Internal audit and financial performance in Mbale district local governments

Abstract

The study was set up to examine the effect of internal audit on financial performance in Mbale district Local Governments case study Mbale.This study was guided by ―Theory of Performance‖ by Don Elger (2011). The study had three specific objectives notably; to find out the effect of financial reporting on financial performance in Mbale District Local Government, to establish the effect of risk detection on the financial performance of Mbale District Local Government, and to examine the effect of audit inspection on financial performance in Mbale District Local Government. The study employed a cross sectional research design that adopted both the qualitative and quantitative methods. The study population was 213 and sample size was 132 based on Krejcie and Morgan (1970) table for determining the sample size. The findings show that auditing activities are important in ensuring that there is improved financial performance in the district. The findings further reflect that financial reporting has a strong significant relationship with financial performance. The study findings also held that risk detection is important in helping to identify the risks, the causes and what corrective measures that management can undertake to avoid reoccurring of such incidents. The study outcomes further indicated that audit inspection is significant in deterring fraud, mischarge of expenditure and wasteful expenditure in the district. Therefore internal auditing should be encouraged at the district in order to enhance effective utilization of resources in order to further financial performance. Furthermore emphasis should be placed on those preventive measures to mitigate the risks and losses caused by risks like fraud and other forms of financial mismanagement. A risk-management strategy and well-drafted economic-crime prevention policies should be put in place to provide a vital platform for the district to prevent and detect financial risks, whilst adequate staff training is required. Management can as well setup a confidential whistle – blowing process as these provide some of the more successful means for the detection of risks. The study therefore recommends that there is need for all departments to provide reports on all the activities undertaken in a particular period of time. Such reports should cover dimensions such as financial reports, strategy implementation reports, variance reports, internal controls in place. This enforces effective accountability of the Local Governments to the relevant stakeholders thus leading to transparency in allocation of finance and finally improving financial performance in the district.