Effect of risk based audit on financial performance of deposit taking microfinance institutions in Kenya

Abstract

The purpose of the study is to trace theeffect of risk-based audit on financial performance of DTMFIs in Kenya. Correlation research design was adopted in the investigation in which quantity data was collected and analysed in order to describe the specific phenomenon in its current trends, current events and linkages between different factors at the current time. The population of 6 deposit taking Microfinance is small therefore the study carried out a census survey of all the Microfinance Deposit Taking Institutions in Kenya. Primary data was collected through a questionnaire which was quantitative in nature.A total of 36 credit officers, branch managers and operation manager auditors at the six Deposit taking microfinance Institutions in Kenya were asked to respond to a questionnaire. Inferential statistic regression and correlation was used to establish the effect of risk based audit on financial performance of DTMFIs. The findings show that there is a positive effect ofRisk Based Audit on financial performance of Deposit Taking Microfinance Institutions in Kenya. The study concluded that risk based audit practices adoption enables detection of risks on time and concentrate on high risk areas, hence enhancing financial performance.The study recommends that management in deposit taking microfinance institutions in Kenyashould 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 financial performance.