Internal Control Systems and Financial Performance of Companies Listed in Nairobi Securities Exchange

Abstract

Internal control systems involve various methods and measures taken by the organization to safeguard assets, check the accuracy of the financial reports, execute the managerial policies and enhance operational efficiency in order to achieve their financial objectives. The study sought to determine how internal control systems influence the financial performance of Nairobi Securities Exchange (NSE) listed companies in Kenya. Specifically, the study sought to determine the effect of risk assessment, internal control environment and internal control of information systems on financial performance of the listed companies in NSE. The study adopted descriptive research design. The target population comprised 63 listed companies in NSE as at 31st March 2023. A sample of 39 companies was drawn from the target population using stratified random sampling technique. The study used primary data collected using structured questionnaires. Data analysis was carried out using descriptive and inferential statistical techniques. Results were presented using tables and charts. The study found that all the internal control systems considered in the study had a positive and significant influence on the financial performance of the listed companies in NSE. The study recommended the need for the management to determine and implement the optimal combination of effective and efficient internal control mechanisms in order to improve performance of these firms.