Effects of risk-based audit on financial performance of state owned corporations in the ministry of east African community, labor and social protection in Kenya

Abstract

Risk-based auditing guides a firm’s usage of its own internal audit function so as to enhance risk management and controls. It enhances accountability and accuracy of financial statements thereby improving financial performance of institutions. The general objective of this study was to establish the effect of risk based audit on performance of state owned corporations in the Ministry of East African Community, Labour and Social Protection in Kenya. The research design used was descriptive research design. The population of the study comprised 160 senior managers of State corporations in the ministry. The study was a census. The study used primary data that was collected through self-administered questionnaires. The data was analyzed by the use of descriptive statistics which included inferential statistics such as regression and bi variate correlation. The study established that risk assessment, internal audit standards,control environment and information system positively affected the financial performance of state owned corporations in Kenya. The study recommends that the Management of state corporations should implement effective risk based audit practices to enhance performance. It also recommends that the management of the commercial state corporations in Kenya should bear the responsibility of equipping their firms’ internal audit functions with adequate resources so as to enable them to develop effective annual risk based audit plans. The study also recommends that in order to improve the financial reporting of state corporations in Kenya, the management of state corporations must embrace International Auditing Standards (ISAs),which guide ethical practices of internal audit personnel. The main limitation of the study was that it was based on data collected from one government ministry only. A study of additional ministries may have provided greater insights to the study topic. Similarly, future research could focus on the private sector for the purpose of making comparisons.