Internal Audit Function And Financial Performance Of Public Ministries: A Case Study Of Homa Bay District Treasury In Kenya

ABSTRACT

The purpose of the study was to establish how internal audit function affects financial performance of Public Ministries. The study focused in examining the relationship between the internal audit function and financial performance, in Public Ministries.

The study adopted the quantitative research methodology employing a cross sectional research design. A population of 434 was selected from some selected departments of Public Ministries of Homa Bay County using stratified simple random sampling.

The findings of the study revealed a significant and positive relationship between internal audit function and financial performance in public ministries.

The study recommended that District Ministries should adopt strong policy measures on the variables of internal audit function which are risk management and internal

controls and also aim at creating a committed workforce for better financial performance.

TABLE OF CONTENTS

DECLARATION ................................................................................................ i

APPROVAL ..................................................................................................... ii

DEDICATION ................................................................................................ iii

ACKNOWLEDGEMENT ................................................................................... iv

ACKNOWLEDGEMENT .................................................................................... v

TABLE OF CONTENTS .......•........................................................................... vi

LIST OF TABLES ........................................................................................... ix

LIST OF FIGURES .......................................................................................... x

ABSTRACT .................................................................................................... xi

CHAPTER ONE ............................................................................................... 1

1.0 Introduction ................................................................................................... 1

1.1 Background to the Study ................................................................................. 1

1.2 Statement of the problem .............................................................................. .4

1.3 Purpose of the Study ...................................................................................... 6

1.4 Objectives of the Study ................................................................................... 6

1.5 Research Questions ........................................................................................ 6

1.6. Scope of the study ......................................................................................... 6

1.6.1 Content Scope ............................................................................................. 6

1.6.2 Geographical scope ...................................................................................... 6

1.6.3 Time scope .................................................................................................. 7

1.7 Significance of the study ................................................................................. 7

1.8 Conceptual framework .................................................................................... 8

CHAPTER TWO:LITERATURE REVIEW .......................................................... 9

2.0 Introduction ................................................................................................... 9

2.1 Internal Audit function .................................................................................... 9

2.1.1 Internal Control ......................................................................................... 10

2.1.2 Control environment .................................................................................. 12

2.1.3 Risk Management ...................................................................................... 14

2.2 Financial Performance of Organizations .......................................................... 16

vi

2.2.1 Performance .............................................................................................. 16

2.2.2 Budget Performance .................................................................................. 18

2.2.3 Financial liquidity ....................................................................................... 19

2.2.4 Financial Accountability .............................................................................. 19

2.3 Financial Performance Reports ...................................................................... 20

2.3.1 Audit Reports ............................................................................................ 21

2.3.2 Annual Reports .......................................................................................... 22

2.4 Relationship of Variables ............................................................................... 22

2.4.1 Internal audit Function and Financial Performance ....................................... 22

CHAPTER THREE:METHODOLOGY ............................................................... 29

3.0 Introduction ................................................................................................. 29

3.1 Research design ........................................................................................... 29

3.2 Study area ................................................................................................... 29

3.3 Survey Population ......................................................................................... 29

3.4 Sample selection and size ............................................................................. 30

3.5 Response Rate ............................................................................................. 31

3.6 Measurement of variables ............................................................................. 31

3.7 Research instruments for data collection ........................................................ 31

3.7.1 Questionnaire ............................................................................................ 32

3.7.2 Secondary data .......................................................................................... 32

3.8 Reliability of Instruments .............................................................................. 33

3.9 Data Collection and analysis .......................................................................... 33

3.9.1 Data collection ........................................................................................... 33

3.9.2 Data analysis ............................................................................................. 34

3.10 Ethical Consideration ................................................................................... 34

3.11 The Problems encountered during the study ................................................. 34

CHAPTER FOUR:DATA PRESENTATION AND INTERPRETATION ................ 36

4.0 Introduction ................................................................................................. 36

4.1 Quantitative data presentation and discussions ............................................... 36

4.2. Descriptive statistics .................................................................................... 36