Effect of Internal Control Systems on Financial Performance of the Government Owned Sugar Firms in Kenya

Abstract

The study sought to investigate the effect of internal control systems on financial performance of state-owned sugar companies in Kenya. The independent variable for the study was internal control systems and the dependent variable was firm’s financial performance. It adopted descriptive research design. The population consisted of all five state-owned sugar companies in Kenya. The study used primary data was collected using a structured questionnaire which was analyzed using descriptive and inferential statistics to analyze on SPSS version 22. The targeted respondents were the senior management staff in various departments of the firm; that is accounting, human resource, procurement and security department. Data obtained and analyzed was from 30 respondents of the target population.27 of respondent who represents 90% answered the questionnaire as required while 3 respondents who represented 10% did not answer the questionnaire as required. The model summary R-square value was 0.520 implying that the predictor variables selected for this study explains 52% of changes in the dependent variable. The study found that internal control system has a positive significant effect on financial performance of state-owned sugar companies in Kenya. Based on the risk assessment, the study concluded that, in an effort to manage its risks, the company has ensured risks are assessed in relation to changes in the operational environment. In addition, the study concluded that the company has set forth a good working relationship between the staff, they are committed to their jobs, all employees have work schedules hence no job conflicts and that there is a mechanism to monitor regular attendance of staff. The study recommended that the management should always put in place mechanisms to enable it identify risks that affect achievement of the company’s financial objectives.