The impact of risk based audit on financial performance in Commercial Banks in Kenya

Abstract

The financial performance requires appropriate risk based audit practices hence effective and efficient internal audit. For the purpose of this study the researcher sought to determine the impact of risk-based audit on financial performance in commercial banks in Kenya. This study adopted Correlation research design for it describes the specific phenomenon in its current trends, current events and linkages between different factors at the current time. The target population for the study constituted of 44 respondents who were finance officers, internal auditors, the credit officers, relationship officers/managers and accountants at commercial banks in Kenya. The study administered questionnaires which included structured and unstructured questions to all the respondents since it was the most appropriate tool to gather information. Descriptive statistics such as mean, standard deviation and frequency distribution were used to analyze the data. Data presentation was done by the use of pie charts and tables for ease of understanding and interpretation. From the findings, the study concludes that risk based auditing through risk assessment, risk management, annual risk based planning, internal auditing standards and internal auditing staffing should be enhanced. This would enable the firm to be able to detect risks on time and concentrate on high risk areas leading to increased transparency and accountability, hence enhancing financial perfomance. Proper planning improves efficiency, accuracy, completeness, timeliness, convenience and clarity. Credible audit reports, auditor independence to identify and rectify audit errors, effective implementation of audit recommendations, financial management and compliance with accepted audit standards, effective internal audit staff and independent audit committee influence financial perfomance in commercial banks. From the findings, the study recommends that management in commercial banks in Kenya should adopt effective risk based audit practices such as risk assessment, risk management, annual risk based planning, internal auditing standards and internal auditing staffing to enhance effective and efficient financial performance.