The Effect of Internal Controls on the Financial Performance of Three Star Hotels in Nairobi County

Abstract

The hospitality sector bears an extensive intriguing history starting with hotels, and inns, and developing into the hospitality sector. The purpose of the investigation is to verify the bearing of the internal controls in the performance of three star hotels in Nairobi County. This investigation will be key to tourism enterprises, general public, students as well as the government because it will provide essential contributions theoretically as well as practically. The investigation depended on agency concept, institutional theory and stakeholder’s theory hypothetically, it will augment the general comprehension of internal control and their bearing on enterprise performance. The population consisted of all 37 three star hotels in Nairobi County. The investigation utilized primary data sourced by a structured questionnaire which was analyzed through descriptive and inferential statistics to analyze on SPSS version 22. The targeted respondents were the senior management staff in various departments of the firm; that is accounting, human resource, procurement and security department. Data obtained and analyzed was from 32 respondents of the target population. All the 32 respondents answered the questionnaire as required. Regression analysis outcomes illustrated in table 4.6 shows R, which is correlation coefficient, was 0.622, indicating a powerful link between the research variables. Coefficient of determination (𝑅2) of 0.542 points out that 54% of the variations in financial performance are elucidated by the predictor factors in the analytical model i.e control activities, control environment, risk assessment and monitoring. On the other side, 46% of the variation in value of financial performance is explained by other aspects not encompassed in the model. The outcomes on the bearing of unsuccessful internal control system points out that since most of the respondent weren’t sure whether the enterprise have an updated accounting procedures guidebook. It is recommended that hotel administration ought to come out with an up to date document with details about the policies and procedures of the organization