Investigation of the relationship between auditing and performance of state corporations in Kenya

Abstract

Auditing is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users. The business unit should have its own customers, distribution channels, production facilities, and financial performance measures (Brewer, 2002). The main objective of the study was to investigate the relationship between auditing and performance of state corporations in Kenya. The study adopted causal research and sampled 10% of the 133 parastatals audited by KENAO. Primary data and the secondary data were obtained. Primary data was collected through the use of questionnaire. Regression was run in analysis to determine the relationship between auditing and financial performance. Findings were presented in tables, graphs and pie charts. The study found that without auditing, performance with regards to returns on sales will be negative (losses); however, increase in auditing practices as indicated by nature of audit committees, internal controls, accountability, transparency, auditor's independence would have positive influence on performance. Public sector audit plays an essential role in maintaining confidence in the stewardship of public funds and in those to whom the responsibility of stewardship is entrusted. Therefore the study recommended auditing in all the parastatals so that their performance can be improved.