Relationship between Internal Auditors’ Professional Conduct and Financial Performance of Money Transfer Companies in Kampala Uganda

Relationship between Internal Auditors’ Professional Conduct and Financial Performance of Money Transfer Companies in Kampala Uganda

Abdifatah Suleiman Awil

Department of Accounting and Finance, Islamic University in Uganda, Kampala, Uganda

DOI: https://dx.doi.org/10.47772/IJRISS.2025.908000343

Received: 07 August 2025; Accepted: 14 August 2025; Published: 10 September 2025

ABSTRACT

The study was conducted to examine the relationship between internal auditors’ professional conduct and financial performance. It was guided by three specific objectives; To examine the relationship between internal auditors’ professional independence, competence, integrity and financial performance. A correlational research design was adopted. The study population was composed of 75 individuals from three different money transfers in Uganda. All these were selected using a census inquiry. Closed ended questionnaires were used to collect the data which was quantitative in nature. Data collected was entered into the (SPSS). Out of the 75 questionnaires that were distributed, 73 questionnaires were fully completed. This translates to a response rate of 97.3%. The results indicated that; there is a statistically significant positive relationship between internal auditors’ professional independence, competence, integrity and financial performance (r = .465, Sig. Value < 0.05), (r = .395, Sig. Value < 0.05) (r = .415, Sig. Value < 0.05) respectively. A regression analysis was also carried out and it revealed that independence is the most significant predictor variable to financial performance. Its relationship with financial performance (R) is 0.465; its effect on the sample (R square) is 0.216 while its effect on the total population (Adjusted R Square) is 0.205. Owing to the findings of the study, it was recommended that management of money transfer companies should start regularly rotating its internal auditors among different branches. Management should also stop the practice of involving internal auditors in non-audit service and should make efforts to increase the competence of their internal auditors.

Keywords: Internal auditors’ professional conduct, independence, competence, integrity, and financial performance.

INTRODUCTION

Background to the Study

It is widely accepted that internal auditors’ professional conduct based on independence, competence and integrity adds value to an organization and generally leads to an improvement in financial performance or an organization (IIA, 2010). Internal auditors’ professional conduct refers to a number of basic principles which internal auditors are expected to uphold while conducting their auditing work (Odia, 2014). According to INTOSAI (2013), the key principles of auditors’ professional conduct are independence, integrity and professional competence. These principles are important for internal auditors for two reasons. First, internal auditors are frequently faced with ethical dilemmas which can challenge their standards (Thompson, 2003). They may face situations which require them to speak out and this is not always easy, particularly when pressure is being exerted by senior management to “go with the flow” and not to “make waves” (Thompson, 2003). Second, with the current emphasis on corporate governance, it is becoming increasingly recognized that internal auditors can play a key role in strengthening business ethics and corporate integrity all of which have a contribution towards financial performance of a company (Moeller, 2004).

Financial performance is the extent to which objectives of the firm and in this case financial objectives will be met or have been meet (Yahaya & Lamidi, 2015). Financial performance can also refer to the general well-being of a firm as far as finance is concerned over a certain period of time (Yahaya & Lamidi, 2015). Financial performance focuses more items that affect the financial statements or reports of a firm directly.

Statement of the Problem

Adherence to internal auditors’ professional conduct is considered to play a crucial role in not only providing reliable, objective, and neutral service to company management, but also in enhancing company growth, return on investments and general financial performance of a company (Ljubisavljević & Jovanovi, 2011).

In response to the foregoing, management of money transfer companies in Kampala Uganda endeavors to employ internal auditors who are independent, competent and act with high degree of integrity to ensure that the operations at the companies are carried out efficiently and effectively to enhance its financial performance.

However, statistics available show that this is far from being achieved as the company has for years been facing a problem of poor financial performance. The problem of poor financial performance has been there for over three years since 2015 when the money transfer Audit Report (FY 2016/17) revealed that the companies made a financial loss of over 36 million shillings resulting from fraudulent actions of top managers. The same problems were also faced in 2016 when over 11.5 million shillings could not be accounted for by the officers in charge. In the last six months of 2018, the company faced severe liquidity challenges and even failed to clear most of its financial obligations like payment of utility bills, workers’ salaries and rent arrears which went up to a tune of 86.2 million shillings by close of December 2018 (Audit Report, FY  2018/19). What puzzles the researcher is that the companies have for all these years continued to face financial frauds and poor financial performance even when it has full time professional internal auditors who are expected to detect and prevent fraud and at the same time give advice to management on how to improve the financial performance of the companies. The study therefore sought to examine whether there was any statistically significant relationship between internal auditors’ professional conduct and financial performance of money transfer companies in Kampala Uganda.

Specific objectives of the study

The specific objectives of the study were as follows;

To examine the relationship between internal auditors’ professional independence and financial performance of money transfer companies in Kampala Uganda.

To examine the relationship between internal auditors’ professional competence and financial performance of money transfer companies in Kampala Uganda.

To examine the relationship between internal auditors’ professional integrity and financial performance of money transfer companies in Kampala Uganda.

REVIEW OF LITERATURE

Theoretical Review

Internal auditors’ professional conduct

Every profession considers the development and application of a professional conduct as a means of maintaining acceptable professional standards among its members (Hinds, 2005). A professional conduct sets out the standards of professional and personal conduct and professional competence that the profession expects from its members (King,2008). Just like all other professions, the auditing profession has a code of conduct which is designed to promote an ethical culture within internal auditing (IIA, 2006). The code of conduct consists of a number of basic principles which internal auditors are expected to uphold. These principles are considered to be essential premises for independent and effective internal auditing that promotes accountability (Odia, 2014).

According to INTOSAI (2013), the key principles of auditors’ professional conduct are independence, integrity and professional competence. These principles are important for internal auditors for two reasons. First, internal auditors are frequently faced with ethical dilemmas which can challenge their standards (Thompson, 2003). They may face situations which require them to speak out (Barrier, 2003) and this is not always easy, particularly when pressure is being exerted by senior management to “go with the flow” and not to “make waves” (Thompson, 2003). Second, with the current emphasis on corporate governance, it is becoming increasingly recognized that internal auditors can play a key role in strengthening business ethics and corporate integrity (Moeller, 2004).

Financial performance

Financial performance is the extent to which objectives of the firm and in this case financial objectives will be met or have been meet (Yahaya&Lamidi, 2015). Financial performance can also refer to the general well-being of a firm as far as finance is concerned over a certain period of time (Yahaya&Lamidi, 2015). Financial performance focuses more items that affect the financial statements or reports of a firm directly. The financial performance is a crucial indicator or measure of some economic units’ success for example on achievement of set goals and objectives (Xu &Wanrapee, 2014). Firms stakeholders are mostly interested in the firm’s performance as far as finance is concerned (Nyamita, 2014).  Financial performance of a firm has several major characteristics, potentials of the business, defines competitiveness, economic intents of the company’s leadership and reliability of present or future contractors (Dufera, 2010). The financial performance analysis can deal with items such as dividend growth, sales turnover, capital employed, asset base among others about the firm (Omondi&Muturi, 2013). In the current study, indicators of financial performance will include levels of Accountability, Profitability and Liquidity.

