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INTERNAL CONTROL AND GROWTH OF BANKING INDUSTRY A STUDY OF DIAMOND BANK

INTERNAL CONTROL AND GROWTH OF BANKING INDUSTRY A STUDY OF DIAMOND BANK, UYO, AKWA IBOM STATE 

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ABSTRACT 

This study 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. The study revealed that: There is a indicant rc1ationshi 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. 

TABLE OF CONTENTS

Abstract

Table of Contents

CHAPTER ONE: INTRODUCTION

1.1     Background to the Study

1.2     Statement of the problem

1.3     Objectives of the study

1.4     Research Questions

1.5     Research Hypotheses

1.6     Significant of the study

1.7     Scope of the study

1.8     Limitation of the study

1.9     Definition of terms

1.10   Organization of the study

CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.1     Theoretical Framework

2.1.1  Theoretical Background to the Study

2.1.2  Conceptual background to the study another literature

2.2.3  Manage and control of the system

2.2.4  Types of Banks Common irregularities Practices

2.2.5  Causes of Bank Irregularities

2.2.6  Factors influencing the existence of irregularities in banks

2.2.7  Effect of Irregularities

2.2     Empirical Literature review

2.3     Summary of Literature Review

CHAPTER THREE: RESEARCH METHODS

3.1     Research Design

3.2     Population of the Study

3.3     Sample and Sampling Techniques

3.4     Nature of Data-Primary/Secondary

3.5     Method of Data Collection/Instrument

3.6     Model Specification

3.7     Statistical Tools for Data Analysis

3.8     Validity/Reliability

INTERNAL CONTROL AND GROWTH OF BANKING INDUSTRY A STUDY OF DIAMOND BANK

CHAPTER FOUR:  ANALYSIS OF DATA, PRESENTATION AND DISCUSSION OF FINDINGS

4.1    Data presentation

4.2    Discussion of findings

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1.   Summary

5.2    Conclusion

5.3    Recommendations

5.4    Contributions

        References

        Appendices 

INTERNAL CONTROL AND GROWTH OF BANKING INDUSTRY A STUDY OF DIAMOND BANK

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.

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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.

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INTERNAL CONTROL AND GROWTH OF BANKING INDUSTRY A STUDY OF DIAMOND BANK

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;

  1. examine the influence of segregation of duties on the growth of banking industry.
  2. investigate the influence of supervision control on the growth of banking industry.
  3. investigate the influence of management control on the growth of banking industry.

1.4     Research Questions

The following research questions were formulated to guide the study:  

(i)      To what extent does segregation of duties affect the growth of banking industry in Nigeria?

(ii)      To what extent does supervision control affect the growth of banking industry?

(iii)     To what extent does management control affect the growth of banking industry in Nigeria?

1.5     Research Hypotheses

The following research hypotheses are formulated for the findings of the study

  1. There is no significant influence of segregation of duties and the growth of banking industry in Nigeria.
  2. There is no significant influence of supervision control and the growth of banking industry.
  3. There is no significant influence of management control and the growth of banking industry.

1.6     Significant of the study

A study of this nature holds numerous benefits across an eclectic range of stakeholders. Firstly, the study will be useful to management in evaluating the like determinants of internal control for the growth of banking industry in Nigeria.

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Secondly, the study will be of immense significant to the literature especially as it will provides evidence from a developing economy like Nigeria and the growth of its industry.  Thirdly, the study will be of immense benefits to policy institutions as well as banking industry nationwide. The study will also be useful to accounting students and other researchers who would find this work reliable for the growth of banking industry.

1.7      Scope of the study

The scope of this study may be defined with respect to the subject matter, the sample study area and time period. Consequently, this study is focus on the internal control and growth of banking industry with reference to Union Bank Uyo Metropolis.

1.8      Limitation of the study

This study is limited to the above scope due to financial, time constraints.

(i)       Lack of co-operation from the respondents in responding promptly to the questions asked.

(ii)      Lack of finance in providing material required for the research work.

(iii)     The time given for the completion of the study could not enable the researcher to conduct an in-dept study into the problem situation.

1.9     Definition of terms 

The following terms are defined to avoid ambiguity in the words used in this study:

Internal Control: It is the system of internal administrative and financial checks and balances designed by management to ensure that the goal and responsibilities of the organizations are achieved.

Growth: In banking industry, growth has to do with increase of expansion in developing and satisfying of customers.

Banking Industry: Are institution that deals on financial transaction, payments and saving of funds for its customers.

INTERNAL CONTROL AND GROWTH OF BANKING INDUSTRY A STUDY OF DIAMOND BANK

1.10   Organization of the study

The research work is organized in the various ways;

Chapter one is introduction covering the background to the study, statement of the problem, objectives of the study, significance of the study, research questions, research hypotheses, scope of the study, limitation of the study organization of the study and definitions of terms. Chapter two focuses on the review literature which embraces theoretical, conceptual framework and relevant work to the study.

The chapter three which discuss about research methodology, research design, population of the study, sample and sampling technique, nature of data (primary/secondary), method of data collection/ instrument, model specification, statistical tools for data analysis, and validity/ reliability of measuring instrument. Chapter four will show the analysis and presentation of key findings arising from the study. Lastly, chapter five will deal on summary, conclusions, and recommendations to ensure effective and efficient use of financial control by uses for investment.

Mr. Harrison

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