Effects of External Auditing on Financial Performance of Savings and Credit Cooperative Societies: A Case Study of Mombasa County

Abstract

Audit attempts to ascertain how far the financial statements present a true and fair view of the concern by ensuring that the books of accounts are properly maintained by the concern as required by law, an external audit conflict of interest is less likely to happen in Sacco's than when an internal audit occurs. The 2008 Sacco Act lays down the guidelines for external audit for SACCOs in Kenya which includes matters of submission of accounts, the requirements for external auditors, reporting, appointment and removal and even the display of the accounts in the SACCO. Kenya has over 13000 registered Sacco's which contribute to over 45% of Nation's GDP, due to their social economic value of Sacco's and the associated poor performance, there was need to assess the effects of external auditing on their performance, the overall objective of the study was to determine  the effects of external auditing on performance of Sacco's, it was be guided by the following objectives: Determining the role of management Audit in performance of Sacco's, Investigating the role of internal control Audit on Sacco's performance and determining the effect of information technology audit to performance of in Sacco's. The study employed descriptive research design because the research objective was to provide systematic description that is as factual and as accurate as possible. The target population was 33Chief Accountants; a Sample size of 30 respondents was selected using the formula by Glenn (2012). A representative sample size was selected using simple stratified random sampling and Data was collected using Questionnaires which were administered to the respondent's and analysed using Multiple regression model so as to determine whether the sets of independent variables together predict the dependent variable. The refined quantitative data was analysed using statistical package for social sciences version 17.0 and data was presented using percentages and frequency tables. The study found out that external Information System Audit had highest influence on performance of Sacco's followed by External Management Audit, this was largely attributed to possibility that shareholders are interested on evaluation of Sacco's by a third independent institution on its cores areas of operation such as IT and management quality. The study recommends that Sacco's should equip themselves with knowledge on external audit so as to shield the Sacco's from poor management of their resources. The study further recommends that Sacco's should have a reference bureau were they can share information with other financial institutions so as to help them manage their savings well.