Internal auditors’ professional conduct and financial performance

A number of studies have been conducted all over the world to indicate the positive contribution of internal auditors’ professional conduct on financial performance of organisations. For instance, Awdat (2015) conducted a study on the relationship between internal auditors’ professional conduct in terms of adherence to professional standards and professional skills and financial performance of commercial banks operating in Jordan. The results indicated that there is a statistically significant positive relationship between internal auditors’ professional conduct and financial performance of commercial banks operating in Jordan.

Farouk and Hassan (2014) conducted a study in Nigeria on the impact of auditors’ professional conduct (professional independence) on financial performance of quoted cement firms in Nigeria. The study indicated that auditors’ professional conduct (professional independence) have significant impacts on the financial performance of quoted cement firms in Nigeria. The study recommended that management of quoted cement firms in Nigeria should employ the services of audit firms whose character and integrity is beyond question.

Wangithi, Mungai and Ngungu (2016) conducted a study in Kenya on the influence of auditors’ professional conduct / independence on financial performance of Water and Sanitation Company in Kirinyaga County. The results of the study revealed that there is a positive relationship between auditor’s professional conduct / independence and financial performance which implies that increased adherence to auditor’s professional conduct / independence leads to an improvement in financial performance of an organisation.

Nafuna (2014) conducted a study in Uganda. One of its objectives was to examine how internal auditor’s professional conduct in terms of independence affects financial performance of Uganda Revenue Authority. The study indicated that internal auditor’s professional independence results into an improvement in financial performance, as process loopholes could independently be reported and the solutions to process improvements suggested.

Internal auditors’ professional independence

Independence relates to internal auditors’ ability to undertake audits without any form of impediments and in a manner that is free of all forms of bias (Institute of Internal Auditors, 2012). Cameran et al. (2005) stated that independence in fact portrays a state of mind that relates to integrity, objectivity and professional judgment, while Raiborn et al.(2006) conclude that the independence in appearance represents the external impression by the public about the auditor. Chia-Ah and Karlsson (2010) also states that independence can be of two forms; independence of mind and independence in appearance. Independence of mind requires the auditor to have a state of mind that permits the provision of opinion without being affected by influences that compromise professional judgement, allowing an individual to act with integrity and exercise objectivity and professional skepticism. Independence in appearance requires the auditor to avoid situations that will cause others to conclude that they are not maintaining an unbiased attitude objective of mind (Farouk & Hassan, 2014).

Internal auditors’ professional independence and financial performance

Internal auditor’s independence is a crucial element in portraying the function as effective and allows the execution of their roles in a manner that enable the organization to achieve its objectives (Christopher, Sarens, & Leung, 2009). Chia-Ah and Karlsson (2010), opines that the threats to independence are often very significant and thus undermine the auditor’s effectiveness in rendering the auditing services. Delai and Omri (2016) stressed that to be effective, internal auditors should have unlimited access to organizational personnel, records, departments and senior management. The findings also agree with the Chartered Institute of Internal Auditors (2017) which stressed those internal auditors should operate freely from obstruction and interference if they are carry out their duties effectively. The guidelines issued by the Basel Committee on Banking Supervision (2012) also indicated that it is a sound practice, whenever practicable and without jeopardizing competence and expertise, to periodically rotate internal audit staff. This is because a continuous performance similar tasks or routine jobs may negatively affect an individual internal auditor’s capacity for critical judgment because of possible loss of objectivity.

Canning and Gwilliam (2010) stressed that internal auditors should not be involved in provision of non-audit activities since perception of their independence and therefore their effectiveness diminishes significantly on account of provision of non audit services like engaging in recruitment of employees, providing customer care services to clients and or engaging in tasks meant for other employees like working as tellers in a financial institution. Kamotho (2014) also argues that performance of non-audit services by internal auditors erodes and impairs their independence and objectivity and is a recipe for familiarity and self review threats to independence. George, Konstantinos and Theofanis (2015) also argued that for minimum, chief internal auditors should be at a position that has adequate authority to promote their independence, to ensure wide functional scope, sufficient thought on engagement communications and sufficient action on audit recommendations.

Cohen and Sayag, (2010) stated that IA independence reduces misunderstanding and conflict of interest in the managerial operations. Even though internal auditors are part of the management and equally expected to evaluate the activities of entire management, the required organizational independence allow them to function efficiently to the overall performance of the organization. Chie and Karlsson, (2010) on the other hand opines that threats to auditor’s independence undermine the auditors’ effectives in executing their responsibilities. This is supported by Ahmad and Tylor, (2009) were they stated that the fundamental positioning of internal auditor’s role results to a challenges in their effort to function independently. Internal auditor’s responsibilities were seen as oversight activities which involved monitoring and evaluation of organizational operations. It is considered to be instrumental in guiding and evaluating the performance of an organization (Christopher, 2015).

The internal auditor’s ability to exercise their responsibilities with a certain degree of independence was very critical to the profession and this challenge is typically the requirement by the corporate governance codes which indicated that IA should channel their report functionally to the audit committee (AC) of the board or council and administratively to the chief executive officer (CEO) (Ahmad and Tylor, 2009). This unique role of assurance services to organization and consultancy services to top management placed IA in a conflict situation since in the long run the internal auditors may develop personal relationships with management of the organisation (Stewart and Subramaniam, 2010). Woodland and Reynolds (2003) examined the association between indirect measures of audit quality and financial statement analysis using multivariate regression analysis. They found that audit fees is positively associated with financial statements but do not find evidence that auditor size, tenure or industry specialization are associated with audit quality in the directions predicted. Their results provide new evidence as to the current usefulness of these indirect measures in predicting audit quality.

In an empirical examination conducted by Mihret, et al, (2010) on “the antecedent and organizational performance implication of internal audit effectiveness: some proposition and research agenda” found that internal auditor’s independence and organizational performance has significant relationship. Abu–Azza, (2012) equally indicated a positive relationship between IA independence and organizational performance in the study conducted on perceived effectiveness of IA in Liberian public institutions. Qualitative approach through the use of institutional and matrix theories were employed. Faruk& Hassan, (2014) study on impact of IAQ and financial performance of quoted cement companies by Nigerian stock exchange, shows a significant relationship between IA independence and financial performance after applying multiple regression analysis. The findings agree with Mwiti, Walubuka & Gichana (2019) who indicated that , if they are to have a significant positive contribution towards financial performance of the firm, internal auditors ought to be independence of management  influence. Moreover limited or minimal internal auditors’ independence negatively influences financial performance of a financial intuitional (Mwiti, Walubuka & Gichana,2019)

Internal auditors’ professional competence

Attribute Standard 1200 IIA (2004), the International Standards for the Professional Practice of Internal Auditing, states that “The assignment should be carried out with due regard to expertise and professional rigor.” The expertise and due professional care every internal auditor is an essential for the proper functioning of the internal audit function. Therefore, due professional care should consider the nature, role and capacity of auditor in gathering information, testing, evaluation and communication, as well as competent to examine all areas of the company’s operations (IIA, 2004). Boynton et al (2006) states that the competence of auditors is determined by three (3) factors items, namely: 1) formal education at university to enter the accounting profession; 2) Training practices and experiences in the field of auditing; 3) Following continuous professional education for the auditor’s professional career. According to He (2015), auditors need to have technical competence which is often achieved through the acquisition of professional qualification and training like ACCA.

