INTERNAL CONTROL SYSTEMS AND FINANCIAL SUSTAINABILITY OF SELECTED SUPERMARKETS IN NAIROBI CITY COUNTY, KENYA
John Kilonzo Mutuku - Postgraduate Student, Department of Accounting and Finance, School of Business Economics and Tourism, Kenyatta University, Kenya
Dr. Francis Gitagia (Ph.D, CPA) - Lecturer, Department of Accounting and Finance, School of Business Economics and Tourism, Kenyatta University, Kenya
ABSTRACT
Financial sustainability has remained unstable among supermarkets in Nairobi City County, as reflected by contraction in the sector where total branches declined from 259 in 2020 to 194 in 2021 before partial recovery, alongside cumulative closures of about 100 outlets by 2024, and the collapse or downsizing of major retail chains such as Nakumatt, Tuskys, and Uchumi, reflecting persistent instability in financial sustainability. The overall research goal was to examine the effect of internal control systems on the financial sustainability of supermarkets in Nairobi City County, Kenya. Specifically, the study assessed the effects of control activities, control environment, risk assessment, and monitoring on financial sustainability. The study was underpinned on Systems Theory and Fraud Triangle Theory. A descriptive research approach was adopted targeting 40 managers and senior officers responsible for finance, operations, compliance, risk, and revenue drawn from selected supermarkets in Nairobi City County using purposive sampling. Primary data were collected using structured questionnaires in a cross-sectional survey with reference to the year 2025. Diagnostic tests - normality, multicollinearity, heteroscedasticity, and linearity were conducted. Data were analyzed utilizing SPSS through descriptive statistics and inferential techniques including Pearson correlation and multiple regression analysis. Data were presented using tables. Regression results showed that control activities had a positive significant effect on financial sustainability (β = 0.284, p = 0.0126), control environment had a positive significant effect (β = 0.336, p = 0.005), risk assessment had a positive significant effect (β = 0.221, p = 0.0353), while monitoring had a positive significant effect (β = 0.297, p = 0.0109). The study concludes that control activities, control environment, risk assessment, and monitoring practices strengthened financial sustainability among supermarkets in Nairobi City County. The study recommends strengthening structured internal control systems. The study adhered to ethical norms such as informed consent, confidentiality, and voluntary involvement.