Risk Based Internal Audit Approaches and Financial Perfomance of Insurance Firms Listed at the Nairobi Securities Exchange Kenya
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Date
2023
Authors
Were, Brian Wangira
Journal Title
Journal ISSN
Volume Title
Publisher
kenyatta university
Abstract
As a primary concern, financial performance is a key ingredient to the overall stakeholder satisfaction. However, as evidenced by the statistical performance reports, it’s clear that insurance firms in Kenya continue to post unsatisfactory results that do not align with the overall shareholder expectations and the trend seems to be progressively detrimental to the financial health of this sector. Cumulatively, the reduction in the overall operating profits, the increase in management expenses, the decline in the return on equity, the increase in the insurance fraud cases, and the increase in cyber threats despite a consistent increase in the gross written premium income is a key concern and does not in any way depict the overall stakeholder expectations. Additionally, the digital wave equally threatens to bring along additional risks associated with data manipulation, Cybercrime and business operations sustainability owing to the increase in the adoption of technology and digital platforms as they seek to expand their reach, enhance customer service delivery, and enhance their efficiency. The study’s objective was to establish the effects of the risk-based internal audit approaches (cybercrime security controls, data analytics, and disaster recovery controls) on the overall financial performance of the NSE, Kenya listed insurance firms. Firm size was used to moderate between risk-based approaches and insurance financial performance. The research was anchored on the Information System Success Model, Agency Theory, Chaos Theory, and Growth of the Firm Theory. A positivist research philosophy was deployed and a causal research design adopted. 6 Insurance firms licensed to trade at the NSE, Kenya were surveyed and used purposive sampling to select it’s 60 respondents. Both primary and secondary data were used where questionnaires were the primary data collection instrument while data extraction forms were used to collect secondary data. Analysis of the data was done using both descriptive and inferential statistics and presented using graphs, statistical tables, and pie charts. The study findings revealed that cybercrime security controls, data analytics controls, and disaster recovery controls had a positive statistical significance on financial performance of Insurance firms listed at the NSE, Kenya. Contrary, firm size was found not to have a statistical moderation significance towards the risk-based internal audit approaches relationship to financial performance. The study concluded that firms that had Cybercrime security controls, data analytics, and disaster recovery controls in place were noted to have an increased operational efficiency that ultimately drove financial performance. Consequently, the study recommended that it would be prudent enough for Insurance firms across the board to put in place a clear framework that seeks to embed Cybercrime security controls, data analytics controls, and disaster recovery controls through the Internal Audit units as a way of enhancing their operational efficiency which is what drives the control on the usage of the revenues generated.
Description
A Thesis Submitted to the School of Business, Economics and Tourism in Partial Fulfillment of the Requirements for the Award of a Degree in Master of Science in Finance Kenyatta University
Keywords
Internal Audit, Financial Perfomance, Insurance Firms, Nairobi Securities Exchange, Kenya