Sukrisno, Agoes and CenikArdana (2009) states that competence means the skill and ability to perform a job or profession. A competent person means a person who can do his job with good quality results. In broad terms, the competence includes the mastery of science / knowledge (knowledge) and skills (skills) are insufficient, and have attitudes and behavior (attitude) that is suitable in carrying out the job / profession. But too often the concept of competence is meant in a more narrow sense, that is only associated with the knowledge and skills without considering the attitude and behavior. Azhar Susanto (2007) states that competence means that employees have the knowledge and expertise to perform their duties. Cheng et al (2002) suggest competence is someone who has the knowledge (education, skills and experience) and attitudes and ethical behavior in the work. Such expertise contributes to the ability of the auditors to perform the systematic and discipline audit approach to improve the effectiveness of internal auditing (Zulkifli et al., 2014).

Internal auditors’ professional competence and financial performance

Makhijani (2009) cited in Yosep (2016) stated that competence is proven to encourage personal characteristics that are superior job performance and establish a causal link between certain behaviors and achieve success. On the overall, an auditor shall have the competence and the obligation to maintain professional knowledge and skills on an ongoing basis. With that expected of an auditor can provide better services and the corresponding expectations of users of audited financial statements. The Chartered Institute of Internal Auditors (2017) which emphasizes the need for internal auditors to have adequate knowledge of the risks faced by their organization. According to them, an internal auditor’s knowledge of the management of risk enables him or her to act as a consultant providing advice and acting as a catalyst for improvement in an organization’s practices. So, for example if a line manager is concerned about a particular area of responsibility, working with the internal auditor could help to identify improvements. Or perhaps a major new project is being undertaken – the internal auditor can help to ensure that project risks are clearly identified and assessed with action taken to manage them.

Konrath (2002), states that the examination can be done well, implementing checks should be someone who has the education, experience and expertise in the field of accounting and auditing. An auditor must have certain qualifications to understand the criteria used and must be competent, in order to determine the type and amount of evidence that must be collected to reach the proper conclusion after the evidence is complete audit tested. Thus, companies need to determine the level of competence required for the various work tasks and translate those needs to a level that requires the knowledge and skills (Moeller, 2011).

According to Al Twaijri, Brierly and Gwilian (2003), an audit must be carried out by a professional staff that has the necessary education, training, experience and professional qualifications to conduct the full range of audits required by its mandate. Ma’ayan and Carmeli (2016) in their research mention that auditor capacity comprises professional skills, economic resources and behavior toward auditees. Cohen and Sayag (2010) stated that greater professional proficiency on the part of the internal auditors will be related to greater auditing effectiveness.  Hutchinson and Zain, (2009) in their study on internal audit experience and qualification; and firm performance from Malaysia indicated significant relationship between qualification of IA and firm performance after employing multiple regression analysis to test the data obtained from 60 listed firms in Malaysia.

In an empirical examination of determinant of internal audit effectiveness – internal audit qualification, experience and professional proficiency, Cohen and Sayag, (2010) conducted their studies in Israel organizations to examine data collected from 108 Israel organizations. The result of the study using correlation and regression analysis indicated significant relationship of IA competency with organizational performance. Although, the model used in their analysis combined both private and public organization, the regression analysis shows that the positive relationship is more on private organization because of their sensitivity in implementing internal auditing standards. Studies in internal audit competency and organizational performance are limited and generally concentrate on private firms (Al-Matari et al, 2014).

In similar studies (Chi, et al, 2010; Gaballa and Ning, 2011) indicated that IA competency has strong relationship with firm performance. To this effect, IA competency will be employ to examine its relationship with organizational performance in public institutions with particular reference to Nigerian federal universities. This is supported from the result of the findings of Muluqeta&Gebrehiwot (2008) where they indicated that lack of qualified, experience and professional audit staff as one of the factors hindering IA effectiveness. They suggested that internal audit should have sufficient educational qualification and adequate continuous professional development programme to enable them upgrade their skills and knowledge to meet organizational expectations. Hutchinson and Zain (2009) also indicated that it is important to use experienced internal auditors since there is a significant positive relationship between experience of internal auditors and firm performance. The use of auditors that have adequate experience in audit work is also supported by Prawitt, Smith and Wood (2009) showed that a positive relationship exists between experience of internal audit and earning management of the firm.

Previous researchers like Al-Nofaie (2003); Mulgan (2003); Ferguson and Rafuse (2004) emphasized the importance of having multidisciplinary auditors. According to Al-Nofaie (2003), it is crucial for auditors to be familiar with other disciplines besides accounting and management. Other disciplines may include computer science, economics, research methodology, social science, public policy analysis, law, engineering, agriculture and pharmacology (Al-Nofaie 2003).Alzeban and Gwilliams, (2014) conducted a survey study in Saudi Arabian public sector. I the study, competency of internal audit with four variables of educational qualification, professional certificates, work experience in the field of internal IA job and continuous training and other staff developmental programmes were considered. The result of their finding indicated competency and IA effectiveness have positive relationship, which in turn leads to organizational performance.

Mihret et al, (2010); and Alzeban&Sawan, (2013) have found that competency of IA have a significant and positive relationship with IAQ which in turn have significant impact on organizational performance. That means, the need to ensure internal auditor possessed required qualification, skills and adequate knowledge to execute their responsibilities more effectively is quite imperative. Moreover, the more competent the internal audit, the more likely the function can assess factors which indicate management bias or risks of opportunism and serve as safeguards to mitigate the threat (Prawitt et al., 2009).

Internal auditors’ professional integrity

The increasing number of corporate fraud cases has put more pressure on auditors to improve their levels of integrity (Petrick& Scherer 2003). According to Funnell (1996), integrity is the ability of auditors to carry out their work in an honest manner. He looked at integrity as the staunch observance of accepted standards of honesty which must underlie all professional decisions and actions. Mutchler (2003) also consider integrity as effectively analysing relevant and sufficient evidential matter and honestly reporting results to the appropriate parties without the auditor’s judgment being skewed. That is, whether internal auditors are able to analyse information in an objective manner and form judgments that are free of bias.

