dc.description.abstract | In today’s business world, the major interest is to enhance accountability, profitability and enjoy
competitive advantage. As a way of achieving this, SACCOs employ internal auditing, to enable
them monitor the monetary activities to enhance financial performance. Despite the fact that the
majority of SACCOs (around 70%) have implemented either an in-house or outsourced audit
system, their financial performance remains below expectations, with instances of fraud, poor
fund management, and inadequate budget development and utilization. Given these
circumstances, the purpose of this research was to examine how the internal audit system affects
the financial performance of SACCOs in Meru County. The study concentrated on four primary
goals: evaluating the influence of compliance, risk assessment, control function, and monitoring
on the financial performance of SACCOs in Meru County. The study's theoretical foundation
was built on the agency, legitimacy, and capture theories. To accomplish the research objectives,
a descriptive research design was employed, targeting 42 SACCOs that had operated in Meru
County for a minimum of ten years. The study adopted a census approach, including all 42
eligible SACCOs in the study. The respondents consisted of the chief executive officers of the
respective SACCOs, totaling 42 participants. Data collection involved the use of a structured
questionnaire, which was pre-tested in four SACCOs from Tharaka-Nithi County, selected
purposively. The collected data were accurately coded based on the responses to various items.
In the analysis of data, this study employed SPSS (Version 24) and utilized descriptive and
inferential statistics. Multiple linear regression models were used to investigate the connections
between the dependent and independent variables. The study's findings uncovered a noteworthy
correlation between compliance and the financial performance of SACCOs in Meru County,
rejecting the hypothesis that the compliance slope is zero (b = 0). Similarly, a noteworthy
relationship was observed between risk assessment and financial performance, rejecting the
hypothesis that the risk assessment slope is zero (b = 0). However, no noteworthy impact on
financial performance was found for control function and monitoring. The study concluded that
compliance plays a vital role in ensuring SACCOs adhere to regulations and guidelines, thereby
fostering transparency, accountability, and good governance. Furthermore, effective risk
assessment can assist SACCOs in reducing operating costs, enhancing efficiency, and improving
financial performance. The study recommends that SACCO management strive for full
compliance with relevant regulations to enhance accountability and financial performance.
Additionally, implementing robust risk assessment policies is advised to mitigate risks, reduce
operational costs, and boost financial performance. Finally, the study suggests expanding the
research to encompass other financial institutions to explore potential variations in the
correlations between the internal audit system and financial performance. | en_US |