Effect of internal audit practices on corporate governance of the health sector in Kenya

Abstract

One of the most important keystones and foundations of corporate governance is that internal auditors are anticipated to work with audit committees, boards and senior management to assist put the right tone at the top and helps to guarantee that ethical behavior flows down all the way through the ranks to lower level employees. A viable internal audit function is one of the most grounded devices to screen and improve organization performance. Internal auditing and corporate governance have now become a matter of major public concern. It is against this realization that the study investigated effect of internal audit practices on corporate governance with focus on health sector in Kenya. The specific research objectives were to determine the influence of risk management, internal environment audit practices, control activities and monitoring activities on corporate governance of the health sector in Kenya. The study adopted Agency theory and Stewardship theory. An explanatory research design was employed. The study sought the views from internal auditors and risk managers of the health sector. The target population of this study was 110 auditors of referral hospitals in Kenya of which sample sizes of 86 respondents were selected. The research instruments that were used in this study were questionnaires and interview schedule. The validity of the instrument was determined by the researcher using expert judgment. Cronbach’s Coefficient Alpha was used to determine the reliability of the research instrument. The data were then coded and entered in the computer for analysis using the Statistical Package for Social Sciences (SPSS). The descriptive analyses that were used include mean, percentages, standard deviation and frequencies. Inferential statistics were used to analyze relationship between variables. This was done using Pearson product moment correlation and multiple regression analysis. From the model, (R 2 = .874) showing that the factors account for 87.4% variation in corporate governance in health sector. The predictors used in the model captured the variation in the corporate governance in health sector. The β-value for risk management, internal environment audit practices, control activities and audit monitoring activities had a positive coefficient, depicting positive relationship with corporate governance in health sector in Kenya. There was a significant positive relationship between risk management (β 1 =0.370), internal environment audit practices (β 2 =0.613) and audit monitoring activities (β 4 =0.112; p <0.05) and corporate governance in health sector. There was no significant relationship between control activities (β 3 =0.153 and p value >0.05) and corporate governance in health sector. The risk management, internal environment audit practices and audit monitoring activities influenced the corporate governance in health sector, while control activities do not. The study recommended that risk assessment should be led at the level of individual organizations and over the wide range of exercises and auxiliaries of the solidified association.