INTERNAL AUDIT UNIT FUNCTIONS ON OPERATIONAL PERFORMANCE OF KENYA REVENUE AUTHORITY IN SELECTED REGIONS

Abstract

An internal audit unit is a creation of the management on the basis that the unit operates independently for the purpose of advising the management. The main objective of this study was to investigate the effect of internal audit unit functions on operational performance at the Kenya Revenue Authority. Specifically, the study sought to examine the effect of monitoring of internal control systems, risk assessment and management, audit recommendations review and financial reports evaluation on operational performance of Kenya Revenue Authority Southern and Nairobi regions. Theories that were used to guide the study are control theory, agency theory and performance theory. Causal research design was used in conducting the study with the target population being the Kenya Revenue Authority officers. The study targeted 253 respondents comprising of Finance Employees, Audit Employees and Investigation Employees. Stratified random sampling was used to select 155 respondents from the three departments. Piloting was done in Kisumu KRA office. Validity was established using content and construct validity. Reliability was established using Cronbach Alpha. Data collection was done by use of a questionnaire. Data analysis was done by use of both descriptive statistics and inferential statistics. Descriptive statistics was presented in percentages, frequencies, mean and standard deviation while inferential statistics involved correlation analysis and linear regression at 0.05 significance level. The study findings were presented in the form of tables. The study found out that monitoring of internal control systems had a significant effect on operational performance among the KRA staff in the selected regions (p=0.000< 0.05). Risk assessment and management had a significant effect on operational performance among the KRA staff in the selected regions (p=0.000< 0.05). Audit recommendations review had a significant effect on operational performance among the KRA staff in the selected regions (p=0.000< 0.05). Financial reports evaluation had a significant effect on operational performance among the KRA staff in the selected regions (p=0.000< 0.05). The study concluded that monitoring of internal control systems offered guidance and follow ups on performance. Financial reports evaluation led to objectivity and accuracy in the course of duty. The study recommends that monitoring of internal control systems, risk assessment and management, audit recommendation review and financial report evaluation should be prioritized so as to improve operational performance. This would help build a strong internal control system objective on performance. Kenya Revenue Authority management should assess risk and provide mitigation measures that could lead to operational performance. That KRA should up audit exercises and conduct interim as well as final audits and make use of audit recommendations given to enable operational performance. Finally, the study recommends that KRA should always make financial reports in accordance to law and hence review them to establish areas to be improved for operation performance. The study recommends research for farther studies on all KRA regions and departments. The study can cover all staff from high level to support staff and explored based on other audit functions such as audit planning to enhance operational performance.