Impact Of Internal Control System On Profit Performance Of Commercial Banks
Abstract
This study primarily aims at chancing out the impact of internal control system on the profit performance of marketable banks in Nigeria with an empirical study on Orient Bank of Nig. Plc and United Bank of AfricaPlc.
Internal control systems impact on marketable banks might be as a result ofnon-adherence to the system or strict, inflexible adherence on the system. These two axes will always have adverse effect on the profit performance of the marketable banks and as such the operation will always try to strike a balance or trade- off for their profit maximization.
The paper thus tends to estimate the extent of adherence to internal control system, its impact on the profit performance of OBN PLC and UBA PLC and control strategies to be espoused to revitalize or moderate the system.
This design is divided into five( 5) chapters –
Chapter One This is the introductory chapter that provides information about internal control system. This chapter gives sapience of the problem identification, objects and significant of study, thesis to be tested and compass and limitations of the study.
Chapter Two This is the Literature Review which makes good references to people that carried out the studies on internal control. It includes the significance and rates of good internal control and also rates anticipated of bank staff. Chapter Three This includes Research design, compass and methodology.
Chapter One
Preface Analysis
General Introduction
Internal control is the set of account and executive control and practices that helps directors in operating their association more effectively and efficiently. It ensures that both the account and executive conditioning are in order with the laid down procedures, norms, and statutory conditions. It also detects divagation if any and calls for immediate corrective measure. In any profit acquainted association, the ideal of operation is to maximize profit, and internal control is a fashion that can be of backing in attaining similar maximizations.
Banking is a adventure accepted primarily for profit and whose operation should at least include taking plutocrat on account and releasing of similar plutocrat wholly or incompletely on demand or authority of the depositor.
An important object of banking particularly in the developing countries is the creation of profitable development. In performance of this profitable development as well as banks ’ profitability, banks tends to ameliorate on their services by contriving styles of sound and effective system of internal control.
This study thus, intends to estimate how the internal control programs have affected the profit performance of marketable banks with particular reference to Orient Bank of Nigeria Plc and United Bank for AfricaPlc.
PROBLEM IDENTIFICATION
There have been ceaseless cases and stories been told about high frequence of fraud, embezzlement, overcharging, manipulation, missing lines and tally cards and other banking malpractices in banks moment, with the operation and shareholders not knowing how to handle the adverse situation.
The Orient Bank of Nigeria( OBN) Plc and United Bank of Africa( UBA) Plc weren’t left out in these increase in crime – surge problems and banking malpractices, despite the actuality ofinter-control and bias espoused to descry fraud. This situation has crowned in the lack of confidence by the staff, shareholders and client over the growth and profitability of the banks.
Moreso, with the proliferation of banks and also the increase in pastoral banking, with marketable bank’s branches, the volume of account records has drastically increased, thereby challenging the appraisal of the acceptability and trustability of records, and overall effectiveness of operations.
likewise, with the public interest in the “ verity and fairness ” of fiscal statements – profit and loss account and balance distance, whose stratum of dependable is on the internal control system, the exploration is thus aimed at probing the extent of adherence to the internal control system and its impact on the profit performance of the banks.
Statement Of Ideal
The ideal of this exploration include among others the following
1. To identify and estimate the internal control designed, installed and operated by the operation of OBN and UBA with a view to assessing its impact on profit performance.
2. To examine the extent of adherence or compliance to the programs, norms and procedures by the members of the staff in order to recommend operating enhancement.
3. To identify possible scarcities and sins of the being internal control to find means of upgrading them.
4. To review the profit performance of the banks OBN and UBA and relate it to their internal control.
5. To critically dissect the effectiveness, acceptability and connection of the colorful internal control.
6. To offer useful recommendation to proper design, installation and operation of an acceptable and good internal control system.
Significant Of Study
The exploration is intended to define the position of internal control and its impact on profitability of OBN and UBA Plc. It’ll be of great significance to the banking staff especially the directors and officers whose interest are geared towards the improvement of the chances of bank profitability; in serving as a companion in the performance of their duties. It’ll assess the effect of fraud, manipulations, crimes, indecorous authorization,
deceitfulness, shy account records etc on profitability in view of the being internal control system.
A comprehensive knowledge of system of internal control will form a foundation on which the adjudicator’s report on “ true and fair view ” final account is grounded and as similar, the study will be of immense values to the rehearsing Accountants, Adjudicators, attorneys, shareholder and other interested parties for acceptance and reliance of fiscal statement.
likewise, it’ll include further exploration in the enhancement of banking services in Nigeria for the interest of the shareholders, guests and government.
Eventually, the study will give the base for recommendation to the operation of the stylish approach to designing, installing and operating an advanced system of internal control aimed at promoting functional effectiveness and barring or at least minimizing waste.
Expression Of Thesis
1. The operation of OBN and UBA Plc designed and installed 50 good system of internal control which their programs, norms and procedures are stuck to by the members of the staff.
2. The system of internal control espoused by UBA Plc enhances its profit performance than the system espoused by OBNPlc.
3. The present internal control systems espoused by the banks are effective and adequately operated.
4. The being internal control systems of the banks enhance their profit performance.
System Of Testing Thesis
thesis I- This thesis will be anatomized grounded on the repliers responseto the Strategic Position and Action Evaluation( SPACE) of features of a good internal control system in OBN and UBA Plc. The standing ranges from 1 to 4, representing weak to veritably strong. The SPACE normal will be used.
Average responses to question I of the general questionnaire taken according to department will be subordinated to single proportion testing using the following test statistics
Z = X- npo
Npo( L – po)
Where
n
=
sample size
x
=
number of responses in favour
po
=
proportion to be tested
The Position Of Significance
will be 5 for the testing to give a critical value of z
. one tagged test)
Responses to questions of the general questionnaire will be tested to gain the part played by the operation in the design and installation of internal control and icing that the programs norms and procedures are stuck to.
Oral interview will be conducted on the bank officers at their convenience for elaborate discussion on the extent of staff adherence to the installed system.
There will be proper disquisition of documents and records to find out the trustability of the oral responses.
thesis IIThis thesis will be tested grounded on the relative analysisof the periods and fiscal statement of the Bank.
It’ll also be anatomized from the responses to the applicable areas covered by the questionnaire. similar areas include electronic data processing, purchasing, cash bills and disbursement, petty cash, payroll and fix means.
thesis IIIThis thesis will be tested with the following;
a) Oral interview will be conducted on the workers to find out the extent of their adherence to the procedural primer of the banks.
b) farther information will be inspired from responses to question 4,5 and 7 of the general questionnaires.
c) workers will be observed during working hours( 8 am –1.30 pm) to ascertain the processes involved in their operations substantially recessions and deposits of plutocrat in the banks and also to descry crimes and excrescencies.
d) A thorough study on authorization will be made to know whether workers conform to effective and acceptable operation.
thesis IVIn assaying this thesis, the following test will be carried out.
a) Data collected from the general questionnaire will be tested and also oral interview conducted. A five time fiscal statement will be anatomized and eachyear’s profit compared with the proceeding times to ascertain the direction of profit performance. This will also be matched with the degree of adherence to internal control features within these ages.
Compass/ Limitations Of Study
This study covered the internal control systems espoused by colorful marketable banks in Nigeria. The population sample was taken from only two banks OBN and UBA and their branches in Enugu State. Other corridor of the country weren’t covered, though empirically generalized view was made of them.
The study was confined to two major areas of internal centre. They are
i) executive control
ii) Account and fiscal control( internal checks, internal investigation and other fiscal system of control). This was done grounded on a
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