Abstract
Life insurance companies are very crucial in the mobilisation of financial resources in a country, and therefore have a tremendous impact on the economic growth and financial stability of the country. The importance of internal control mechanisms in achieving these goals cannot be overemphasized. Despite the growing trend in internal control systems in financial institutions, there is little knowledge on the internal control practices that exist within life insurance companies in Ghana and how these influence their performances. It is against this background that this study set out to fill this gap. The main objective of this study is to examine the effect of internal control mechanisms on the performance of life insurers in Ghana. The multiple regression analysis was used to establish the statistical relationship between the COSO framework of internal control system and the performance of the Ghanaian life insurers. The findings from this study showed that internal control mechanisms have positive and unique contribution to explaining the performance of life insurance companies in Ghana. The study recommends among others that the life insurance firms need to improve upon the core principles of the various components of the COSO internal control integrated framework. For instance, with regards to the control environment, the insurance firms should demonstrate commitment to integrity and ethical values; they should exercise oversight responsibility, establish structure, authority, and responsibility, demonstrates commitment to competence, and enforce accountability throughout the firms. Keywords Ghana life insurance industry, internal control systems, firm performance DOI: 10.7176/RJFA/11-18-11 Publication date: September 30 th 2020
Highlights
The importance of internal control system in relation to achieving an organization’s goals cannot be overemphasized (Badoo, Hammond & Oppong, 2020; Brennan & Soloman, 2008)
The general objective of the study The main objective of this study is to examine the effect of internal control mechanisms on the performance of life insurers in Ghana Specific objective Specific objectives are to: 1. Assess the relationship between the internal control systems and performance of the life insurance companies in Ghana
The findings from the study showed that the sampled firms relatively adhered to the internal controls procedures put in place by managements, and there is significant positive correlation between the components of COSO internal controls integrated framework and performance of the selected life insurance companies
Summary
The importance of internal control system in relation to achieving an organization’s goals cannot be overemphasized (Badoo, Hammond & Oppong, 2020; Brennan & Soloman, 2008). The COSO framework point out that properly instituted systems of internal control improve the reporting process and gives rise to reliable reports which enhances the accountability function of management of an entity. This model has been adopted as the generally accepted framework for internal control and is widely recognized and use by many researchers and practitioners (Badoo et al 2020; Amissah,2017; Abdi, 2015) as the definitive standard against which organizations measure the effectiveness of their systems of internal control
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