To keep confidence in the auditor by the public opinion, the auditor must perform all the professional responsibilities with the utmost integrity (Arens&Loebbecke, 2000). The ethical criteria require integrity in winning customers, maintaining the dignity of the profession in addition to the cooperation with his colleagues in all matters (Mohamed, 2011). At the completion of the professional work, the auditor must be objective, free of conflicts of interest, and his professional judgment is not influenced by others (Messier et al, 2006). Stewart &Subramaniam (2010) stressed that if internal audit reporting is to play its role in accomplishing organizational objectives, it must be objective, factual and unbiased. Holt and DeZoort (2009) further stressed that since internal auditors are expected to check all the organizational controls and report on them, objectivity in the reporting should not be compromised.

Internal auditors’ professional integrity and financial performance

The value of audits is weakened when their integrity is questionable (Jamal, Chen, and Luo 2014). Stakeholder’s confidence in the independence of auditors is also strongly linked to their confidence in an auditor’s ability to challenge management; unfortunately, this function does not seem to be one much expected of auditors (FRC, 2015). Maiyo (2017) even stressed that it is important to conduct periodic reviews on the performance and conduct of internal auditors to keep them in compliance with the Auditing Standards. Such reviews can also facilitate the transformation of an internal audit department into a more strategic business partner and value-added activity (Maiyo, 2017).

Tandon, Sudharsanam & Sundharabahu (2007) also indicated that audit reporting can be effective if the report is supported by sufficient, appropriate, accurate and reliable evidence. He defines sufficient evidence as the quantum of audit evidence that is obtained (quantity of evidence), and appropriate evidence as relevant and reliable evidence (the quality of the evidence). He also defined accurate evidence as the capability of providing correct information that conforms exactly to fact and is performed with care and precision, while reliable evidence is the degree of the auditors’ confidence in checking the originality of audit evidence. Hutchinson and Zain (2009) also established that, among others, the function of the internal audit function is to investigate and assess the internal operations of the company and compile a comprehensive report that should have realistic recommendations to management on how to improve the effectiveness of the internal controls of the company.

In the code of ethics issued for government of Uganda internal auditors, integrity was mentioned as the core value of a Code of Ethics (Republic of Uganda, 2009). Internal auditors have a duty to adhere to the highest standards of behaviour (e.g. honesty and candidness) in the course of their work and in their relationships with the staff of audited entities. In order to sustain public confidence, the conduct of internal auditors should be above suspicion and reproach (Republic of Uganda, 2009). Integrity can be measured in terms of what is right and just. Integrity requires internal auditors to observe both the form and the spirit of auditing and ethical standards. Integrity also requires internal auditors to observe the principles of independence and objectivity, maintain irreproachable standards of professional conduct, make decisions with the public interest in mind, and apply absolute honesty in carrying out their work and in handling the resources of the internal audit (Republic of Uganda, 2009).

All internal auditors should demonstrate integrity in all aspects of their work. At all times the integrity and conduct of each internal auditor must be above reproach. The relationship with colleagues, internal clients and external contacts should be one of honesty, truthfulness and fairness. This establishes an environment of trust and confidence that provides the basis for reliance on all activities carried out by individual auditors and the internal audit team (CIPFA, 2006). Emasu (2010) notes that the effectiveness of Internal Audit Function partly depends on; legal and regulatory framework, placement of the function and its independence, existence of Audit Committees, resources allocated to the function and professionalism of Internal Audit staff. The auditor has to be honest and straight in all his professional relations; this requires that his name should not be linked to any distorted or misleading report or information or accounts prepared with negligence, incomplete or a kind of ambiguity leads to misleading (Thunaibat, 2010). It also includes integrity, honesty, fairness and trust (Dahdouh et al., 2012).

Integrity is the most important factor in an auditor’s budget decisions (Blaskovich and Mintchik 2007) and in evaluating engagement risk (Ethridge, Marsh, and Canfield 2005). Management attitude and reactions toward the audit could give auditors an idea about management’s level of integrity and could be a good indicator of fraud risk (Abdullatif 2013). Further, management staff who lack integrity are more apt to ignore policies and procedures to pursue their own self-interests. This practice increases the risk of fraud and abuse by management (Fuller and Jensen 2002).

A study conducted by Issa (2008) shows that there is positive relation between the performance auditor control, the independence, objectivity and integrity of auditors and the habilitation, skills and quality of the auditor. Farouk and Hassan (2014) also indicated that to improve financial performance, company management should employ auditors whose character and integrity is beyond question.

Theoretical Review

Agency theory

This study was based on the agency theory. Sarens and Abdolmohammadi (2007), states that according to the agency theory, a company consists of a set of linked contracts between the owners of economic resources (the principals) and managers (the agents) who are charged with using and controlling these resources. Jensen and Meckling (1976), states that in agency theory, agents have more information than principals and this information asymmetry adversely affects the principals’ ability to monitor whether or not their interests are being properly served by the agents. Sarens and Abdolmohhamadi (2007), opines that an assumption of agency theory is that principals and agents act rationally and use contracting to maximize their wealth. A consequence of this is the moral hazard issue. Jensen and Meckling (1976) opine that moral hazard constitutes a situation where to maximize their own wealth; agents may face the dilemma of acting against the interests of their principals. Since principals do not have access to all available information at the time a decision is being made by an agent, they are unable to determine whether the agent’s actions are in the best interest of the firm. To reduce the likelihood of the moral hazard, principals engage in contracting to achieve optimality, including hiring internal auditors. Internal auditors help to ensure that the interests of the principles are protected. The current study was based on the assumption that, for the auditors to effectively uphold the interests of principals like improvement in financial performance of the companies, they must adhere to their professional conduct like professional independence, professional integrity and professional competence.

Research gaps

The above literature reveals that several studies have been conducted on the different elements of internal auditors’ professional conduct. Nevertheless, it appears that most of the previous studies focus on the effect of these elements on audit quality or organizational performance while paying little attention to assessing their effect on financial performance of organizations. Moreover, despite their earlier findings, the literature reviewed is reportedly done in developed countries with little focus on developing countries like Uganda where the current study will be conducted from. This lack of evidence on effect of internal auditors’ professional conduct on financial performance of organizations and Uganda in particular are the major gaps identified in previous researchers’ studies hence justifying the need for the current study.

Conceptual framework

Source: Developed with modifications basing on the work of Odia (2014) and INTOSAI (2013).

METHODOLOGY

This section presents the methodology that was adopted in the study. It describes the research design, study population, sample size and sampling technique and data collection instruments. It also includes measurement of reliability and validity of the various instruments, and the data analysis procedures to be employed in the study.

Research Design

The researcher used a correlational research design in the course of the study. This design is deemed appropriate since the study sought to examine the relationship between elements of internal auditors’ professional conduct and financial performance. According to Osebgo & Ifeakor (2011), the extent of relationship or association between two or more variables can be obtained through a statistical procedure known as correlational research design.

