Effect of Internal Audit Practices on Financial Performance of Banks in Ghana
Abstract
Internal audit (IA) practices are considered as one of the key measures necessary for promoting healthy business activities. In this study, the researchers examine the effect of internal audit practices on the performance of banks in Ghana. The study used a sample of 154 respondents from 5 selected banks, the study adopted the quantitative research approach, data was analyzed using inferential statistical methods such as correlations and regression analysis. The study results indicate that there is a strong positive effect of monitoring, risk assessment and information and communication on the financial performance of banks in Ghana, whereas there was no significant effect of control environment and control activities on the financial performance of banks in Ghana. The study recommends that the management of banks should strengthen the control environment, by enhancing the policies and procedures adopted by the banks in safeguarding assets and properties, there is the need to continuously review the existing policies, procedures and activities performed to ensure that they have not outlived their usefulness in the wake of changing competitions and advancement in technology and management orientation.
References
Ahmed, S. O., & Ng’anga, P. (2019). Internal Control Practices and Financial Performance of County Governments in the Coastal Region of Kenya. International Journal of Current Aspects, 29-41.
Asare, T. (2009). Internal auditing in the public sector: Promoting good governance and performance improvement. International Journal on Governmental Financial Management, 3(1), 15-27
Barua, A., Rama, D. V. and Sharma, V. (2010). Audit committee characteristics and investment in internal auditing. Journal of Accounting and Public Policy, 29, pp. 503–513.
Bank of Ghana. (2018) Banking reforms and regulatory framework-Ghana
Bank of Ghana Financial Stability Report, December (2019) https://www.bog.gov.gh/wp-content/uploads/2020/09/Financial-Stability-Review-Dec-2019.pdf
Beasley, M. S., J. V. Carcello, D. R. Hermanson, and T. L. Neal. (2009). The Audit Committee Oversight Process. Contemporary Accounting Research 26 (1):65-122.
Collins, O. O. (2014). Effect of internal control on the financial performance of microfinance institutions in Kisumu central constituency, Kenya. Scholarly Journal of Scientific
Committee of Sponsoring organization. (2013). - Internal control / integrated framework executive summary. Committee of Sponsoring Organisation of the Treadway Commission (Coso) (pp. 1-8).
Corporate Governance Directive. (2018) Bank of Ghana Corporate Governance Directive.
Davis, J., Schoorman, F. & Donaldson, L. (2003) Towards a stewardship theory of management. Academy of Management Review, 22, vol. 1 pp. 20-47
Eisenhardt, T. (1998) Larger boards size and decreasing firm value in small firms. Journal of Financial Economics, 48, 35-54.
Greenwood, R., Oliver, C., Suddaby, R., & Sahlin-Andersson, K. (2008). The SAGE Handbook of Organizational Institutionalism. London: Sage Publication Ltd, 2007.
Hair, J. F., Sarstedt, M., Ringle, C. M., & Mena, J. A. (2011). An assessment of the use of partial least squares structural equation modelling in marketing research. Academy of Marketing Science, 414-433.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: managerial behaviour, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.
Kinyua, J. K., Gakure, R., Gekara, M., & Orwa, G. (2015). Effect of Internal Control Environment on the Financial Performance of Companies Quoted in the Nairobi Securities Exchange. International Journal of Innovative Finance and Economics Research, 29-48.
Mallin, C. (2007) Corporate Governance 2nd edition. Oxford University Press, Oxford UK
Mbilla, S. A., Nyeadi, J. D., Gbegble, M. K., & Ayimpoya, R. N. (2020). Assessing the Impact of Monitoring, Information and Communication on Banks Performance in Ghana. Asian Journal of Economics, Business and Accounting, 58-71.
Mire, H. A. (2016). Effects of Internal Control System on The Organizational Performance of Remittance Companies in Mogadishu-Somalia. Journal of Business Management, 153-167.
Nicholson, G.J, & Kiel, G. C. (2003). Board Composition and Corporate Performance: How the Australian Experience Informs Contrasting Theories of Corporate Governance. Corporate Governance Vol.11, No.3 Pp. 189-205.
Norman, S. C., Rose, A. M., & Rose, J. B. (2010). Internal audit reporting lines, fraud risk decomposition, and assessments of fraud risk. Accounting, Organizations and Society, 35(5): 546-557.
Ramachandran, J., Subramanian, R., & Kisoka, I.J. (2012): Effectiveness of Internal audit in Tanzanian Commercial Banks.
Sarens, G. & Beldee, I. (2006b). ‘The Relationship between internal audit and senior management: a qualitative analysis of expectations and perceptions, ‘International Journal of Auditing, Vol. 10, No. 3, pp.219–241
Solomon, J., (2013). Corporate Governance and Accountability 4th ed. Chichester, UK: John Wiley & Sons.
Ofori, W. (2011). Effectiveness of internal controls: perception or reality. Journals of Business, 30-45.
Copyright (c) 2020 Eleazer Fianko Ofei, Mark Andoh - Owusu, Carl-Reindolph Asante
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
