Internal Control System In Banks Prospects And Problems (A Case Study Of Union Bank Plc)

Project and Seminar Material for Accountancy / Accounting

Internal Control System In Banks Prospects And Problems (A Case Study Of Union Bank Plc)


Abstract


This researcher examines the prospects and problem of internal control in bank, using Union Bank Plc Muhtala Muhammed way llorin as a case study. Forty four (44) staff of the bank were randomly sampled. A questionnaire was design to collect data from respondents, simple percentage, chi-square test and average total weighted response (AWTR) to analyze the data collected. The study revealed that internal control system is effective in Union Bank Plc, it was also found out that the purpoled factor are militating against internal control system. Level of management and gender does not affect responses of the respondent on factors that are militating against internal controls system. However, working experience and education qualification of respondent affect the response of the respondent on factors that are militating against internal control system. The recommendations were proffered and these are:

  1. The management should daily with the factor militating against internal control system if the internal control is to be more effective.
  2. Appointment of personnel to a particular work should be base on working experience and educational qualification
  3. The bank should appoint right people into the bank when they want to employ people.
  4. There should be training of all personnel of the bank so that this will improve their skills,
  5. Also internal control system should be review regularly, so that if there is problem, it can be corrected.

Table of Content


  • Title page
  • Certification
  • Dedication
  • Acknowledgement
  • Abstract

Chapter One

Introduction

  • 1.1 Background of the study
  • 1.2 Statement of the problem
  • 1.3 Justification of the study
  • 1.4 Statement of hypothesis
  • 1.5 Objective of the study
  • 1.6 Scope of the study
  • 1.7 Plan of the study.

Chapter Two

Literature Review

  • 2.1 Introduction
  • 2.2 Concept of internal control
  • 2.3 Classification of internal control
  • 2.4 Types of internal control
  • 2.5 Reliance on internal control
  • 2.6 Axes on internal control
  • 2.7 Objective of internal control
  • 2.8 Environment of internal control
  • 2.9 Requirement for effective control
  • 2.10 Application of Internal Control
  • 2.11 Limitation of internal control

Chapter Three

Research Methodology

  • 3.0 Types of Data
  • 3.2 Research design
  • 3.3 Sample procedure
  • 3.4 Method of data analysis

Chapter Four

Presentation and Analysis of Data

  • 4.0 Data presentation
  • 4.1 Data analysis
  • 4.2 Findings.

Chapter Five

Summary, Conclusion and Recommendations

  • 5.0 Summary
  • 5.1 Conclusion
  • 5.2 Recommendations
  • 5.3 Suggestion for further research
  • Bibliography

Chapter One


Introduction

1.1 Background of the Study

Banks are very important in any nation; they are the backbone f the nation’s economy. Function of banks according to Ezeudiji (1997), including money creation, acceptance of deposit from the customers, provision of facilities for domestic and foreign remittance, help government in implementing monetary policies e.t.c.

According to Benaijee (2001) internal control system is whole system of control, financial and otherwise established by the government in order to carryon business of the enterprises in an orderly manner, ensure adherence to management policies safeguarding the assets and ensure as far as possible the completeness and accuracy of accounting records”.

The function of internal control system includes the detection of error, early detection of fraud and protection or safeguarding of business assets but despite the fact that all banks have internal control system, there have been a lot of problems in the banking sector. Ranging from bank liquidating to defrauding the banks, many banks have been liquidated example of such bank include Savannah bank Plc, National Bank Plc (although it is now being resuscitated) merchant bank Nigeria limited. Nigeria international bank limited to mention few.

According to Central Bank of Nigeria (CBN) annual report over (N16,billion) sixteen billion naira was defrauded from the banking sector, also recently a bank was suspended from the cleaning system by the central bank of Nigeria (CBN) because of mis-management of banks resources expert have given reasons as to what causes banks distress. According to Exeudiyi (1997) one of the causes of bank distress is the internal control system problems include poor or lack proper authorization of loan and contract, poor loan recovery, failure to collect proper collateral security, management override the control e.t.c.

According to Koroye (1989). It a bank interval control (detective in any significant way. then) that audit should be decline outright or opinion must qualified as strictly as possible. It is because of two main reasons.

  1. Banking transaction are very prone to fraud
  2. The auditor will take forever action to vouch the transaction to obtain substantive audit transaction.

1.2 Statement of the Problem

Internal control system many organization, including bank is very important because it ensures orderliness, in the organization, advance to management policies, early detection of error and fraud, protection of assets e.t.c internal control system problems have led to closure of many banks in Nigeria, Ezeudiji (1997) thereby making depositors customer to shareholder of such banks to loss his or her shares. It is inimical to nations economy because provide 90% of the capital employed in Nigeria. Due to the following problem it leads to the following questions.
Does bank operation carried out in any orderly manner, and follow the procedure laid down? Does transactions recorded accurately and correctly?.