A quantitative methodology was adopted. This is based on Ahmad & Usop (2011) who noted that a quantitative research methodology is the one used to validate the relationship between the variables and verifying the research hypotheses.

Study Population

According to Ngechu (2004), a population is a well-defined or set of people, elements, events or households that are being investigated. The study population was 75 individuals in money transfer companies. These include the branch managers in each of the braches who are 4 in total, section heads in each of the branches who are 10 in total and operations staff in each of the branch who are 61 in total.

Sample Size

According to Kothari (2004), a sample is a small group of the universe taken as the representative of a whole. Given their numbers as indicated in the foregoing subsection and to enhance population validity and eliminate sampling errors, all the 75 employees were selected to participate in this study. Table 1 below shows the structure of the population, sample size and sampling techniques

Table 1 :  showing the structure of the population, sample size and sampling techniques

Source: Money transfer companies, 2019

Sampling Techniques

Sampling techniques refer to the procedure a research uses to select the needed study sample (Kombo & Tromp, 2006). To enhance population validity and eliminate sampling errors, a census inquiry was used to select all the 75 employees. The justification for using a census enquiry is that it eliminates sampling bias (Maina & Kwasira, 2015).

Data Collection Instruments

The researcher used questionnaires as the study instruments. These are described below.

Questionnaire

The researcher prepared closed ended questionnaires and these were administered to all respondents in the study area. The questionnaires were preferred as a data collection instruments because of their ability to yield the most satisfactory range of reliable data (Blanche et al., 2006). Questionnaires are also advantageous because they save time on the part of the researcher and heighten the independence and accuracy of responses from respondents (Jwan, 2010). The questionnaires were composed of two sections. The first section gathered respondents’ demographic information while the second section was comprised of the variables under study. Likert-format items were presented with 5-point scales. Where SD=strongly disagree, D= disagree, N= neutral, A= agree, SA= strongly agree.

Data Quality control

This section presents the ways though which the researcher ensured validity and reliability of the instruments

Validity of the study instruments

Saunders et al., (2007) stated that, the validity of a questionnaire is concerned with the extent to which a questionnaire measures what it is designed to measure. In other words, validity determines the extent to which items actually reflects the construct they were designed to measure (Hair, Black, Babin & Anderson, 2010). Questions were discussed with the researcher’s supervisor and another expert in research who examined them in relation with the objectives of the study. Thereafter, a Content Validity Index was computed using the following formula

Content Validity Index (CVI) = No of items rated relevant

Total No of items in the instrument

Following guidance of the formula above, the researcher computed a CVI by dividing the number of items that were rated as relevant (23 items) with total number of items in the instrument (25 items). Consequently, a content validity index of 0.92 was obtained which indicates that the instrument was valid since items with validity co-efficient of at least 0.70 are accepted as valid in research (Oso et al., 2008).

Reliability of Instruments

Reliability is the extent to which a research instrument yields consistent results when it is administered again at different points in time (Sekaran, 2003). As suggested by Cooper and Schindler (2003) a pilot test should be conducted to test for reliability of research instruments. Consequently, the instruments were pilot-tested on a sample of 10 respondents in the study area. The results from the pilot test were entered in the SPSS and Cronbach‘s Alpha Coefficient test was computed. The results are as on Table 2.

Table 2:Reliability Statistics

According to results of the reliability statistics in table 2 above, the instrument used in generating study results was reliable since the Cronbach’s Alpha Coefficient was 0.852 which is above 0.5 which is the least recommended Coefficient in survey studies according to Amin (2005).

Data Analysis

Data collected was coded, sorted and then entered in a computer program known as Statistical Package for the Social Scientists (SPSS) Version 20.0 for analysis. This program was used to generate descriptive and inferential statistics like Pearson’s Correlation analysis. Pearson’s correlation coefficients were used to determine the relationship between the variables. Pearson’s correlation was selected because the study involved examining the relationship between the variables (Oso & Onen 2008). Multiple regression analysis was also used to establish the most significant predictor variable among the three elements of the internal auditors’ professional conduct.

DATA PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS

The data presented and discussed includes the response rate, background characteristics of respondents as well as descriptive and inferential statistical an alysis of the study objectives.

Response Rate

A total of 75 respondents were selected for the study and hence 75 questionnaires were distributed to them. Out of the 75 questionnaires that were distributed, 73 questionnaires were fully completed. This translates to a response rate of 97.3% which the researcher considered adequate for analysis. According to Cooper and Schindler (2003), a response rate of between 30% and 80% of the total sample size is sufficient for use in making generalizations about the entire population.

Demographic Characteristics of the Respondents

The section presents results generated on demographic characteristics of the respondents such as gender, age, and level of education of the respondents.

Table 3: Gender of respondents

From the above Table 3, the number of male respondents was 43 (58.9%) while that of female respondents was 30 (41.1%). This suggests existence of both male and female employees in money transfer companies. Existence of both male and female employees suggests that monry transfer companies indeed embraced gender diversity which has been cited by many previous researchers as one of the key factors that affect firm’s long-term and short-term financial value (Fidanoski, et al., 2014; Dankwano & Hassan, 2018)

Table 4:  Gender of respondents

As far as age of the respondents is concerned, results presented in Table 4 above indicate that respondents in the age bracket of 20 – 29 years were 32 (43.8%). Those in the age racket of 30 – 49 years were 27 (37.0%) while those between 50 years and above were 14 (19.2%). This suggests that money transfer companies employs people of various age groups a practice cited by many previous researchers as one of the strategies that can enhance performance of an organisation (Odhiambo et al., 2018; Darwin, 2015).

Table 5: Education level of respondents

In terms of education levels of the respondents, Table 5 above indicates that 12 (16.4%) of the respondents had diploma level education, 55 (75.3%) had bachelor’s degrees and 6 (8.2%) had masters degrees. On the overall, these results indicate that money transfer companies employs people of reasonable education levels. This agrees with Jaoko (2014) who supported the idea of employing employees with reasonable education levels since the success of an organization entirely depends on their performance, academic qualifications and skills.

Statistical results on the specific objectives of the study

In order to arrive at the major conclusions of the study, the researcher presents statistical analyses about the three specific objectives in the following sub-sections.

Objective One: to examine the relationship between internal auditors’ professional independence and financial performance

In this objective, the study sought to investigate whether there is any statistically significant relationship between internal auditors’ professional independence and financial performance. The results presented in descriptive frequency tables below indicate the level of respondents’ agreement or disagreement on statements concerning internal auditors’ professional independence in money transfer companies. Responses on each of the items were rated on a five-point Likert scale with SA representing strongly agree, A representing agree, N  representing not sure, D  representing disagree and SD representing strongly disagree.

