International Journal of Business & Law Research 3(1):15-33, Jan-Mar 2015 (ISSN: 2360-8986)



© SEAHI PUBLICATIONS, 2015 www.seahipaj.org

ROLE OF INTERNAL AUDIT FUNCTION IN PROMOTING EFFECTIVE CORPORATE GOVERNANCE OF COMMERCIAL BANKS IN KENYA


Michael Kipkurui CHANGWONY1* & Dr. Gladys ROTICH2
Faculty of Law,
1Msc Scholar Procurement & Logistics
Jomo Kenyatta University of Agriculture and Technology, Kenya
*Email of corresponding author:mikerui1@yahoo.com
2Lecturer, Jomo Kenyatta University of Agriculture and Technology, Kenya

ABSTRACT
Internal auditing function was traditionally designed to safeguard firm’s assets and assist in the production of reliable accounting information for decision-making purposes. Corporate failures in the past have raised concerns among the public over corporate governance. Similar studies have hypothesized that the internal audit function had influence on the corporate governance of an organization. The aim of this study was to determine the role of internal audit function in promoting effective corporate governance of Commercial banks in Kenya. This study adopted a descriptive research design. The study used stratified random sampling in identification of 89 respondents. Structured questionnaire was used to gather data from the respondents. Data collected was coded and analyzed with the aid of the Statistical Package for Social Sciences (SPSS) version 21 for descriptive statistics and inferential statistics. Presentation was by use of pie-charts, graphs and percentages which enhanced a meaningful description. The study established that all the independent variables that is positioning of the internal audit function, risk identification, measurement and prioritization approach adopted by the bank, internal audit independence and staffing of the internal audit department have a positive and significant influence on effective corporate governance. The study therefore concluded that the internal audit function plays a positive and significant role in promoting effective corporate governance of commercial banks in Kenya. This study recommends further studies on the role of other major players such as Central Bank of Kenya, the Government of Kenya, the bank’s Board of Director, the bank’s Board Audit Committee, banks Senior Management and the External Auditors.
Key Words: Corporate Governance, adequacy of staffing, risk identification, level of Internal Audit independence