1.3 Justification of the Study

The study is very important nowadays were federal government and state government has striving hard to woo investor in Nigeria. Since foreign investor will not invest in any country where there is no good banking sector. The study will be of immense benefit to banks determine the extent to which internal control system is effective. In addition the study would determine the factor problem militating against the success of internal control in banks so that solution proffer to it. The study will be of immense help because most of the funds requires by Nigerians are provided by banks also anything that affects banking sector also affect many others sectors such as agriculture and economy sector of the nations

The study will be useful for further research in related topic.


1.4 Statement of the Hypothesis

The following hypotheses form the framework for carrying out this study.

  • Ho 1: The internal control system is not significantly effective in union bank plc.
  • Ho 2: The factors are not significantly militating against Interval control system RI union bank plc Ho3: There is no significance do not significantly effect responses on factors militating against internal control system in union bank plc
  • Ho 4: working experience do not significantly effect responses on factors militating against internal control system in union bank plc.
  • Ho 5: level of management on the respondent does not significantly affect the responses on factors militating against internal control system in union bank plc.
  • Ho 6: The academic qualifications of the respondent do not significantly affect their responses on factors militating against internal control system in union bank plc.

1.5 Objectives of the Study

The objectives of the study are:

  1. To find out if there is internal control in union bank plc
  2. To investigate the effectiveness of internal control system in union bank plc
  3. To find out factors that affect internal control system in union bank plc
  4. To suggest way to improve internal control system effectiveness in union bank plc

1.6 Scope of the Study

This study is limited to Union bank plc Muritala Muhammed way branch ilorin due to financial constraints and other’ problem. The study can only be generated to union bank plc branches ail over the country.


1.7 Plan of the Study

This plan is divided into (5) five chapter,

The first chapter discuss on the introduction of the study which comprises of the general background of the study, hypothesis, significance, limitation, plan of the study and scope of the study.

The second chapter contains chapter that review the related literature, these literature is reviewed under the concept of internal control.

Chapter three deals mainly with research methodology it substantially give detail information on the instrument used for the study it also contains research design and explanation on procedure for collection of data.

Chapter four deals with analysis and interpretation of the data collected; finally, summary, conclusion and recommendations are made in chapter five.


Chapter Five


Summary, Conclusion and Recommendation

5.1 Summary of Findings

The study was designed to investigate the effectiveness of internal control system in Union Bank Plc. Forty four (44) respondents all staff of Union Bank, Muritala Mohammed way llorin branch were randomly sample. The instrument used for the research was questionnaire which was designed to collect necessary informative require for the study from the respondents.

The researcher enjoyed Maximum Corporation from the staffs of union bank plc. Sample percentage, average weighted response (AWR) and chi-square were employed in accepting and rejecting the hypothesis formulated by the researcher.

The study revealed that internal control system is significantly effective in Union Bank Plc. The purported factors
Significantly militating against internal control system in Union Bank Plc. It was also found that there was no significant gender difference in the response on factors militating against internal control. It was however revealed that educational qualification and working experience of the control system in Union bank plc also the study reveals that there is internal control system in Union Bank Plc.


5.2 Conclusion

The study shows that internal control system will be more effective if fraud, management override of control, abuse of responsibility e.t.c are taking into consideration where developing internal control system. The study also shows that educational qualification and working experience of respondent have effect on respondent answer to factors militating against internal control.

Also level of management and gender have no effect at all on that there is internal control system in Union Bank Plc in a nutshell, internal control system is very useful in solving the problems of bank liquidation and ensuring orderliness in banking operation.


5.3 Recommendations

Based on the findings of this research study the following recommendations were made;

  1. The internal control system can be more effective in the factors militating against internal system like fraud management, override of controls, abuse of responsibility e.t.c
  2. Were dealt with by the management.
  3. Appointment or assignment of a personnel to a particular work or job in the banks operation should be based on the educational qualifications and working experience of that personnel
  4. The banks should appoint right people into the bank when they want to employ people.
  5. There should be training of all personnel of the bank so that
    this will improve there skills.
  6. All internal control should review regularly, so that if there is problem it can be corrected.
  7. Internal control unit should be made independent
  8. Strict adherence to the features of internal controls

5.4 Suggestion for Further Research

Since the research is carried out on cash operation, cheque transaction, fund transfer and interest bearing deposits. This project is hereby suggested for further research using other area of bank operation.


Internal Control System In Banks Prospects And Problems (A Case Study Of Union Bank Plc)


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Internal Control System In Banks Prospects And Problems (A Case Study Of Union Bank Plc)


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