CONTROL ENVIRONMENT AND CONTROL ACTIVITIES INTERNAL CONTROL SYSTEMS AND MANAGEMENT OF LOCAL REVENUE BY COUNTY GOVERNMENTS OF KENYA

Ayao Evans Onsindu, Prof. Willy Muturi, Prof: Christopher Kanali

Abstract


An adequate and effective internal control system is necessary for better organizational performance. Studies show that an effective internal control mechanism prevents and detects fraud which then enables management to take necessary steps to remedy the situation. This study attempted to examine the effect of internal control systems on the management of local revenue by the county governments of Kenya. The study was guided by the COSO (1992) integrated framework. The two components of the internal control system framework included in the study were the control environment and control activities. Statistical data was collected by a COSO questionnaire that was adapted for use in public entities. The County Chief Officers for finance from all counties provided information on the adequacy and effectiveness of their internal controls respectively. Data was processed and analyzed using descriptive statistics such as frequencies, percentages, mean and standard deviation and inferentially using correlation and regression analysis to describe characteristics and show relationships that predict effective management of revenue in county governments. The hypotheses were tested statistically at the 0.05 level of significance. There was a significant positive relationship between the internal control environment and the management of local revenue. There was also a significant positive relationship between internal control activities and the management of local revenue. The county governments should also ensure that their organizations have a strong internal control environment where internal control activities inform policies and procedures that are adequate.

Keywords: Control Environment, Control Activities, Management of Local Revenue, County Governments 

Full Text:

PDF

References


Adebanjo, D., Ojadi, F., Laosirihongthong, T. and Tickle, M. (2013), “A case study of supplier selection in developing economies: a perspective on institutional theory and corporate social responsibilityâ€, Supply Chain Management: An International Journal, Vol. 18 No. 5, pp. 553-566.

Aikins, S. (2011). An Examination of Role of Government Internal Audits improving Financial Performance. Public Finance and Management, 11(4), 306-337.

Alchian, A.A. & Demsetz, H. (1972). Production, information costs and economic organization. American Economic Review, 62,772-795.

Cohen, J. Krishnamoorthy, G. Wright, A. (2002). Corporate governance and audit process. Mid-Year auditing conference, LA.

Committee of sponsoring organisations of the tread-way commission (COSO, 1992). Internal control-integrated framework. USA: AICPA. P 157

Christopher, Gerrit Sarens, Philomena Leung, (2009) "A critical analysis of the independence of the internal audit function: evidence from Australia", Accounting, Auditing & Accountability Journal, Vol. 22 Issue: 2, pp.200-220.

Crutchley, E. C., Jensin, R. M., & Marshall, B. B. (2007). Climate for Scandal; Corporate Environments that Contribute to Accounting Fraudâ€. The Financial Review, 42:53-73.

Dada, R. A., Adebayo, I. A., & Adeduro, O. A. (2017). An Assessment of Revenue Mobilization in Nigeria Local Government: Problems and Prospects. Archives of Business Research, 5(9).

Dhillon, G. (2001). Defining internal control objectives for information systems security. A value focussed assessment. USA. (Virginia Commonwealth University).

Gupta, P. P. (2006). Control framework and management reporting on internal Control over financial reporting survey & analysis of implementation practice. Institute of management accountant, Washington DC, USA.

Jensen, M.C. & Meckling, W. (1976). Theory of the Firm: Managerial behaviour, Agency Costs and Ownership Structure. Journal of Financial Economics, 3, 305-360.

Muthusi, D.M. (2017). Internal control and financial performance of commercial bank in Kenya, (Kenyatta University).

Mwachiro, D. B. (2013). Effects of internal controls on revenue collection: a case of Kenya Revenue Authority (Doctoral dissertation, University of Nairobi).

Noorve, L. (2006). Evaluation of the effectiveness of internal control over financial reporting. (University of Tartu).

Nyaata, M.M. (2017). Effects of internal control on revenue management in Kakamega County. (Masinde Muliro University of Science & Technology).

Office of the Controller of Budget (OCOB, 2016). County budget implementation review report for the first half of the FY 2015-2016.

Rittenberg, L.E. (2005). The relevance of COSO Enterprise risk management to European organisation- The Pan-European conference of internal Audit, PP 13-14.

Sarens, G. & Beelde, I. D. (2006). Internal auditors’ perception about their role in risk management: A comparison between US and Belgian companies, Managerial Auditing Journal, 21 (1), 61-80.

Tax Administration Integrity and its implications on effective revenue collection in Local Government Authorities: Insights from Moshi Tanzania. European Academic Research Journal, 4(5), 221-223

Tunji, S. T. (2013). Effective internal control system as antidote for distress in the banking industry in Nigeria. Journal of Economics and International Business Research. Vol. 1 (5), pp. 106-121.

Whittington, O. R., & Panny, K. (2001). Principles of auditing and other assurance services. Irwin McGraw – Hill. New York.


Refbacks

  • There are currently no refbacks.