Institutional Constraints And Effectiveness Of Internal Auditors In County Governments, A Case Of Isiolo County, Kenya

Despite the existence of legal and institutional framework of internal auditing in Isiolo county government, there has been increasing trend of misappropriation of taxpayer money as pointed out in the Auditor General Audit reports. Although it is not documented to have a county with zero cases of misappropriation of public fund, the increasing trend of financial impropriety in Isiolo County over the past three years poses a great risk of the county government not achieving its objectives unless mitigating measures are put in place. The objectives guiding this study are to determine the effect of internal auditor’s independence, existing internal control systems, internal auditor’s competence and top management support on the effectiveness of internal auditors. The theoretical reviews supporting the variables of this study are agency theory and stewardship theory. The study adopted descriptive research design. The entire target population consists of 90 staff. Stratified sampling techniques was adopted where the population was classified into five stratum comprising of internal auditors, accountants, AIE holders, Finance officers and revenue officers. The target population included other stakeholders who comprise the primary consumer of the audit report. From each stratum simple random sampling techniques was adopted to select respondents from each stratum making the entire sample to be 40 staff. Questionnaires were administered to collect primary data from the respondents. The collected data was edited, classified, coded and analyzed. The data was analyzed using statistical package for social science (SPSS) version 23. The results were presented in the form of tables. The study found internal auditors in the county to be ineffective in discharging their mandate. The study revealed that the independence of internal auditors in the county is weak due to poor reporting structure, restricted access to records, lack of freedom to determine assignment and lack of operational audit committee. Internal controls such as accurate and complete documentation, automated systems and staff rotations were also very weak. The competency of internal auditors in the county was also wanting; as the staff mix did not have necessary skills, neither do they have proper programs for continuous professional development in place. The study also revealed that top management in the county did not fully support internal audit function by allocating adequate resource to the function, acting upon audit recommendation and ensuring adequate internal audit staff. The study established a statistically significant positive relationship between internal auditor’s independence, existing internal controls systems, internal auditor’s competence, top management support and effectiveness of internal auditors. The study recommends Isiolo county government to enhance independence of internal auditors, improve existing internal control systems, enhance competence of internal auditors through continuous professional development, capacity building and information technology training and management to fully support audit function. The study suggested further research to be conducted on Institutional Constraints and Effectiveness of internal auditors in the National government ministries and private sector, Kenya.