Table 6: Money Transfer Companies internal auditors work with adequate independence from management influence

In Table 6 above, it is observed that 56 (76.7%) of the respondents disagreed and 17 (23.3%) agreed in response to the statement “Money transfer companies internal auditors work with adequate independence from management influence”. Since majority of the respondents disagreed to this statement, it indicates that money transfer companies internal auditors do not work with adequate independence from management influence. These findings disagree with Chie and Karlsson (2010) who supported the idea of having internal auditors who are independent of management influence since any threats to their independence undermine their effectives in executing their responsibilities. The findings also disagree with Mwiti, Walubuka & Gichana (2019) who indicated that, if they are to have a significant positive contribution towards financial performance of the firms, internal auditors ought to be independence of management influence. Moreover limited or minimal internal auditors’ independence negatively influences financial performance of a financial institution (Mwiti, Walubuka & Gichana, 2019).

Table 7:  Money Transfer Companies internal auditors have unlimited access to all the information they need to carry out their duties

In Table 7 above, it is observed that 2 (2.7%) of the respondents disagreed, 57 (78.1%) agreed and 14 (19.2%) strongly agreed in response to the statement that “money transfer companies internal auditors have unlimited access to all the information they need to carry out their duties”. Since majority of the respondents agreed to this statement, it indicates that money transfer companies internal auditors have unlimited access to all the information they need to carry out their duties. These findings agree with Delai and Omri (2016) cited in Kaboi, Kiragu & Kamau (2018) who stressed that to be effective, internal auditors should have unlimited access to organizational personnel, records, departments and senior management. The findings also agree with the Chartered Institute of Internal Auditors (2015) which stressed that internal auditors should operate freely from obstruction and interference if they are carry out their duties effectively.

Table 8: Money Transfer Companies internal auditors are regularly rotated among branches

In Table 8 above, it is observed that 52 (71.2%) of the respondents disagreed, 20 (27.4%) agreed and 1 (1.4%) strongly agreed in response to the statement that “money transfer companies internal auditors are regularly rotated among branches”. Since majority of the respondents disagreed to this statement, it indicates that money transfer companies internal auditors are rarely rotated among branches. These findings disagree with the guidelines issued by the Basel Committee on Banking Supervision (2012) which indicated that it is a sound practice, whenever practicable and without jeopardizing competence and expertise, to periodically rotate internal audit staff. This is because a continuous performance similar tasks or routine jobs may negatively affect an individual internal auditor’s capacity for critical judgment because of possible loss of objectivity.

Table 9 :  Money Transfer Companies internal auditors are not involved in provision of non-audit activities

In Table 9 above, it is observed that 8 (11.0%) of the respondents strongly disagreed, 50 (68.5%) disagreed and 15 (20.5%) agreed in response to the statement that “money transfer companies internal auditors are not involved in provision of non-audit activities”. Since majority of the respondents disagreed to this statement, it indicates that money transfer companies’ internal auditors are involved in provision of non-audit activities. These findings disagree with Canning and Gwilliam (2010) who stressed that internal auditors should not be involved in provision of non-audit activities since perception of their independence and therefore their effectiveness diminishes significantly on account of provision of non-audit services. Kamotho (2014) also argues that performance of non-audit services by internal auditors erodes and impairs their independence and objectivity and is a recipe for familiarity and self-review threats to independence.

Table 10 :  Money Transfer Companies Chief Internal Auditor is at a senior level within the hierarchy of the company

In Table 10 above, it is observed that 63 (86.3%) of the respondents agreed and 10 (13.7%) strongly agreed in response to the statement that “money transfer companies Chief Internal Auditor is at a senior level within the hierarchy of the company”. Since majority of the respondents agreed to this statement, it indicates that money transfer companies Chief Internal Auditor is at a senior level within the hierarchy of the company. These findings agree with George, Konstantinos and Theofanis (2015) who argued that for minimum, chief internal auditors should be at a position that has adequate authority to promote their independence, to ensure wide functional scope, sufficient thought on engagement communications and sufficient action on audit recommendations.

Inferential Statistics for Objective One

Inferential statistics regarding the relationship between internal auditors’ professional independence and financial performance of money transfer companies are presented in this sub section. These statistics were computed based on a Pearson’s correlation analysis where the mean scores for internal auditors’ professional independence were correlated against those of financial performance of money transfer companies. Results are presented in Table 11 below.

Table 11 :  Pearson’s Correlation Analysis Results Objective One

Table 11 shows that the Pearson’s Correlation Coefficient (r) for internal auditors’ professional independence and financial performance of money transfer companies is 0.465 which is positive. The Sig. value is also given as 0.000 which is less than 0.05. Since the Pearson’s Correlation Coefficient (r) is positive (0.465) and the Sig. value (0.000) is less than 0.05, it means that there is a statistically significant positive relationship between internal auditors’ professional independence and financial performance of money transfer companies. Based on these results, the researcher rejects the null hypothesis, upholds the alternative and consequently concludes that there is a statistically significant positive relationship between internal auditors’ professional independence and financial performance of money transfer companies.

Objective Two: to examine the relationship between internal auditors’ professional competence and financial performance

In this objective, the study sought to investigate whether there is any statistically significant relationship between internal auditors’ professional competence and financial performance. The results presented in descriptive frequency tables below indicate the level of respondents’ agreement or disagreement on statements concerning internal auditors’ professional competence. Responses on each of the items were rated on a five-point Likert scale with SA representing strongly agree, A  representing agree, N  representing not sure, D representing disagree and SD representing strongly disagree.

Table 12:  Money Transfer Companies internal auditors have adequate training and expertise in professional accounting

In Table 12 above, it is observed that 9 (12.3%) of the respondents disagreed, 58 (79.5%) agreed and 6 (8.2%) strongly agreed in response to the statement that “money transfer companies internal auditors have adequate training and expertise in professional accounting”. Since majority of the respondents agreed to this statement, it indicates that money transfer companies internal auditors have adequate training and expertise in professional accounting. These findings agree with Al Twaijri, Brierly and Gwiliam (2003) who stressed that an audit must be carried out by a professional staff that has the necessary education, training, experience and professional qualifications to conduct the full range of audits required by its mandate. The findings also agree with IIA (2009) which stressed that an audit has to be conducted by someone who has competency and adequate technical and professional expertise in accountancy. Such expertise contributes to the ability of the auditors to perform the systematic and discipline audit approach to improve the effectiveness of internal auditing (Zulkifli et al., 2014).

Table 13 :  Money Transfer Companies internal auditors have adequate experience in audit work

In Table 13 above, it is observed that 7 (9.6%) of the respondents disagreed and 66 (90.4%) agreed in response to the statement that “money transfer companies internal auditors have adequate experience in audit work”. Since majority of the respondents agreed to this statement, it indicates that money transfer companies internal auditors have adequate experience in audit work. These findings agree with Hutchinson and Zain (2009) who indicated that it is important to use experienced internal auditors since there is a significant positive relationship between experience of internal auditors and firm performance. The use of auditors that have adequate experience in audit work is also supported by Prawitt, Smith and Wood (2009) showed that a positive relationship exists between experience of internal audit and earning management of the firm.

