Effect of Internal Control Systems on Financial Performance of Supermarkets in Kajiado County

Abstract

Across the world, most organizations are report misappropriation of funds. This has resulted to negative effect on organization performance forcing the management to seek for control measure through internal controls systems. The general expectation is that institution and authorization of legitimate internal control systems will dependably prompt to strides made on financial performance. An effective internal control framework has a fundamental part to play in a company's prosperity. In Kenya, there has been cases of theft and collapse of supermarkets such as Uchumi supermarket. Data available from World Bank showed that there was the decline in service in all sectors of the economy including supermarket. Poor financial performance of listed companies adversely affects the economic growth of the Kenyan economy. Thus the current study aimed to establish the effect of internal control systems on financial performance of supermarket in Kajiado County. The target population of this study was 66 different supermarkets operating within Kajiado County. The study employed Mugenda and Mugenda formulae to come up with a sample size of 39 supermarkets. The study relied on primary data which was collected using a structured questionnaire. Data collected was coded and entered to Statistical Package for Social Sciences (Version 22.0). Regression analysis was used to come up with the model expressing the hypothesized relationship between the independent variables and dependent variable. From the findings, the study found that most organizations have set their objectives while independent audit committee and management act with a great degree of integrity in execution of their roles. The study established that there is an on-going and reconciliation of all accounts in most also organization. Further, the study established that organizations assess ethics and values within the organization. The study found that assessment of risks, monitoring procedures, supervisory activities, environmental management and system of verification on reconciliation influence financial performance to a great extent. The study established that presence of higher number of independent directors in the board enhances the decision credibility and objectivity. The study recommended that risk assessment should be led at the level of individual organizations and over the wide range of exercises and auxiliaries of the solidified association. The study concludes that management attitude should be committed to ethical business practices and follows the established control procedures. Internal control ought to be all the time survey in all parts of their organization and embed external controls that will reinforce the organization and improve profits. The study recommends that management should ensure that applicable measures are applied to enhance internal audit practices within the organization that depicts picture of the financial position of the organization without coercion from the management. Finally, the study recommends that supermarkets should apply the best practices of governance to ensure that the interest of management and shareholders are safeguarded and that they do not conflict the objective of the organization.