The Effect of Internal Audit On the Financial Performance of an Organisation A Case Study of Kampala City Council Headquarters

TABLE OF CONTENTS

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

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

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

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

TABLE OF CONTENTS ................................................................................................................. v

LIST OF TABLES AND FIGURES ............................................................................................. vii

ABSTRACT .................................................................................................................................. viii

ABBREVIATIONS .......................................................................................................................... ix

CHAPTER ONE ............................................................................................................................... l

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

1.1 Background of the Study ...................................................................................................... 1

1.2 Statement of the Problem ..................................................................................................... 3

1.3 Purpose of the Study ............................................................................................................. 3

1.4 Objectives ............................................................................................................................... 3

1.5 Research Questions ............................................................................................................... 4

1.6 Area and Scope of the Study .................................................................................................. 4

1.6.1 Geographical scope ................................................................................................................. 4

1.6.2 Conceptual scope .................................................................................................................... 4

1.6.3 Time Scope .............................................................................................................................. 4

1.7 Significance of the Study ........................................................................................................ 4

1.8 Definition ofTerms ................................................................................................................. 6

1.9 Internal Audit and Financial Performance; Conceptual framework ............................... 7

CHAPTER TWO .............................................................................................................................. 8

LITERATURE REVIEW ................................................................................................................ 8

2.0 Introduction .......................................................................................................................... 8

2.1 Internal Audit ....................................................................................................................... 8

2.1.1 The meaning of Internal Audit ............................................................................................ 8

2.1.2 Independence of the Auditor ............................................................................................ 11

2.1.3 Integrity of an Auditor ...................................................................................................... 12

2.1.4 Objectivity of an Auditor .................................................................................................. 13

2.1.S Technical Competence of an Auditor ............................................................................... 14

2.1.6 Professional Proficiency .................................................................................................... 15

2.2 Financial performance ...................................................................................................... 15

2.2.1 The meaning of Financial Performance .......................................................................... 15

2.2.2 Profitability ........................................................................................................................ 16

2.2.3 Capital Growth .................................................................................................................. 17

2.2.4 Customer Satisfaction ....................................................................................................... 18

2.2.S Employment ....................................................................................................................... 18

2.3 Performance Indicators Used by Internal Auditors ....................................................... 19

2.3.1 Relationship between the Internal Audit and Financial Performance ......................... 20

V

CHAPTER THREE ........................................................................................................................ 21

RESEARCH METHODOLOGY .................................................................................................. 21

3.0 Introduction .......................................................................................................................... 21

3.1 Research Design .................................................................................................................... 21

3.2 Study Population .................................................................................................................. 21

3.3 Sample Size and Methods of Sampling .............................................................................. .21

3.4 Sources of Data ..................................................................................................................... 22

3.5 Data collection instruments ................................................................................................ 22

3.6 Data Processing Analysis .................................................................................................... 23

3.7 Methods of data presentation ............................................................................................. 23

CHAPTER FOUR .......................................................................................................................... 25

PRESENTATION, ANALYSIS, AND DISCUSSION OF FINDINGS ..................................... 25

4.0 Introduction .......................................................................................................................... 25

4.1 General findings .................................................................................................................... 26

4.2 Structure of Internal Audit. ................................................................................................. 29

4.3 Staffing of Internal Audit Department ............................................................................... 31

4.4 Checks by internal audit staff to department in 2007/2008 ............................................ 32

4.5 Findings on Management Reliance on Audit Reports ...................................................... 33

4.6 Financial Performance/ Management ............................................................................... 33

4. 7 Relationship between Frequency of Audit Checks and Performance of Kampala City

Council for the Year 2007 /2008 ......................................................................................... 34

4.11 Relationship between Internal Audit and Effective Accountability of Funds by

Kampala City Council for 2007/2008 ............................................................................... 35

CHAPTER FIVE ............................................................................................................................ 36

SUMMARY, CONCLUSION AND RECOMMENDATIONS .................................................. 36

5.0 Introduction ........................................................................................................................ 36

5.1 Summary .............................................................................................................................. 36

5.2 Conclusion ............................................................................................................................ 36

5.3 Recommendations ................................................................................................................ 37

REFERENCES ............................................................................................................................... 39

QUESTIONNAIRES ...................................................................................................................... 41