INTERNAL CONTROL SYSTEMS AND FINANCIAL PERFORMANCE OF PRIVATE SECURITY FIRMS IN NAIROBI CITY COUNTY, KENYA
Francis Munyao Kisaingu - Master’s Student, Department of Accounting and Finance, Kenyatta University, Kenya
Dr. Charity Njoka - Lecturer, School of Business, Economics and Tourism, Kenyatta University, Kenya
ABSTRACT
Effective internal control systems are vital for protecting organizational assets, ensuring adherence to regulations, and enhancing overall operational performance, all of which contribute to strong financial outcomes. Huge cash losses have been recorded throughout the years, putting private security companies involved in cash transportation in the headlines. Theft of cash in transportation occurs not just by the G4S security business, but also by other security agencies engaged to carry it. In one recent occurrence, KK security agents stole a total of Sh82 million while carrying it from Westlands to the Central Bank of Kenya. The Wells Fargo security failed to prevent the theft of 94.9 million belonging to one of the Supermarket in Kenya during money transit. It is evident that the existing private security measures were insufficient to safeguard the business's assets. Private security firms are essential for ensuring safety and security across various sectors, including business environments, residential areas, and public events. This research aimed to investigate the effect of internal control systems on the financial performance of private security firms in Nairobi City County, Kenya. The objectives of the research were: to evaluate the effect of access control on financial performance of private security firms and to analyze the effect of risk assessment on financial performance of private security firms. The research was anchored on Agency Theory and Stakeholder Theory. The linkage between the variables were investigated using a causal study approach. The research focused on a population of 81 officially registered private security companies, from which a sample of 25 firms were chosen utilizing stratified sampling techniques. Data was primarily collected through structured, closed-ended questionnaires. The collected responses were analyzed utilizing both descriptive and inferential statistical methods. Descriptive statistics involved measures like means, standard deviations, and while inferential statistics comprised regression analysis to determine relationships and significance. The analyzed data was presented through frequency and percentage tables, and charts. The findings revealed that access control shows a positive performance as indicated by significance value of .001. Risk assessment have a significance level of .004, further solidifies the importance of this variable. The research concluded that effective internal controls particularly in the areas of access control and risk assessment play a critical role in enhancing the financial performance of private security firms. The research recommended that firm managers prioritize the continuous improvement of internal control frameworks. Specifically, it advocated for regular staff training to upgrade professional skills, as well as collaborative efforts among stakeholders and policymakers to foster an environment that supports best practices in internal control throughout the private security sector.