Table 14 :   Money Transfer Companies internal auditors receive continuous professional development

In Table 14 above, it is observed that 44 (60.3%) of the respondents disagreed, 28 (38.4%) agreed and 1 (1.4%) strongly agreed in response to the statement that “money transfer companies internal auditors receive continuous professional development”. Since majority of the respondents disagreed to this statement, it indicates that money transfer companies mpanies internal auditors rarely receive continuous professional development. These findings disagree with Muluqeta & Gebrehiwot (2008) who indicated that internal auditor should be provided with adequate continuous professional development programme to enable them upgrade their skills and knowledge to meet organizational expectations.

Table 15:  Money Transfer Companies internal auditors have adequate knowledge of other disciplines apart from auditing

In Table 15 above, it is observed that 10 (13.7%) of the respondents disagreed, 51 (60.9%) agreed and 12 (16.4%) strongly agreed in response to the statement that “money transfer companies internal auditors have adequate knowledge of other disciplines apart from auditing”. Since majority of the respondents agreed to this statement, it indicates that money transfer companies internal auditors have adequate knowledge of other disciplines apart from auditing. These findings agree with previous researchers like Al-Nofaie (2003); Mulgan (2003); Ferguson and Rafuse (2004) who emphasize the importance of having multidisciplinary auditors. According to Al-Nofaie (2003), it is crucial for auditors to be familiar with other disciplines besides accounting and management. Other disciplines may include computer science, economics, research methodology, social science, public policy analysis, law, engineering, agriculture and pharmacology (Al-Nofaie 2003).

Table 16 :  Money Transfer Companies internal auditors have adequate knowledge of the risks faced by this organization.

In Table 16 above, it is observed that 8 (11.0%) of the respondents disagreed, 57 (78.1%) agreed and 8 (11.0%) strongly agreed in response to the statement that “money transfer companies internal auditors have adequate knowledge of the risks faced by the organization”. Since majority of the respondents agreed to this statement, it indicates that money transfer companies internal auditors have adequate knowledge of the risks faced by the organization. These findings agree with the Chartered Institute of Internal Auditors (2017) which emphasizes the need for internal auditors to have adequate knowledge of the risks faced by their organization. According to them, an internal auditor’s knowledge of the management of risk enables him or her to act as a consultant providing advice and acting as a catalyst for improvement in an organization’s practices. So, for example if a line manager is concerned about a particular area of responsibility, working with the internal auditor could help to identify improvements. Or perhaps a major new project is being undertaken – the internal auditor can help to ensure that project risks are clearly identified and assessed with action taken to manage them.

Inferential Statistics for Objective Two

Inferential statistics regarding the relationship between internal auditors’ professional competence and financial performance of Money transfer companies are presented in this sub section. These statistics were computed based on a Pearson’s correlation analysis where the mean scores for internal auditors’ professional competence were correlated against those of financial performance of money transfer companies. Results are presented in Table 17 below.

Table 17: : Pearson’s Correlation Analysis Results Objective Two

Table 17 shows that the Pearson’s Correlation Coefficient (r) for internal auditors’ professional competence and financial performance of money transfer companies is 0.395 which is positive. The Sig. value is also given as 0.001 which is less than 0.05. Since the Pearson’s Correlation Coefficient (r) is positive (0.395) and the Sig. value (0.001) is less than 0.05, it means that there is a statistically significant positive relationship between internal auditors’ professional competence and financial performance of money transfer companies Based on these results, the researcher rejects the null hypothesis, upholds the alternative and consequently concludes that there is a statistically significant positive relationship between internal auditors’ professional competence and financial performance of money transfer companies.

Objective Three: to examine the relationship between internal auditors’ professional integrity

In this objective, the study sought to investigate whether there is any statistically significant relationship between internal auditors’ professional integrity and financial performance of money transfer companies. The results presented in descriptive frequency tables below indicate the level of respondents’ agreement or disagreement on statements concerning internal auditors’ professional integrity in money transfer companies. Responses on each of the items were rated on a five-point Likert scale with SA representing strongly agree, A representing agree, N representing not sure, D  representing disagree and SD  representing strongly disagree.

Table 18:  Money Transfer Companies internal auditors act with a great degree of integrity in execution of their roles

In Table 18 above, it is observed that 9 (12.3%) of the respondents disagreed, 58 (79.5%) agreed and 6 (8.2%) strongly agreed in response to the statement that “money transfer companies internal auditors act with a great degree of integrity in execution of their roles”. Since majority of the respondents agreed to this statement, it indicates that money transfer companies internal auditors act with a great degree of integrity in execution of their roles. These findings agree with Farouk and Hassan (2014) who stressed that to improve financial performance, company management should employ auditors whose character and integrity is beyond question.

Table 19: Money Transfer Companies internal auditors reporting is truthful

In Table 19 above, it is observed that 5 (6.8%) of the respondents disagreed, 50 (70.2%) agreed and 18 (24.7%) strongly agreed in response to the statement that “money transfer companies internal auditors reporting is truthful”. Since majority of the respondents agreed to this statement, it indicates that money transfer companies internal auditors’ reporting is truthful. These findings agree with Stewart & Subramaniam (2010) who stressed that if internal audit reporting is to play its role in accomplishing organizational objectives, it must be objective, factual and unbiased. The findings also agree with Holt and DeZoort (2009) who stressed that since internal auditors are expected to check all the organizational controls and report on them, objectivity in the reporting should not be compromised.

Table 20: The information in audit reports is supported by strong evidence.

In Table 20 above, it is observed that 8 (11.0%) of the respondents disagreed, 57 (78.1%) agreed and 8 (11.0%) strongly agreed in response to the statement that “The information in audit reports is supported by strong evidence”. Since majority of the respondents agreed to this statement, it indicates that the information in audit reports is supported by strong evidence. These findings agree with Tandon, Sudharsanam & Sundharabahu (2007) who stressed that audit reporting can be effective if the report is supported by sufficient, appropriate, accurate and reliable evidence. He defines sufficient evidence as the quantum of audit evidence that is obtained (quantity of evidence), and appropriate evidence as relevant and reliable evidence (the quality of the evidence). He also defined accurate evidence as the capability of providing correct information that conforms exactly to fact and is performed with care and precision, while reliable evidence is the degree of the auditors’ confidence in checking the originality of audit evidence.

Table 21: Money Transfer Companies internal auditors provide realistic recommendations to management.

In Table 21 above, it is observed that 5 (6.8%) of the respondents disagreed, 56 (76.7%) agreed and 12 (16.4%) strongly agreed in response to the statement that “money transfer companies internal auditors provide realistic recommendations to management”. Since majority of the respondents agreed to this statement, it indicates that money transfer companies internal auditors provide realistic recommendations to management. These findings agree with Hutchinson and Zain (2009) who established that, among others, the function of the internal audit function is to investigate and assess the internal operations of the company and compile a comprehensive report that should have realistic recommendations to management on how to improve the effectiveness of the internal controls of the company.

