The Role of Internal Audit in Enhancing Corporate Governance for Companies Listed at the Nairobi Stock Exchange

Abstract

The study examined the role of internal audit in Kenya current corporate governance (CG) system via seeking the views of corporate managers. Despite the fact that the contribution of internal audit has been essential for organizations to achieve their business objectives, very little has been known of corporate managers’ perception as to the practical functions of internal audit in the context of CG. Recent events and studies suggest that the benefits of scrutinizing governance extend beyond simply avoiding corporate collapse. Corporate governance is about the way in which boards oversee the running of a company by its managers. The study addressed the following objectives: To assess the auditor’s role in corporate governance, to assess the internal audit capacity to achieve its objectives, to suggest how internal auditors’ independence can be achieved. The research design used was descriptive design and data collection instrument was questionnaire. The target population was internal audit managers of all the Companies listed at the NSE. The study employed both Stratified and Systematic random sampling procedures where a sample size of 30 companies was selected to represent 50% of the population. Information about audit objectives/functions, accountability, capacity and framework was obtained. Issues relating to and practices of corporate governance and internal audit activities within companies listed at the NSE were examined. It was established that most companies consider internal controls as the most important audit objective and also is the task that takes highest proportion of internal audit time. The study as well found that all respondents strongly agreed that for internal audit to add value to governance process there should be good working relationship, independence, awareness, capacity and professionalism.

Key Words: Internal Audit, Corporate Governance, Nairobi Stock Exchange