INTERNAL CONTROL SYSTEMS AND FINANCIAL PERFORMANCE OF PRUDENTIAL BANK LTD

ABSTRACTThe significance of upholding effective internal control system (ICS) in organisations has been persistently and immensely emphasised due to its positive effects on financial performance. Effective internal control and audit enable the prevention and detection of fraudulent activities in the banking industry. Consistent with this, persistent efforts by policymakers to … See more

ABSTRACTThe significance of upholding effective internal control system (ICS) in organisations has been persistently and immensely emphasised due to its positive effects on financial performance. Effective internal control and audit enable the prevention and detection of fraudulent activities in the banking industry. Consistent with this, persistent efforts by policymakers to pursue policies that would improve the Internal Control System in the banking industry have yielded abysmal results with regards to financial performance, particularly at Prudential Bank Limited (PBL). The study sought to analyse the effectiveness of Internal Ccontrol Systems on the financial performance of Prudential Bank Limited. The research design employed a descriptive analysis with a target population of 12 employees at Prudential Bank Limited. Primary data was collected using a questionnaire survey and quantitatively analysed parametric (mean score, one-sample t-test and frequencies) and non-parametric (relative importance level) tests in SPSS 21. It was revealed that the Internal Control Systems at Prudential Bank Limited are highly robust and effective. However, the system is unable to detect people who do not comply with control policies. Moreover, inadequate physical control measures and procedures to protect the company’s assets against theft and unauthorised access were major challenges associated with Prudential Bank Limited’s Internal Control Systems. It was also discovered that the control system had led to positive financial and non-financial performance at Prudential Bank Limited. One of the key recommendations is that PBL should involve staff in the formulation of control policies and also conduct regular control system reviews.

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