Internal Audit and the Financial Performance of Medium Enterprises: A Case of Fraine Supermarket

Abstract

The study was carried out at Fraine Supermarket. The study aimed at understanding the relationship between Internal Audit and the Financial Performance of Medium Enterprises A Case 0f Fraine Supermarket. The study aimed at examining the relationship between the internal audit function, its independence and contextual factors influencing the financial performance of medium enterprises. Using a correlational research design was employed, the study gathered data through questionnaire surveys from a census of 30 respondents and data was analyzed using Statistical Package for Social Sciences (SPSS). The study found out that internal audits enhance financial reporting accuracy (Mean = 3.77, SD = 0.863) and investor confidence (Mean = 4.04, SD = 1.216). They also improve alignment with financial practices (Mean = 3.96, SD = 0.916) and decision-making reliability (Mean = 3.81, SD = 1.059). However, the reduction in financial irregularities was less significant (Mean = 2.96, SD = 1.294). Independence in audits significantly enhances performance (Mean = 3.85, SD = 1.190) and ensures comprehensive oversight (Mean = 4.50, SD = 0.648). It also reduces conflicts of interest (Mean = 3.31, SD = 1.087) and fosters transparency (Mean = 3.73, SD = 0.827). Organizational culture (Mean = 4.19, SD = 0.895) and advanced technological tools (Mean = 4.31, SD = 1.087) have the most positive impact on audit effectiveness and financial performance. The study concluded that robust internal audit functions and their independence significantly enhanced the financial performance of medium enterprises. Effective internal audits improved reporting accuracy, investor confidence, and financial decision-making. Contextual factors such as organizational culture, management support, and technological tools further bolstered audit effectiveness and financial outcomes. The study recommended that medium enterprises should prioritize strengthening their internal audit functions by ensuring independence and addressing contextual factors such as organizational culture and management support. Investing in advanced technological tools and adequate resources will further improve audit efficiency and effectiveness.