Abstract
Internal control is relevant in every business establishment, though its presence may not be a guarantee that fraud and corporate scandals would cease to occur. From the rural banking communities in Ghana, this study examines the significance of internal control element on the performance of elected rural banks. The statistical analysis and inferential judgment is based on the responses gathered from 650 bank employees on the functioning of internal controls. Based on the quantitative results and analysis, the study found a highly significant relationship between internal controls and performance of banks with respect to the principles prescribed by the Committee of Sponsoring Organization of the Treadway Commission framework –COSO. There exist a very strong internal control systems in the rural banks of Ghana, however monitoring, control activities and issues of corporate governance need to be addressed.
Highlights
The banking and financial industry has gone through a series catastrophes in past couple of years, with a significant numbers of them folding up due to cases of fraud, losses resulting from market risk, internal control and cooperate governance weaknesses (Barra 2010)
Bank failures such Lehman Brothers was due to fraud, and it has been a subject of reference in the study of internal control, likewise major corporate failures across Europe and America such as Enron and WorldCom, which subsequently compelled the US government to implement several regulations to protect the interest of investors and the public with the introduction of Sarbanes Oxley Act2002 and Subsequently the Committee of Sponsoring Organizations of the Treadway Commission (Martin, Sanders et al 2014).These regulations brought relief to investor and stakeholders with reasonable assurance that their investments are protected from losses
That is the heritage of internal controls, as it serve as the cornerstone for achieving the organizational objectives through a series of procedures designed by management and board and places the responsibility on the shoulders of the people working in the organization, meaning that internal control is the responsibility of everyone working within the organization (Tekathen and Dechow 2013)
Summary
The banking and financial industry has gone through a series catastrophes in past couple of years , with a significant numbers of them folding up due to cases of fraud , losses resulting from market risk , internal control and cooperate governance weaknesses (Barra 2010). Other major concerns include the fear of money laundering and compliance with transfers regulations as well as capital requirements to meet adequate liquidity requirement (Bellavite Pellegrini, Meoli et al 2017) Bank failures such Lehman Brothers was due to fraud, and it has been a subject of reference in the study of internal control, likewise major corporate failures across Europe and America such as Enron and WorldCom, which subsequently compelled the US government to implement several regulations to protect the interest of investors and the public with the introduction of Sarbanes Oxley Act2002 and Subsequently the Committee of Sponsoring Organizations of the Treadway Commission (Martin, Sanders et al 2014).These regulations brought relief to investor and stakeholders with reasonable assurance that their investments are protected from losses. Since the effectiveness of controls are subject to changes over a period of time , every internal control systems requires consistent evaluation (Ahluwalia, Ferrell et al 2016), measuring internal control is a continues process, since controls can be good today but fails the following years due to increasing and new www.macrothink.org/bms
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