Effect of Internal Control Systems on Financial Performance of Commercial Banks: A Case Study of Centenary Bank Mukono Branch

Abstract

This study investigated the impact of internal controls on the financial performance of commercial banks using centenary bank as the case study. The objectives of the study included; to find out the effect of control environment on financial performance of Centenary bank, to find out the effect of risk assessment on financial performance of centenary bank, to find out the effect of control activities on financial performance of centenary bank The study targeted a population of 34 registered small-scale enterprises, with a sample size of 3 respondents selected through Krejcie and Morgan's sample size table. Data was collected using questionnaires and analyzed using SPSS software. The findings reveal that the organization has established a strong control environment that deters fraudulent activities, promotes risk management, and emphasizes regulatory compliance. While there's room for improvement in terms of financial reporting accuracy and operational efficiency, the positive aspects of the control environment are likely contributing to the organization's overall solid financial performance. In addition, research reveals that credit risk assessment plays a crucial role in determining the financial performance of the bank. The use of credible credit risk data and risk estimation during credit risk analysis positively affects financial performance. Adequate efforts to estimate credit risk help strengthen the credit management process and enhance credit risk controls. On the other hand, insufficient risk assessment and undertakings of risky investment/lending without adequate risk evaluation can jeopardize the bank's solvency. Finally findings show a positive impact of control activities on various aspects of financial performance and risk management. However, there is significant variability in the responses, which could indicate diverse opinions among the participants in the survey or assessment. The specific implications of these findings would depend on the context in which this data was collected and the goals of the analysis.