Control Environment and Financial Accountability of Service State Corporations in Kenya: The Mediating Role of Internal Audit Effectiveness and the Moderating Role of Board of Governance
DOI:
https://doi.org/10.53819/81018102t5461Abstract
The study examined the effect of the control environment on the financial accountability of service state corporations in Kenya, with a focus on the mediating role of internal audit effectiveness and the moderating role of board of governance. The study was guided by Agency Theory, Stewardship Theory, and Systems Theory. A positivist philosophy and descriptive-explanatory research design were adopted. The target population comprised 82 service state corporations, from which 68 corporations were selected using proportionate stratified random sampling. Four officers from each corporation were targeted, resulting in 272 respondents. Data were collected using structured questionnaires and analysed using Partial Least Squares Structural Equation Modelling (PLS-SEM), bootstrapping and Hayes’ PROCESS Model 14. The findings established that control environment had a positive and significant effect on internal audit effectiveness (β = .835, p < .001) and financial accountability (β = .767, p < .001). However, internal audit effectiveness did not significantly affect financial accountability (β = −.029, p = .671), and its mediating effect was not significant (β = −.024, p = .673). Board of governance significantly moderated the relationship between control environment and internal audit effectiveness (β = .171, p < .001), but did not significantly moderate the direct relationship between control environment and financial accountability (β = −.106, p = .089). The index of moderated mediation was significant (Index = .267, 95% CI [.180, .362]). The study concludes that board governance plays an important conditioning role in the indirect relationship between the control environment and financial accountability.
Keywords: Control Environment, Financial Accountability, Internal Audit Effectiveness, Board of Governance, Service State Corporations
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