The Impact of Risk Based Internal Audit on Operational Efficiency of Deposit Taking Saccos in Nairobi County, Kenya

Abstract

Organizations are facing changes in every aspect of their operations in terms of emerging technologies and processes. This has led to emergence of new business risks which previously were not in existence. These developing trends have forced enterprises to redevelop their strategies and reconsider the internal auditing’s importance. Risk based internal auditing has materialized as a key enabler of efficient risk management. There are critical benefits that accrue to the firms that pursues operational efficiency such as achieving higher profits margins, customer satisfaction and seamless process. The purpose of this research was to explore the effect of risk based internal auditing on operational efficiency of deposit taking SACCOs in Nairobi county. The target population of the research was the 42 DTS operating in Nairobi county. A questionnaire rated on the 5-point likert scale was used to obtain responses from internal auditors, finance managers and chief executive officers. The study targeted a total of 126 responses, out of these 103 filled and returned the questionnaire. Secondary data was obtained from SACCOs financial statements. Tables and charts aided in exhibiting the information to enhance presentation of results that have been analyzed to enable interpretation. The study found out by use of regression model on the study variables, the dependent variable being operational efficiency and the independent variable being risk based internal audit measured in terms of variables for instance risk evaluation, internal audit competence, risk-based planning as well as internal auditing standards. 18.4% of sources of operational efficiencies in the DTS may possibly be as result of joint effects of the predictor variables. The research design was descriptive. The research adopted one-way ANOVA to establish the significance of the regression model from which a 0.001227 probability value was determined. The study concluded that DTS that are promoting usage of risk based internal audit has positive influence on the operational efficiency through increased profitability, business turnover and volume of sales. The study suggests further survey on other competitive strategies that organizations can apply to enhance operational efficiencies by focusing on other sectors.