Internal Auditing and Financial Performance of Selected Commercial Banks in Kampala, Uganda

ABSTRACT The study was set to examine the impact of internal auditing on financial performance of commercial banks in Uganda. It was set to establish the effect of internal audit Standards on the financial performance, to determine the effect of internal controls audits on financial performance and to determine the effect of internal auditing on financial performance of commercial banks. The study adopted a descriptive design employing quantitative data analysis based on questionnaires that were closed ended. The study involved 122 respondents who were chosen from the banks of Cairo international bank, Equity bank and DFCU Bank. The findings on the first objective revealed that internal audit standards had 32.4% effect on financial performance of commercial banks in Uganda, Being a coefficient, it means that internal audit standards has a positive effect on the banks studied, the second objective reveal that internal control audits had 29% effect on the financial performance of selected banks in Kampala, it implies that internal control audits has a positive effect on the banks studied. On the third objective the researcher found that internal auditing affect the financial performance of commercial banks. The researcher concludes that internal audit standards had a significant effect on the financial performance of commercial banks in Kampala. This means that internal audit standards alone account for financial performance of commercial banks meaning that improving internal audit standards requires focusing on other factors in order to improve financial performance. The results reveal that the state of internal control audits affected performance of commercial banks and a possibility that not only do internal control audits account for financial performance. The researcher recommend that there is need for improving the state of the internal audit standards which seem to be weak, the management of commercial banks needs to adopt means of establishing and developing the internal audit standards. The banks need to investigate the aspects around the auditing such as management competency cash management among others to enable the banks establish and evaluate the status quo in the commercial banks. The bank need to adopt the computerized systems that could enhance the audit performance strength for better performance. The audit strength is fundamental as it provides means through which the internal control system functions. Furthermore the internal audit systems need for security in terms of authorizations in order to attain a complaint and a system that is hard to manipulate. The third objective reveal that the management of commercial banks should also procure the latest ICT audit software’s that would enhance fast delivery of services and detection of frauds or any mischief in this field. Internal auditors should be fully trained on how to use the software’s and fresher courses should also be increased in this regard.