Effect of Internal Audit Timeliness on Financial Performance of Deposit Taking Savings and Credit Cooperatives in Western Kenya

Renson Nyongesa; Maniagi Musiega; Evans Silver Kwendo

doi:10.51867/ajernet.5.4.159

Authors

Renson Nyongesa
wekesarenson@yahoo.com
Masinde Muliro University of Science and Technology, Kenya
Maniagi Musiega Masinde Muliro University of Science and Technology, Kenya https://orcid.org/0000-0003-3248-6933
Evans Silver Kwendo Masinde Muliro University of Science and Technology, Kenya

Keywords:

Deposit Taking SACCOs, Financial Performance, Internal Audit Practices, Internal Audit Timeliness

Abstract

Savings and Credit Cooperatives (SACCOs) in Kenya and all over the world play a key part in development of the nations. They have tremendously contributed to the economic growth of third world countries in the world. The objective of the study was to determine the influence internal audit timeliness on financial performance of Saccos in Western Kenya. The main theory was signalling theory. The study was guided by descriptive survey research design. The study targeted 129 internal auditors, accountants, finance officers and chief executive officers in all the 15 Deposit Taking SACCOS. Stratified random and simple sampling techniques were used to select 97 respondents from a target of 129. The study used primary data obtained through self-administered structured questionnaire. Data was analysed using both descriptive and inferential statistics, thus for descriptive mean, standard deviation, frequency and percentages were used. For inferential, correlation analysis and regression was used. Data was analysed using the SPSS 26 software. The results indicated that one-unit increase in internal audit timeliness would results to significant increase in financial performance by 0.339 units (P=0.000). Internal audit timeliness has significant positive effect on financial performance of deposit taking Saccos. The study concludes that the internal audit team's timely follow-up on audit issues showcases a proactive approach to financial risks. Timely resolution of audit issues reflects accountability and drives continuous improvement. The study recommended that top management should provide sufficient financial and human resources for internal audit activities especially through continuous professional development of the internal audit staff.

Dimensions

REFERENCES

Adekola, D. R., & Adewale, O. A. (2018). Impact of internal audit function and efficiency on organizational performance. International Journal of Accounting Research, 3(6), 15-19. https://doi.org/10.12816/0052291 DOI: https://doi.org/10.12816/0052291

Ahmad, N., & Haniffa, R. (2021). Top management support, board characteristics and internal audit function: Theoretical and empirical insights. Sustainability, 13(6), 31-37.

Alzeban, A., & Gwilliam, D. (2014). The association between internal audit function quality attributes and financial reporting quality: Evidence from Saudi Arabia. International Journal of Auditing, 18(2), 152-167.

Arianpoor, A. (2019). Impact of audit report lag, institutional ownership and board characteristics on financial performance. Iranian Journal of Accounting, Auditing and Finance, 3(2), 83-97.

Arrow, K. J. (1973). The theory of discrimination. In O. Ashenfelter & A. Rees (Eds.), Discrimination in labor markets (pp. 3-33). Princeton, University Press, Bahren.

Asare, F. K. (2021). Assessing the operations of the internal audit units in financial administration of some selected municipal and district assemblies (MDAs) in Volta Region. Dama Academic Scholarly & Scientific Research Society, 3(5), 78-102.

Chen, Q., & Chen, Z. (2024). Mandatory internal control audit and corporate financialization. Finance Research Letters, 62(10), 50-85. https://doi.org/10.1016/j.frl.2024.105085 DOI: https://doi.org/10.1016/j.frl.2024.105085

Cochran, W. G. (1977). Sampling theory when the sampling-units are of unequal sizes. Journal of the American Statistical Association, 37(218), 199-212.

https://doi.org/10.1080/01621459.1942.10500626 DOI: https://doi.org/10.1080/01621459.1942.10500626

DeFond, M., & Zhang, J. (2014). A review of archival auditing research. Journal of Accounting and Economics, 58(2-3), 275-326. https://doi.org/10.1016/j.jacceco.2014.09.002 DOI: https://doi.org/10.1016/j.jacceco.2014.09.002

Gichinga, R. N., Gatauwa, J., & Kimutai, C. (2024). SASRA moderation effect between firm characteristics and firm efficiency of deposit taking savings and credit cooperatives societies in Kenya. International Academic Journal of Economics and Finance, 4(1), 345-367.

Kabue, A. W. (2020). Effects of internal audit practice on performance of public commissions in Kenya. A case of parliamentary service commission of Kenya. International Academic Journal of Economics and Finance, 4(1), 368-391.

