2 Sample 35 viii CHAPTER ONE INTRODUCTION 11 INTRODUCTION 111 BACKGROUND OF THE

2 sample 35 viii chapter one introduction 11

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Table 3. 2 Sample.....................................................................................................................................35viii
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CHAPTER ONEINTRODUCTION1.1 INTRODUCTION1.1.1 BACKGROUND OF THE STUDYThe internal audit department is noted as a key department in an organization as the process of internal audit is key in the application of accounting systems. Most firms have therefore seen it necessary to introduce internal audit alongside external audit for the sake of enhancing the efficiency of the efficiency of their operations.Globally financial scandals have been Witnessed which triggered a reaction for tighter regulations and standardized form of accounting and corporate governance for example World.com and Enron in 2002. Investors lost over $180 billion and there arose need to prevent such terrible incidences from occurring and thus internal audit offered a likely best solution to this.As a matter of understanding, internal audit entails the process of checking for errors and frauds so that corrective measures can be taken to avoid misuse of organization funds. This happens within the organization to differentiate it from external audit. The efficiency of internal audits helps to develop the work of the organization since the financial reports reflect the internal audit department’s quality. The financial and corporate strategy of an organization is underpinned by effective internal systems in which the internal audit has a vital role in raising the reliability of the internal control system, improving the risk management process. Internal audit is therefore believed to be crucial to the success of an enterprise in that it acts as a powerful brake on the possible deviations from the structured objectives together with the policies. Hutchinson and Zain [2009] explored the relationship between internal audit quality andfirm performance in Malaysia. They found a strong relationship between internal audit quality and performance with opportunities of high growth. This was consistent with Hermanson and Rittenberg [2003] argument that the existence of an effective internal audit function is associated with superior organizational performance. Kiabel [2012], Mihrete et al [2010] and Ejoh and Ejom in their researches found out that internal audit has no significant effect on a firm’s performance. The reason for the deviations is likely to 1
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have been since their studies were so limited on both developed countries and those developing .Some studies have concentrated on problems concerning internal auditing in developed countries such as USA and The UK, we have found little evidence in developing countries such as our case Kenya .All these scholars recommended further study by future researchers to examine the existence of the relationship between internal audit and the performance of the firm. Since digitalization, robotics and business transformation are picking momentum in most organizations’ day in day out, organizations need to embrace analytics to tolerate the change. Data analytics seem to be the game changer for internal audit profession. The top 8 audit plans being embraced for this year 2018 are;
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