dc.description.abstract | Internal auditing is an independent, objective assurance and consulting activity designed to add
value and improve an organization's operations. It helps an organization accomplish its
objectives by bringing a systematic, disciplined approach to evaluate and improve the
effectiveness of risk management, control, and governance processes. The internal audit
department is regarded as the key element in the application of accounting systems which in turn,
helps in evaluating the work of the department. The internal audit is considered as the backbone
of the business accounting as it is the section that records all businesses related to the sector. The
efficiency of internal audit helps develop the work of the company because the financial reports
reflect the internal audit department‟s quality. The study sought to establish the relationship
between effectiveness of internal audit function and financial performance of companies listed in
NSE. The research design employed in this study was descriptive design. The population of the
study comprised of all 61 publicly listed companies in the Nairobi Stock exchange. The study
was a census survey. The source of data was both primary and secondary data. The main
instrument for data collection was a semi-structured questionnaire. Data on financial
performance was extracted from the audited financial statements of the listed companies at the
NSE. Data was analyzed through the use of descriptive statistics and multiple linear regression
analysis. The multiple linear regression models was used to estimate the causal relationship
between ROA and the independent variables. SPSS Version 21 was used for analysis of the
different variables in this study. The six independent variables that were studied (professional
proficiency of internal auditors, quality of audit work of internal audit department, organizational
independence of the internal audit department, career development of internal audit personnel,
top management support to the internal audit department and size) explain a substantial 78.4% of
financial performance among companies listed at the NSE as represented by adjusted R2 (0.784).
It was established that there was a positive relationship between effectiveness of internal audit
function and financial performance. The study found out that the intercept was 2.397 for all
years. The study therefore concludes that effective internal audit function has a positive
influence on financial performance of companies listed at the NSE. The study recommends that
companies should employ skilled and competent professional internal auditors to strengthen the
internal controls and minimize on fraud .With efficient internal controls, cases of fraud,
embezzlement and cash mismanagement will be controlled hence supplementing on the level of profits in the company | en_US |