| dc.description.abstract | Businesses across the world are faced with the threat of failure with a majority of them
not surviving their third anniversary. The majority of these challenges are fraud-related
and could be avoided if a strong internal control system is put in place. The study’s main
aim was to establish how the financial performance of MEs in the food manufacturing
sector in Nairobi County was influenced by internal control. The objectives of the study
were to establish the influence of cash reconciliations, segregation of duties, inventory
audit, cost management, and risk assessment on the financial performance of SMEs in the
food manufacturing sector in Nairobi County. The study was descriptive, the study’s target
population included 95 MEs in the areas of the food processing sector. The sample for the
population was 77 MEs obtained through the Yamane formula at a margin error of 5%.
Data for the study was collected using a questionnaire through the in-person drop and pick
method. The study obtained secondary data from the financial statements of the companies
on revenues as well as net profit earned. Collected data was then analyzed through
descriptive analysis and inferential analysis using SPSS. Presentation of the results was
done on tables and narratives. Descriptive analysis revealed that the majority of food
manufacturing companies in Nairobi carry out routine cash reconciliations, they keep
proper cash reconciliation records and have real-time cash registers and bank alert
messages on transactions as internal cash controls. The study also found that
manufacturing companies in Nairobi County have allocated more than one person to
authorize the payment. The study found that many companies in the manufacturing
industry in Nairobi County carry out inventory audit regularly. The study also revealed
that food manufacturing companies in Nairobi County have cost management internal
control practices that involve budgeting and comparison of budgets with actual spending,
besides the company outsources materials and services from the cheapest suppliers that
have enabled them to save profound amounts. The study finally found that risk assessment
as an internal control is carried out among food manufacturing companies in Nairobi
County through the identification of risks, conducting risk evaluation, and analysis of risks
to establish benefits. Regression analysis revealed a significant influence of cash
reconciliation on financial performance; the study also revealed a significant influence of
the segregation of duties on financial performance. Further, inventory audits were found
to have a significant influence on financial performance. Besides, the study revealed that
cost management significantly influenced the financial performance of food
manufacturing companies in Nairobi County. Finally, the study revealed that risk
assessment significantly influenced the financial performance of food manufacturing
companies in Nairobi County. The study concluded that cash reconciliations, segregation
of duties inventory audits, cost management, risk assessment as internal control practices
had a positive and significant influence on the financial performance of food
manufacturing companies in Nairobi County. The study recommended for the
manufacturing MEs in Nairobi County to keep petty cash records for reconciliation,
reconcile payment receipts and invoice records and conduct ad-hock cash checks. The
study also recommended better communication of job responsibilities to the employees.
The study further recommended an increase in the number of stock-taking times in a year.
The study also recommended the introduction of cost budgetary reviews. The study finally
recommended the allocation of an optimal amount of financial resources for resources
assessment. | en_US |
