The relationship between internal audit function and the corporate governance of deposit taking microfinance institutions is Kenya
Abstract
Every industry and organization should aspire to have a good corporate governance
image that enhances the reputation of the industry and or organization making it
attractive to customers, investors, suppliers, contributors or donors. Quite a number of
studies have been done on the effectiveness of internal audit in promoting good
corporate governance. Most of these previous studies focused on financial institutions.
Others focused on establishing the relationship that exists between corporate
governance and performance. The researcher felt that the internal audit function and
the corporate governance area has not been fully exhausted and therefore focused on
the licensed deposit taking microfinance institutions in Kenya. The objective of this
study was to establish the relationship between the internal audit function and the
corporate governance of the deposit taking microfinance institutions in Kenya. A
descriptive cross-sectional design method was preferred for this study. The target
population of this study was the 9 licensed deposit taking microfinance institutions in
Kenya. The study targeted the Heads of Internal Audit and Company Secretaries of all
the 9 deposit taking institutions. The study collected primary data on the current state
of affairs of the deposit taking microfinance institutions. The main instrument for data
collection was questionnaires with structured questions. The research was quantitative
in nature and this implies that descriptive statistics was employed. The researcher also
used a multivariate regression analysis to determine the relationship between the
independent variables and the dependent variable. The study found out that that risk
management had the greatest effect on corporate governance within deposit taking
microfinance institutions in Kenya followed by internal controls while compliance
and consulting and audit committee had the least effect respectively. The study
recommends that the deposit taking microfinance institutions should recognize
contribution of internal auditing in promoting good corporate governance.
Additionally, the study recommends that the deposit taking microfinance institutions
should apply internal auditing in its operations as an effective tool for ensuring
compliance with set policies and procedures. The study further recommends that
deposit taking microfinance institutions in Kenya be well equipped to implement
corporate governance practices in their daily activities to the levels acceptable in
developed market economies and improve accessibility to firm financing by
enhancing transparency and accountability in the information disclosed.