Relationship Between Compliance Auditing and Financial Reporting Quality Among Commercial State Corporations in Kenya

Abstract

The study sought to determine the relationship between compliance auditing and financial reporting quality among CSCs in Kenya. Mixed approach of descriptive survey and correlational design was embraced targeting 33 CSCs in Kenya and census was used. Both primary and secondary data was gathered and using data collection sheet and questionnaire respectively. The analysis of the gathered data was done through means and standard deviations, correlation and regression and presented through tables. The study observed that board independence (β=0.454, p<0.05 & t>1.96) had the greatest significant effect on financial reporting quality of the CSCs followed by corporation age (β=0.339, p<0.05 & t>1.96), corporation size (β=0.319, p<0.05 & t>1.96) and lastly compliance auditing (β=0.254, p<0.05 & t>1.96). It was concluded that compliance auditing plays an instrumental role as far as financial reporting quality of the firm is concerned. The study recommends that policy makers working in CSCs in Kenya should review the existing policies and regulations to ensure they comply with the established standards. Since board independence was significant, this study recommends that the government being a key shareholder among these CSCs should demand for a balance between executive and independent directors to enhance the effectiveness of the boards in discharging the duties.