Internal Audit, Environmental Audit and Perforamnce of State Corporations in Kenya: a Case of Nyayo Tea Zones Development Corporation of Kenya

Abstract

Environmental audit measurement systems have been revered as a way of ensuring that public institutions continuously improve in performance. An environmental audit system is a contract that is enforceable setting measurable targets for governmental organizations to attain. The purpose of the study was to determine the outcome of internal audit on the relationship between performance and environmental audit of Nyayo Tea Zones Development Corporation in Kenya. The study employed descriptive research design. The target population was 19 nineteen branches of Nyayo Tea Zones Development Corporation, three regional offices, Kipchbo tea factory and Head office covering the period 1989-2018. Data was analyzed using descriptive analysis, trend analysis, correlation analysis and regression analysis. Descriptive results indicate that the average expenditure on internal audit was 6075711 KES. The correlation showed that expenditure on internal audit and financial performance of Nyayo Tea Zones Development Corporation are negatively and significantly associated (r=-0.1629, p=0.0386). Model results showed that internal audit (measured as expenditure on board allowance, external audit fees, internal audit monitoring fees and monitoring espenses) and financial performance of Nyayo Tea Zones Development Corporation are negatively and significantly related (β=-0.311839, p=0.0043). It was further established that the average expenditure on environmental audit was 19107198.58 KES. The correlation results indicated that expenditure on environmental audit expenditure asset quality and financial performance of Nyayo Tea Zones Development Corporation are negatively and significantly associated (r=- 0.2164, p=0.0295). Regression of coefficients findings indicated that environmental audit (measured as expenditure on legal and professional fees, expenses on staff uniforms, expenses on electricity manufacturing cost and expense on fuel wood cost) and financial performance of Nyayo Tea Zones Development Corporation are negatively and significantly related (β=-0.209712, p=0.0043). From the study findings, there are several conclusions made which are noteworthy. Based on the findings above, the study concludes that expenditure on internal audit has a negative and significant relationship with financial performance of Nyayo Tea Zones Development Corporation. The study also concludes that expenditure on environmental audit has a negative and and significant relationship with financial performance of Nyayo Tea Zones Development Corporation. The study recommends close monitoring of expenses on board allowance, external audit fees and internal audit monitoring expenses . This will ensure that the costs do not jeopardize the actual task of doing internal auditing. Internal audit plays an important role in deterring fraud through monitoring operations, carrying out checks on internal controls and reporting independently to the audit committee of the board and administratively to the executive management. It was established that environmental audit has inverse relation with performance. The study recommends for a close monitoring of legal and professional fees, staff uniforms expenses, electricity manufacturing cost and fuel wood cost in order to make sure that they do not eat into large portions of the corporation revenue. Environmental audit is an essential instrument providing a stepping stone for competitive advantage for companies that embrace it. Environmental issues in internal audit have demonstrated the usefulness of the department in the overall performance of an institution and therefore one can comfortably deduce that environmental audit plays a significance role of improving performance of organization.