Effect Of External Audit Outcomes On Financial Performance Of County Government Of Nakuru, Kenya

Abstract

The County Government of Nakuru has been facing diverse financial performance related challenges. These challenges include under collection in the local revenue for the 2014/2015 by 24% due to county government failure to update valuation, and overspending on the employees’ wages and remuneration with expenditure amongst other aspects. The objective of this study was to determine the effect of external audit outcomes on financial performance of county governments with a focus on Nakuru County. The study adopted a descriptive survey research design where senior and middle level management staffs in the finance department were targeted. 80 employees in the County Government of Nakuru were sampled through the census method. Structured questionnaires were used for data collection and their validity checked using content validity index, while Cronbach alpha coefficient of 0.7 was established as the reliability test. The study used frequencies as descriptive statistics while the Fisher’s exact test, correlation analysis and regression analysis were used as the inferential statistics to examine the relationship between external audits outcomes and financial performance of County Government of Nakuru. The study found that external audit outcomes positively influence the financial performance of County government of Nakuru. The study thus recommended that the finance department of the County Government of Nakuru continually provide training to its officials to ensure that best practices in audit are embraced. The department should also encourage implementation of good financial management systems including internal control systems so that there are well maintained records and accounts which are readily available when information and explanations by external auditors are requested.