Influence of Internal Audit Risk Planning Practices on the Financial Performance of SACCOs in the Western Region of Kenya

Abstract

To better monitor and control risks, businesses may use risk-based internal audit (RBIA) practices. It also increases transparency and honesty in the financial reporting process. The Western Region and Kenyan Deposit Taking Savings and Credit Cooperatives (DT-SACCOs) are the primary subjects of this research. Despite having an audit department in place, some DT-SACCOs encounter difficulties in auditing their operations, such as a lack of audit evidence (too weak or incorrect) that makes it difficult for the auditor to make the proper choice or generate accurate findings. An internal audit that takes risk into account may help a company prioritize its resources where they will have the most impact. This allows the SACCO to boost its financial performance and provide better reporting to its members. This research looked at how risk-based internal audits affected the profitability of DT-SACCOs in Kenya's Western Region. Based on three theories - the Positive Accounting Theory of internal auditing risk planning, the Contingency Theory of risk management, and the Agency Theory of internal audit capacity—this descriptive study was conducted. Fifteen DT-SACCOs in the Western Region of Kenya will be the focus of the study. Primary data was collected from DT-SACCO members, with a response rate of five per SACCO. The data on financial performance was verified using secondary sources of information. Regression analysis shows that risk-based audit planning had a statistically significant effect on the financial performance of DT-SACCOs in the Western area (t = 5.626, p<0.05). The study recommended that SACCO management practice risk-based auditing with adequate planning from all stakeholders to enhance transparency and accountability. Furthermore, the management should ensure there is timely action on audit queries.