Kiplagat, B. L. (2020). Internal Audit Practices And Financial Performance Of Deposit Taking Savings And Credit Co-Operative Societies In Kericho County, Kenya. Journal of Auditing and Accounting Studies, 4(1), 107-142.

Kombo, K.D., & Tromp, L.A.D. (2006) Proposal and Thesis Writing: An Introduction. Paulines Publishers, Nairobi, Kenya.

Krejcie, R. V., & Morgan, D. W. (1970). Determining sample size for research activities. Educational and psychological measurement, 30(3), 607-610.

https://doi.org/10.1177/001316447003000308 DOI: https://doi.org/10.1177/001316447003000308

Lenz, R., & Jeppesen, K. K. (2022). The future of internal auditing: Gardener of governance. EDPACS, 66(5), 15-21. https://doi.org/10.1080/07366981.2022.2036314 DOI: https://doi.org/10.1080/07366981.2022.2036314

Mbuti, E. M. (2014). Effect of internal audit reporting quality on financial performance of savings and credit cooperative societies: A case study in Murang'a County in Kenya (Doctoral dissertation, KCA University).

Milgrom, P., & Roberts, J. (1986). Price and advertising signals of product quality. Journal of Political Economy. 7(5), 537-561. https://doi.org/10.1086/261408 DOI: https://doi.org/10.1086/261408

Mugenda, O. M., & Mugenda, A. G. (2013). Research Methods: Quantitative and Qualitative Approaches. Acts, Press. Nairobi.

Musungu, O. W. (2022). An unhealthy state of affairs: The dilemma in the fight against corruption and the right to health. Kabarak Law Review, 1(5), 107-128.

https://doi.org/10.58216/klr.v1i.242 DOI: https://doi.org/10.58216/klr.v1i.242

Mutulu, F. J. (2021). Effect Of Internal Audit On The Organizational Performance Of State Corporations In Kenya (Doctoral dissertation, KCA University).

Nyikuli, R. A. (2022). Internal audit practices, top management support and organizational performance of state corporations in Kenya (Doctoral dissertation, KCA University).

Odhiambo, C. A. (2022). Effect of internal controls on the financial performance of commercial banks listed in the NSE and licensed by the CBK. Accounting and taxation review, 5(2), 79-103.

Ogunmodede, E. O., Aggreh, M., Nwokediba, E. E., & Udeh, F. N. (2023). Moderating effect of abnormal audit fees on the relationship between audit delay and the quality of financial reporting: A study of listed industrial goods firms in Nigeria. Journal of Global Accounting, 9(4), 328-350.

Polii, H. R. L., Morasa, J., & Wokas, H. R. (2023). Unraveling The Mystery Of Audit Delay: How Financial Performance And Non-Financial Factors Affect Audit Timing. Accountability, 12(2), 15-25.

Rafiki, A., & Sarea, A. (2020). The impact of an audit committee's independence and competence on investment decision: A study in Bahrain. Asian Journal of Accounting Research, 5(2), 299-313. https://doi.org/10.1108/AJAR-02-2020-0008 DOI: https://doi.org/10.1108/AJAR-02-2020-0008

Sabella, R. F., & Mutmainah, I. (2022). The role of timeliness in providing audit opinions of local government financial report. SAR (Soedirman Accounting Review): Journal of Accounting and Business, 7(2), 98-110.

Saputra, A. D., & Fadjarenie, A. (2022). The Effect of Profitability, Solvency and Internal Audit on Audit Delay (Empirical Study on Mining Companies on the Indonesia Stock Exchange in 2017-2019). Asian Journal of Social Science Studies, 7(2), 36. https://doi.org/10.20849/ajsss.v7i2.1008 DOI: https://doi.org/10.20849/ajsss.v7i2.1008

SASRA (2023). The Sacco supervision annual report 2023. Nairobi. SASRA.

Sishumba, J., Saidi, L., & Milupi, N. (2022). A Study into the Effects of Internal Audit on the Financial Performance of Commercial Banks in Zambia. Asian Journal of Accounting Research, 5(2), 314-339.

The Institute for Internal Auditors. (2022). The future of internal auditing: gardener of governance. The EDP Audit, Control, and Security Newsletter, 66(1), 51-93.

Ugwu, C. C., Aikpitanyi, L. N., & Idemudia, S. (2020). The effect of audit quality on financial performance of deposit money banks (evidence from Nigeria). Journal of Economics and Business, 3(1) 101-134. https://doi.org/10.31014/aior.1992.03.01.196 DOI: https://doi.org/10.31014/aior.1992.03.01.196