48 relationship between audit practices and financial

4.8 Relationship Between Audit Practices and Financial Performance of SACCOs
To generate a linear regression model showing the relationship between internal auditing
practices and financial performance of SACCOs, data was collected on number of times audit
planning is carried out, number of audit committee members, frequency of stakeholders’
involvement and number of annual reports as shown in Table 14:

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Table 14: Results of Indicators of Financial Performance and Internal Auditing
Practices
Financial Performance Internal Audit Practices
AV OS IL IS AP NA FSI NAR
500,000 200,000 45,000 32,000 1 3 2 3
800,000 400,000 55,000 29,000 2 5 5 4
1000000 470,000 50,000 39,000 3 6 9 6
1,500,000 670,000 50,000 44,000 4 10 11 9
Key: AV-Asset Value; OS-Operational Surplus; IL-Interest on Loans; IS-Interests on
Savings; AP-Audit Planning; NA-Number of Auditors; FSI-Frequency of S takeholders’
Involvement; NAR-Number of Audit Reports
From Table 14, financial performance was measured in terms of asset values (AV),
operational costs (OC), interests on loans (IL) and interests on savings (IS). The data
indicates that financial performance mostly depend on the audit planning, number of trained
auditors a SACCO has and number of audit stakeholders involved. It does not depend on the
number of reports which are provided. This is evidenced by the fact that interests on loans
and savings are almost the same despite the higher number of audit reports. These findings
thus affirm the fact that the kinds of internal auditing practices are potentially powerful tools
for meeting the management objectives of enhancing total financial performance of SACCOs.
On average, financial performance of any SACCO is directly related to the internal audit
planning
Table 15: Results of Average Financial Performance and Internal Auditing Practices
Average Financial Performance Internal Audit Practices in SACCOs
AP NA FSI NAR
259,000 1 3 2 3
428,000 2 5 5 4
519,667 3 6 9 6
754,667 4 10 11 9

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The results on Table 15 indicate that average financial performance of SACCOs are
determined largely by the internal auditing practices. These results were subjected to Multiple
Linear Regression which results are indicated in Table 16:
Table 16: Model Summary c
Model R R Square
Adjusted R
Square
Std. Error of the
Estimate
Change Statistics
Durbin-
Watson
R Square
Change
F
Change df1 df2
Sig. F
Change
1 .999 a .998 .995 14777.667 .998 292.873 2 1 .041
2 1.000 b 1.000 .000 .000 .002 .000 1 0 .000 1.800
a. Predictors: (Constant), AP, NA, FSI, NAR
c. Dependent Variable: FP
From Table 16, the first column highlighted, " R Square Change ", shows the increase in
variation explained by the addition of the interaction term, that is, the change in R 2 . The
change in R 2 is reported as 0.002, that is, 0.2%, which is the percentage increase in financial
performance of SACCOs. These results are statistically significant given that p-value,
0.000<0.05. This means that financial performance of most SACCOs is directly related to
internal auditing practices adopted by the SACCOs. At the same time, Multiple Linear
Regression Model was generated as shown in Table 17:
Table 17: Linear Multiple Regression Model
Model
Unstandardized
Coefficients
Standardized
Coefficients
t Sig.