Abstract:
Risk-based auditing guides a firm’s usage of its own internal audit function so as to enhance risk
management and controls. It enhances accountability and accuracy of financial statements
thereby improving financial performance of institutions. The general objective of this study was
to establish the effect of risk based audit on performance of state owned corporations in the
Ministry of East African Community, Labour and Social Protection in Kenya. The research
design used was descriptive research design. The population of the study comprised 160 senior
managers of State corporations in the ministry. The study was a census. The study used primary
data that was collected through self-administered questionnaires. The data was analyzed by the
use of descriptive statistics which included inferential statistics such as regression and bivariate
correlation. The study established that risk assessment, internal audit standards, control
environment and information system positively affected the financial performance of state
owned corporations in Kenya. The study recommends that the Management of state corporations
should implement effective risk based audit practices to enhance performance. It also
recommends that the management of the commercial state corporations in Kenya should bear the
responsibility of equipping their firms’ internal audit functions with adequate resources so as to
enable them to develop effective annual risk based audit plans. The study also recommends that
in order to improve the financial reporting of state corporations in Kenya, the management of
state corporations must embrace International Auditing Standards (ISAs),which guide ethical
practices of internal audit personnel. The main limitation of the study was that it was based on
data collected from one government ministry only. A study of additional ministries may have
provided greater insights to the study topic. Similarly, future research could focus on the private
sector for the purpose of making comparisons.