Table 22: The conduct of Money Transfer Companies internal auditors is subject to periodic reviews

In Table 22 above, it is observed that 3 (4.1%) of the respondents strongly disagreed, 46 (63.0%) disagreed and 24 (32.9%) agreed in response to the statement that “The conduct of money transfer companies internal auditors is subject to periodic reviews”. Since majority of the respondents disagreed to this statement, it indicates that the conduct of money transfer companies internal auditors is rarely subjected to periodic reviews. These findings disagree with Maiyo (2017) who indicated that it is important to conduct periodic reviews on the performance and conduct of internal auditors to keep them in compliance with the Auditing Standards. Such reviews can also facilitate the transformation of an internal audit department into a more strategic business partner and value-added activity (Maiyo, 2017).

Inferential Statistics for Objective Three

Inferential statistics regarding the relationship between internal auditors’ professional integrity and financial performance of money transfer companies are presented in this sub section. These statistics were computed based on a Pearson’s correlation analysis where the mean scores for internal auditors’ professional integrity were correlated against those of financial performance of money transfer companies. Results are presented in Table 23 below.

Table 23:Pearson’s Correlation Analysis Results Objective Three

Table 23 shows that the Pearson’s Correlation Coefficient (r) for internal auditors’ professional integrity and financial performance of money transfer companies is 0.415 which is positive. The Sig. value is also given as 0.000 which is less than 0.05. Since the Pearson’s Correlation Coefficient (r) is positive (0.415) and the Sig. value (0.000) is less than 0.05, it means that there is a statistically significant positive relationship between internal auditors’ professional integrity and financial performance of money transfer companies. Based on these results, the researcher rejects the null hypothesis, upholds the alternative and consequently concludes that there is a statistically significant positive relationship between internal auditors’ professional integrity and financial performance of money transfer companies.

Multiple Regression Analysis

A multiple regression analysis was also conducted to establish the most significant predictor variable among the three elements of the internal auditors’ professional conduct. Results are presented in table 24 below.

Table 24:Model Summary Results for a Multiple Regression Analysis

The study findings in table 24 above indicate that among the three elements of the internal auditors’ professional conduct; internal auditors’ professional independence is the most significant predictor variable to financial performance of money transfer companies. Its relationship with financial performance of money transfer companies (R) is 0.465; its effect on the sample (R square) is 0.216 while its effect on the total population (Adjusted R Square) is 0.205.

CONCLUSIONS AND RECOMMENDATIONS

Conclusions

The following conclusions were made on each of the specific objective of the study.

Objective One: to examine the relationship between internal auditors’ professional independence and financial performance

In this objective, the study sought to investigate whether there is any statistically significant relationship between internal auditors’ professional independence and financial performance. It was observed that there were some inadequacies which limited the internal auditors’ professional independence like failure to regularly rotate the internal auditors and involving them in provision of non-audit activities. Nevertheless, study findings based on a Pearson’s correlation analysis indicated that there is a statistically significant positive relationship between internal auditors’ professional independence and financial performance (r = .465, Sig. Value < 0.05). Based on these results, the researcher rejected the null hypothesis, upheld the alternative and consequently concluded that there is a statistically significant positive relationship between internal auditors’ professional independence and financial performance.

Objective Two: to examine the relationship between internal auditors’ professional competence and financial performance of

In this objective, the study sought to investigate whether there is any statistically significant relationship between internal auditors’ professional competence and financial performance. It was observed that there were some inadequacies in internal auditors’ professional competence like limited provision of continuous professional development opportunities to its internal auditors. Nevertheless, study findings based on a Pearson’s correlation analysis indicated that there is a statistically significant positive relationship between internal auditors’ professional competence and financial performance (r = .395, Sig. Value < 0.05). Based on these results, the researcher rejected the null hypothesis, upheld the alternative and consequently concluded that there is a statistically significant positive relationship between internal auditors’ professional competence and financial performance.

Objective Three: to examine the relationship between internal auditors’ professional integrity and financial performance

In this objective, the study sought to investigate whether there is any statistically significant relationship between internal auditors’ professional integrity and financial performance. It was observed that there were some inadequacies in internal auditors’ professional integrity like absence of periodic review of the conduct and performance of the internal auditors. Nevertheless, study findings based on a Pearson’s correlation analysis indicated that there is a statistically significant positive relationship between internal auditors’ professional integrity and financial performance (r = .415, Sig. Value < 0.05). Based on these results, the researcher rejected the null hypothesis, upheld the alternative and consequently concluded that there is a statistically significant positive relationship between internal auditors’ professional integrity and financial performance.

Recommendations

Owing to the findings of the study, the following recommendations are proposed. These are also arranged in accordance with the specific objectives of the study.

Objective One: to examine the relationship between internal auditors’ professional independence and financial performance

It was concluded that there is a statistically significant positive relationship between internal auditors’ professional independence and financial performance. However, it was observed that there were some inadequacies which limited the internal auditors’ professional independence like failure to regularly rotate the internal auditors and involving them in provision of non-audit activities. It is therefore recommended that money transfer companies responds to these inadequacies by regularly rotating its internal auditors among different branches for instance every after three years so that they do not develop personal relationships with managers. Management should also stop the practice of involving internal auditors in non-audit services as this practice not only impairs their independence but also gives rise to for familiarity and self-review threats to independence.

Objective Two: to examine the relationship between internal auditors’ professional competence and financial performance

It was concluded that there is a statistically significant positive relationship between internal auditors’ professional competence and financial performance. However, it was observed that there were some inadequacies in internal auditors’ professional competence like limited provision of continuous professional development opportunities to its internal auditors. It is therefore recommended that money transfer companies make efforts to increase the competence of its internal auditors by among others providing those with continuous professional development programmes to enable them upgrade their skills and knowledge in audit works. Management can organize seminars and workshops where the internal auditors could be trained by experts in the best practices in internal auditing work. Furthermore, management can make capacity-building strategies, such as periodic ethics training or implementing a formal code of conduct monitoring system.

Objective Three: to examine the relationship between internal auditors’ professional integrity and financial performance

It was concluded that there is a statistically significant positive relationship between internal auditors’ professional integrity and financial performance. However, it was observed that there were some inadequacies in internal auditors’ professional integrity like absence of periodic review of the conduct and performance of the internal auditors. It is therefore recommended that money transfer companies strives to increase the integrity of its internal auditors by among others conducting periodic reviews on the performance and conduct of internal auditors to keep them in compliance with the Auditing Standards. Such reviews can be conducted by the audit committee or by external auditors and will go a long way in enhancing the credibility of the internal audit function.

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