Effect of Internal Control Environment and Internal Audit Function on Financial Performance of Insurance Companies in Kenya

Abstract

This study investigated the impact of the internal control environment and internal audit function on the financial performance of insurance companies in Kenya. A total of 58 insurance companies were selected, and the study adopted both correlational and descriptive research designs. Data analysis was conducted using multiple regression to examine the relationship between the variables. The findings revealed that a strong internal control environment, alongside an effective internal audit function, significantly contributes to improved financial performance in the insurance sector. The study concludes that robust internal control environment and internal audit function are essential for enhancing accountability, risk management, and operational efficiency. The study recommends that insurance companies establish dedicated government audit units. These units should work in close collaboration with internal audit departments to ensure seamless integration of government policies into internal control frameworks. This approach would strengthen regulatory compliance and support sustainable financial performance in the industry.

Keywords:       Internal Control Environments, Internal Audit Function, Financial Performance, Companies, Internal Control Systems