INTERNAL CONTROLS AND FINANCIAL REPORTING QUALITY IN COASTAL COUNTY GOVERNMENTS IN KENYA
Abstract
This study determined the internal controls and financial reporting quality of county governments in Coast region. The study was grounded on technology acceptance model, agency theory, Stewardship theory, positive accounting theory and performance maximization theory. This study adopted cross-sectional descriptive survey research design. The target population was six County governments in the Coast region which forms the study’s unit of analysis. The unit of observation was finance and economic planning officers drawn from the six target county governments. The study used census technique due to small number of state corporations. Primary data was collected by use of structured questionnaires while Secondary data was collected from performance reports and relevant documents using secondary data collection sheet. The study conducted pilot test before data collection. The collected data was analysed, summarized and tabulated by use of SPSS software version 29. Descriptive analysis and inferential analysis was used to summarize the results for each of the study objectives. The findings from this study indicated that internal audit, risk assessment, automation, and monitoring all significantly contribute to improving the financial reporting quality of Coastal county governments. It was concluded that the county governments have established internal audit teams that are competent and composed diversely, contributing positively to the effectiveness of their financial controls. Additionally, the management's consideration of fraud risks during the assessment process positively influences financial reporting. It was concluded that automation plays a crucial role in maintaining secure and up-to-date access to critical financial systems. However, it remains unclear whether the county governments have established a comprehensive baseline for internal control performance to measure improvements over time. The study recommended that county governments should work towards ensuring that the internal audit team operates with minimal influence from management to maintain objectivity in their work. Additionally, regular fraud risk assessments should be conducted to safeguard against financial misconduct.
Key Words: Internal Audit, Risk Assessment, Automation, Monitoring
CITATION: Gassare, B. S., & Wekesa, M. (2025). Internal controls and financial reporting quality in coastal county governments in Kenya. The Strategic Journal of Business & Change Management, 12 (2), 1051 – 1069. http://dx.doi.org/10.61426/sjbcm.v12i2.3257
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DOI: http://dx.doi.org/10.61426/sjbcm.v12i2.3257
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