Effects of Internal Control Systems on Credibility of Financial Statements in SACCOS. A Case of Kyamuhunga People’s Co-Operative Savings and Credit Society Limited Bushenyi, Uganda

Abstract

The SACCO is faced with difficulties, according to KYAPS's 2021 audit report, including incredible financial reports resulting from material misstatements, material uncertainty from board members and management, loan applicants forging documents, receipts for nonexistent assets and transactions, dishonest details provided by borrowers, and a higher loan default rate. The present study aimed at establishing the relationship between monitoring and evaluation and credibility of financial statements, risk assessment on the credibility of financial statements, the relationship between Internal Audit and credibility of financial statements, a case of Kyamuhunga Peoples’ Cooperative Savings and Credit Society. Correlational research designs were used in this study. Self-administered organized survey questions and interview guides were used. 63 respondents from the KYAPS SACCO participated in this study. SPSS- version 26.0 was used for analysis to obtain descriptive statistics. Pearson linear correlation coefficient and regression analysis was used for analysis and thus there is a significant and positive relationship between monitoring and evaluation and credibility of financial statements as shown by correlation coefficient of 0.740 and P value .000<0.05., risk assessment and credibility of financial statements with 0.733 and p value .000<0.05., and internal audit and credibility of financial statements with correlation coefficient of 0.788 and p value .000<0.05. The findings of the study indicate that there is a significant positive relationship between monitoring and evaluation and credibility of financial statements in KYAPS suggesting that an improvement in monitoring and evaluation leads to improved credibility of financial statements as indicated by the findings, effective implementation of risk assessment results into Credible Financial Statements and that an improvement in Internal audit leads to attainment of credible financial statements. SACCO managers should strengthen the monitoring and evaluation to ensure improved accountability and hence credible financial statements, Risk assessment is emphasized by management to carry out business in an orderly and efficient manner and management should always keep them informed of any new internal controls introduced so as to ensure their effective implementation since they are the very people to implement the policies. Keywords: Internal Control Systems, Credibility of Financial Statements, Monitoring and Evaluation, Risk Assessment, Internal Audit