Effect of Accounting Controls on Financial Performance of Transport Sector SACCOs in Murang’a County, Kenya

Abstract

The study sought to evaluate the effect of accounting controls on the financial performance of SACCOs in the transport sector. The Kenyan transport sector accounts for about 8.3% of the Kenyan GDP. However, the sector faces fundamental challenges such as inadequate flow of information and investment losses due to poor record keeping, which affect the financial performance of the SACCOs in the sector. The study aimed to establish specifically the effect of financial reporting and auditing controls on the financial performance of the transport sector SACCOs within Murang’a County in Kenya. The county was selected for the study because it was found to have nurtured several successful transport sector SACCOs, such as MTN, NTK and KST, serving customers from different parts of the country. The research was founded on the agency theory. The research design used was descriptive, and a census approach targeting all the transport SACCOs within Murang’a County (that are registered under the Ministry of Co-operative Societies Development of Murang’a County) was adopted. The primary data were obtained through the

use of questionnaires, while the secondary data were obtained from the SACCOs' reported audited financial statements for five years from 2017 to 2021. Data collected were thereafter analyzed with the use of descriptive and inferential statistics encompassing the regression analysis. With a response rate of 84.2%, the data collected were cleaned and analyzed through regression analysis, and the hypotheses of the study were further tested. The R Square obtained of 0.027 suggests that the independent variables (financial reporting controls and auditing controls) account for only 2.7% of the financial performance of the transport SACCOs. The study, therefore, concluded that accounting controls had no significant effect on the financial performance of the transport sector SACCOs. The study, therefore, recommends that the SASRA regulatory authority (Ministry of Co-operative Societies) should ensure that the SACCOs are well managed and regulated. The SACCOs should implement strong internal controls that would aid in improving their financial performance. Through the study, the management of the various transport SACCOs will be able to ensure proper implementation of the necessary accounting controls within the SACCOs to enhance their operations.