TABLE OF CONTENTS
TITLE PAGE i
APPROVAL PAGE ii
LIST OF TABLES v
CHAPTER ONE:INTRODUCTION 1
1.1 Background to the Study 1
1.2 Statement of Problem 5
1.3 Objective of the Study 8
1.4 Research Questions 9
1.5 Research Hypothesis 9
1.6 Significance of the Study 10
1.7 Scope of the Study 11
1.8 Limitation of Study 11
1.9 Definition of Terms 12
CHAPTER TWO: REVIEW OF RELATED LITERATURE 13
2.1 Conceptual Review 14
2.2 Theoretical Review 19
2.3 Empirical Review 24
CHAPTER THREE: RESEARCH METHODOLOGY 29
3.1 Design of the Study 29
3.2 Area of the Study 30
3.3 Population of the Study 30
3.4 Sample of the Study 31
3.5 Instrument for Data Collection 31
3.6 Validation of the Instrument 32
3.7 Method of Data Collection 33
CHAPTER FOUR: PRESENTATION AND ANALYSIS OF DATA
4.1 Introduction 34
4.2 Questionnaire Distribution and Collection 34
4.3 Analysis of Responses from Questionnaire 35
4.4 Hypotheses Testing 37
CHAPTER FIVE: SUMMARY OF FINDINGS CONCLUSION, AND RECOMMENDATIONS
5.1 Introduction 43
5.2 Summary of Research Findings 43
5.3 Conclusion 43
5.4 Recommendations 44
1.1 Background to the study
Banking industry is the live-wire or the equivalent to the central nervous system of the human in all capitalist economics. The institution provides the vital link between the surplus unit and the deficit unit of the economy. Banks promote investment by providing facilities for mobilizing savings and appropriate instruments without which either economic growth or development can take place smoothly and efficiently. In the process of performing these functions, banks come to hold the single largest proportion of the economy’s financial resources and correspondingly account for a similar lion share of the credit that propels the engine of growth and development. In the light of this, the subject of internal control in the industry is of interest to all western type economies of the world.
The process of financial account and data production should be based on a recognized, well-defined and well-organized system of procedures. If the business transactions are to be properly and correctly observed, documented, recorded and collated, then there must be a system which is designed to cope with these activities. For this reason, management of the organization has in general, over a period of many years, placed a great deal of emphasis on having strong system of internal control, where possible. This system is intended to maintain adequate process of accounting data production and safeguarding the organization against possible financial loss due to fraud or error.
Internal control, in its broadest sense, includes all controls, checks and procedures, formally instituted by the management, to maintain the maximum administrative and operational efficiency possible within the accounting and non-accounting function of the business organization. However, in terms of financial accounting, the system is mainly concerned with those controls which exist to aid the processing of reliable accounting data and to safeguard companies’ asset.
An important feature of the impact of Internal control is the director review of company financial operations and position at regular and frequent internals by means of interior account and report, operating summaries and other appropriate financial and statistical. In addition to regular view, management may from time to time call for special reviews of particular items e.g. wages, stock, salary access etc. Managerial review and supervision are essential element in an efficient and effective internal control system.
Banks like other business organization achieve their objective through the use of human and economic resources. In most cases, the economic resources are provided by various interest groups that do not participate in the day today normal running of the operation of the business. The onus is therefore, on the management to make sure these resources are effectively and efficiently managed to achieve the set goal and to build up public confidence, the desired control achieved through the setting up of a good and valid internal control system.
2.1 CONCEPTUAL FRAMEWORK
Internal control is the type of control designed and installed by the management of an organization for the growth and survival of the organization. It is the responsibility of the management to ensure and maintain this system of control to enhance profitability. Sequel to this, adequate attention has been given to the study of internal control in business enterprises by experts.
As a concept, Internal Control is distinguished by its scope and its high level of the services offered. The Internal Control System refers to an organized amalgamation of functions and procedures, within a complete system of controls established by the management and whose purpose is the successful function of the business (Cheung, 1997). The Internal Control System is all the methods and procedures followed by the management in order to ensure, to a great extent, as much successful cooperation as possible with the director of the company, the insurance of the capital, the prevention and the detection of fraud, as well as the early preparation of all the useful financial information (Meigs, 1984 ; Papadatou, 2005). According to Cook and Wincle (1976), the Internal Control System resembles the human nervous system which is spread throughout the business carrying orders and reactions to and from the management. It is directly linked to the organizational structure and the general rules of the business (Cai, 1997).
Glance (2006) provided that internal control system refers to “the Institution process and procedure that is been established with the aim of objective achievement. The internal control system also serves as a process that guides an organization towards achieving its established objectives. According to International Organization of Supreme Audit Institution (2004), internal control system is a process effected by an entity’s board of directors, management and other personnel’s, designed to provide reasonable assurance regarding the achievement of the set objectives and the effectiveness and efficiency of operations, reliability of financial reporting andcompliance with applicable laws and regulations and generally the controls are of two types which are preventive and detective controls. According to Church and Schneider (2008), effective internal controls systemare fundamental drivers toward earnings quality.