DETERMINANTS OF INTERNAL CONTROL SYSTEM: A STUDY ON SELECTED COMMERCIAL BANKS IN ETHIOPIA

Abstract

Internal controlling systems are the mechanisms, rules, and procedures implemented by a company to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud. The purpose of this study is to examine determinants of effective internal control system in selected commercial banks in Ethiopia. The descriptive reseaarch design was used and the mixed research approach was used to collect data; while, questionnaires used to collect primary data. The survey was taken commercial banks through random sampling techniques 120 employees for empirical examination. The data was analyzed by using statistical package SPSS version 21 and descriptive and econometrics tool OLS; All independent variables (POER, WOC, IND, GOR, WIECM and WEDOS) were 59% explained the dependent variables (ICS). The study revealed that there existed significant and positive relationships between the Remuneration of internal control staff (β =0.397 prob. = 0.000), organizational structure (β =0.429 prob. = 0.000) and independency of IC staffs (β =0.130 prob. = 0.018) with internal control system. On the other hand, enforcement control (β =-0.379 prob. = 0.000) have a negative and statistically significant relationship with internal control system. However, workers competency (β =0.042 prob. = 0.624), Early report presentation (β =-0.049 prob. = 0.564)have positive relation but not significant effect on internal control system. Based on the findings of the study the banks management emphasize on the role of remuneration internal control staff because of a key to controlling system. This study provides useful information to practitioners and academics who are interested in identifying the determinants of internal control system