Relationship between Internal Control Systems and Effective Management of Small and Medium Size Enterprises in Uasin Gishu County, Kenya

Abstract

This study sought to examine the effectiveness of internal control systems among the small and medium size enterprises in Uasin Gishu County, Kenya. A cross sectional descriptive survey design was used. Data was gathered using a self-administered structured questionnaire. The study was carried out using simple random sampling to get 120 respondents among list of all the SMEs in Eldoret Municipality. Data from the research instruments were analyzed using Statistical Package for Social Scientists. Analysis output included; Descriptive statistics (means, standard deviation, frequencies, percentages and factor analysis), and inferential statistics (correlations, and regressions). The findings of the research enabled the emergence of a theory grounded in the collected data. Indeed, the major features of an effective internal control system applicable for SMEs are found to be sound effective environment, risk assessment process, operational control activities, information and communication system, effective monitoring and evaluation system. All the constructs of Internal Control Systems (Control Environment, Control Activities, Risk Assessment, Information and Communication and Monitoring) have a significant positive relationship with the operations of SMEs in Eldoret Municipality. This implies that the more effective the ICS, the more the ICS are adhered to, the high the chances that SMEs will achieve their objectives. The study highlights the importance of having a sound standardized internal control system in SMEs and its major roles. The research emphasizes on the fact that lack of proper understanding of the value of effective internal control in SMEs usually leads to inefficient system of internal control in SMEs. This study is believed to contribute to the effort of implementing effective internal control systems in Eldoret Municipality SMEs