Effect of Internal Control System on the Operational Performance of Organization: A Case Study of Kenya Revenue Authority (KRA) Headquarter, Kenya
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Date
2023-06
Authors
CHEPKONGA, LORNA CHEPKORIR
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
The issue of financial crisis has persisted despite the fact that internal control systems have been
in place for many years in the majority of organizations. However, the current research aims to
determine the effect of the internal control system on operational performance of Kenya Revenue
Authority. The survey objectives were; to explore the effect of control environment, risk
assessment, control activities and automation on the performance of Kenya Revenue Authority.
The survey was anchored by New Public Management theory and Contingency Theory. A
descriptive research design was utilized. The research targets 640 employees working at finance,
administration and internal audit departments. The study sampled 128 respondents. Questionnaires
were utilized to gather primary data. Both quantitative and qualitative data were collected.
Secondary data were gathered from annual financial reports. Quantitative data were analyzed
descriptively and inferentially. Qualitative data were analyzed through themes and presented in
verbatim forms. Only frequency, percentage, means, and standard deviations were utilized in
descriptive statistics. Regression modeling and product moment correlation were used for
inferential statistics. Graphs and tables were used to display the findings. The findings show that
coefficient of correlation was 0.865, an indication that the study variables significantly influenced
operational performance of KRA. Coefficient of adjusted determination was 0.724 which
translates to 72.4%. This indicates that variations in dependents variable was explained by the
independent variables (risk assessment, control environments, control activities and automation).
Also, the findings from regression coefficients revealed that risk assessment, control
environments, control activities and automation significantly affect the operational performance
of KRA since the P-value is less than 0.05. The study concludes that internal control systems have
statistically significant relationship with operational performance of Kenya Revenue Authority.
The study concludes that KRA should establish strong internal control policies that will help the
firm achieve its goal of optimizing revenue collection. The study recommends that management
needs to be dedicated to the system's operations, set policies and processes for authorizations at a
high enough level, and make sure that clear lines of authority and responsibility have been
established to guarantee policy and procedure compliance. Additionally, managers need to make
sure that roles in the department responsible for collecting revenue are clearly defined, train
personnel on how to use the accounting and financial management system, and finally make sure
that management promptly explains any differences between actual and budgeted income.
Description
A Research Project Submitted To School, of Law, Arts and Social Sciences in Partial Fulfillment of the Requirement for the Award of the Degree of Masters of Public Policy And Administration, Kenyatta University.
Keywords
Effect of Internal Control System, Operational Performance of Organization, Kenya Revenue Authority, Kenya