The relationship between internal audit independence and share performance of firms listed in the Nairobi stock exchange

Abstract

The internal audit department is very important inside a firm that the internal audit 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 accounti ng as it is the section that records all bus inesses related to the sector. The main objective of the study was to establish the relationship between Internal Audit Independence and Share performance of firms listed in the Nairobi Stock Exchange . The study adopted a descriptive research design to sample the target population of 60 companies quoted at the NSE as of December 2013. The study found out that there exists a significantly strong positive correlation between internal audit independence and share per formance. A significantly strong positive correlation also exists between valuation ratios (dividend pay - out ratio) and share performance . However the study findings conclude a strong and an insignificant correlation between exchange rate and share perform ance . The study findings also conclude that a weak and an insignificant correlation between inflation rate and share performance exists. The study als o found that t here has been a significant increase of exchange rates, inflation rate, dividend payout rati o and ROI over the 5 year period. Also the study concludes that Fraud investigation, verification of financial transaction (Financial audit), and assessment of internal control are the major scope of work for internal audit. The study concludes that there exists a significantly strong positive correlation between internal audit independence and share performance. A significantly strong positive correlation also exists between valuation ratios (dividend pay - out ratio) and share performance. However the study findings conclude a strong and an insignificant correlation between exchange rate and share performance. The study findings also conclude that a weak and an insignificant correlation between inflation rate and share performance exists.