's theory of inspired confidence. In this Cross-sectional study, descriptive, and correlational research designs were used. The study's target population consisted of all commercial state corporations, The study used primary data giving a total of 33 targeted respondents out of which 31 were filled and returned. The questionnaire was used in data collection. Data were summarized using descriptive statistics, by use of frequencies and percentages (%), while the causal relationship between the variables was determined using inferential statistics, using correlation analysis (R-value) and regression analysis (beta coefficients, R2 & p values). For ease of comprehension and interpretation, the collected data were analyzed using SPSS version 20.0 and Excel and then presented as tables and figures. The results showed that audit standards (β = 0.399, p=0.001), audit independence (β = 0.326, p=0.009), and audit quality (β = 0.254, p=0.018) all significantly and positively affect the organizational performance of commercial state firms in Kenya. Therefore, the study draws the conclusion that audit standards, audit independence, and audit quality all significantly and favorably affect the organizational performance of Kenyan commercial state firms. The study advises policymakers to pay great attention to internal audit, particularly in monitoring and evaluating procedures to ensure quality standards. For accountability and openness, the study advises routinely monitoring the audit department. The results of the study suggest that risk analysis be encouraged at the level of individual enterprises as well as across the whole range of functions and extensions of the established organization. The researcher suggests that commercial state organizations might improve the quality of their audits by creating and putting into practice methods to assess the auditor's likelihood to find and disclose errors.