ABSTRACT: This study examined Internal Control And Growth Of Banking Industry; A Study Of Diamond Bank. It was conducted to look at the effect of internal control and growth of banking industry with a particular reference to Diamond Bank, Uyo, Akwa Ibom State. A survey research design was used for the study using questionnaire instrument. The researcher used 345 (three hundred and forty five) staff as population for the study. The data for this study were analyzed using tables and percentages. A statistical tool of Pearson product moment Correlation Co-efficient (PPMCC) was used for test of hypothesis. Three alternate hypotheses were accepted.
Internal Control And Growth Of Banking Industry; A Study Of Diamond Bank
The study revealed that: There is a significant relationship between segregation of duties and the growth of banking industry in Nigeria; That most of bank frauds are traceable to lapses in internal control. It was recommended that: Management of banks should ensure a strong internal system in banks, there should be separation/delegation of functions as well as proper auditing function. Finally, qualified personnel should be recruited, trained and re-trained to familiarize with the operating culture of banks.
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Banking institutions occupy a central position in the nation’s financial system. And they play essential roles in the development process of the nation’s economic growth. By intermediating between the surplus and deficit spending units, banks increase in quantum of national savings and investments and hence… national output. By granting credits, banks create money thus influencing the level of money supply which is an essential term in the growth of national income as it determines the level of growth and economic activities in the country.
On the other hand, for the development of banking industry, the Auditing Practice (APC) defines internal control as a system…, the whole system of controls, financial and otherwise, established by the management in order to carry on the business of the enterprise in an orderly and efficient manner, ensure adherence to management policies, safeguard the assets and ensure as far as possible for the growth and the completeness and accuracy of the business records.
According to Kantzos and Chondrako (2006), there is currently a considerable interest in the topic of internal control system and its contribution to exact management of any business economic resources. This developing role of the internal control for the growth of banking industry is reflected in the definition posited by Cahill (2006) who states that control is one of the essential features in banking industry because of its financial checks and balances, administrative and corrective actions and responsibilities in achieving its goals.
While Palfi and Muresan, (2009), opined that, the growth in international financial markets, the emergence of the universal banking policy amongst others… has given banks the opportunity to design new products and to provide a wide range of services which has come with increases in associated risks. Consequently, there is growing management recognition of the importance of implementing a good internal control that is now seen as critical elements in the assurance process. In the same vein, internal control plays a crucial role in any organizations globally.
With particular emphasis on banks, a strong internal control system has long been identified as really important due to the nature of financial business and also because of their susceptibility to fraud (Chill, 2006). In addition, according to Basle Committee on Banking Supervision (1998), an evaluation of the problems and challenges that resulted in the collapse of several reputable organizations such as banks revealed that, the loses acquired by these banks or any financial organizations could have been prevented…if there were effective internal control.
The committee further emphasized that, internal control must be structured so that…. it can deliver reasonable assurance to management and stakeholders so that all avenues accrue to its benefits, and all expenditure will duly be authorize and properly disbursed, all assets are adequately safeguarded, all liabilities are recorded, all statutory requirements relating to the provision of accounts will be complied with and all financial reporting provision followed. In the Nigerian banking industry, there is the perception by stakeholders that, the quality of internal control appears to be inadequate.
In view of the growth of banking industry, and other economic growth and complexities, proper management is not possible unless they have an effective system of internal control. Therefore, internal control play an essential role which they intends to examine and provide empirical findings on the relationship between internal control and growth of banking industry with particular reference to Union Bank in Uyo Metropolis.
1.2 Statement of the Problem
The need for the internal control in any organizations, especially banks cannot be under-minded due to the fact that the banking sector which has crucial role to play in the economic development of the nation is now being characterized by more economic instability, slow growth in real economic activities, corruption and the risk of frauds.
Internal controls are the foundation of safe and sound banking industry. It is a process affected by any organization’s structure, work, and authority flows, people and management information system, designed to help the organization accomplish specific goals or objectives {Princeton 2008]. From the definition, a properly designed and consistently enforced internal system of operational and financial internal control helps a bank’s board of directors… and management to safeguard the banks resources, produce reliable financial reports and complies with laws and regulations. Therefore, internal control plays an essential role to the growth of banking industry. It also helps the organization to meet its goals more effectively.
Internal Control And Growth Of Banking Industry; A Study Of Diamond Bank
1.3 Objectives of the study
The main objective of this work is to evaluate the system of internal control and the growth of banking industry with particular reference to Union Bank in Uyo Metropolis. To achieve the objectives effectively, the study intends to;
- examine the influence of segregation of duties on the growth of banking industry.
- investigate the influence of supervision control on the growth of banking industry.
- investigate the influence of management control on the growth of banking industry.
