Effects of Risk Assessment, Control Environment and Control Activities on Performance of Listed Banks in Ghana

Main Article Content

Redruth Nyaaba Ayimpoya
David Amoah Akolgo
Simon Akumbo Eugene Mbilla
Michael Kwame Gbegble

Abstract

Globally, internal controls serve many important purposes for public private and public help organizations. There is however an increasing call for better and improved internal control systems especially in firms that are listed on public market. However, internal control systems, irrespective of how well conceived and implemented cannot provide absolute assurance of management and boards regarding the achievement of objectives. This research focused on the three components of internal control systems namely control environment, risk assessment, and control activities. This study therefore formulated four objectives and investigated how risk assessment, control activities, and control environment affects the performance of Ghanaian banks. In this quantitative study, representatives from twelve listed banks were engaged. Descriptive and regression analysis was performed on the field data. The study result shows while Risk assessment has a strong significant effect on financial performance, Control environment and Control activities, have a weak significant effect on financial performance. The practical implication of the study is that, when assessing the performance of banks, risk areas must be examined critically to reduce or eliminate their impacts on bank performance.

Keywords:
Stock exchange, internal control, listed banks, performance, control environment.

Article Details

How to Cite
Ayimpoya, R. N., Akolgo, D. A., Mbilla, S. A. E., & Gbegble, M. K. (2020). Effects of Risk Assessment, Control Environment and Control Activities on Performance of Listed Banks in Ghana. Asian Journal of Economics, Business and Accounting, 14(4), 18-33. https://doi.org/10.9734/ajeba/2020/v14i430200
Section
Original Research Article

References

Reid K, Ashelby D. The Swansea internal quality audit processes: A case study. Quality Assurance in Education. 2002; 10(4):237-246.

Ashbaugh-Skaife H, Collins DW, Kinney Jr WR, LaFond R. The effect of SOX internal control deficiencies and their remediation on accrual quality. The Accounting Review. 2008;83(1):217-250.

Doyle J, Ge W, McVay S. Determinants of weaknesses in internal control over financial reporting. Journal of Accounting and Economics. 2007;44(1-2):193-223.

Hogan CE, Wilkins MS. Evidence on the audit risk model: Do auditors increase audit fees in the presence of internal control deficiencies? Contemporary Accounting Research. 2008;25(1):219-242.

Lawson BP, Muriel L, Sanders PR. A survey on firms' implementation of COSO's 2013 Internal Control–Integrated Framework. Research in Accounting Regulation. 2017;29(1):30-43.

Beneish MD, Billings MB, Hodder LD. Internal control weaknesses and information uncertainty. The Accounting Review. 2008;83(3):665-703.

DeFond ML, Francis JR. Audit research after Sarbanes-Oxley. Auditing: A Journal of Practice & Theory. 2005;24(s-1):5-30.

Ngugi K. A survey of internal control systems among the listed private companies and the public sector companies in Kenya. Unpublished Research Thesis. University of Nairobi; 2011.

Madawaki A. Adoption of international financial reporting standards in developing countries: The case of Nigeria. International Journal of Business and Management. 2012;7(3):152.

Knechel WR. The business risk audit: Origins, obstacles and opportunities. Accounting, Organizations and Society. 2007;32(4-5):383-408.

Ayagre P, Appiah-Gyamerah I, Nartey J. The effectiveness of internal control systems of banks. The case of Ghanaian banks. International Journal of Accounting and Financial Reporting. 2014;4(2):377.

Takahiro S, Jia P. Comparison of internal control systems in Japan and China. International Journal of Business Administration. 2012;3(1).

Wang X, Hong Y, Huang J, Jiang ZP. A distributed control approach to a robust output regulation problem for multi-agent linear systems. IEEE Transactions on Automatic Control. 2010;55(12):2891-2895.

Wardiwiyono S. Internal control system for Islamic micro financing: An exploratory study of Baitul Maal wat Tamwil in the City of Yogyakarta Indonesia. International Journal of Islamic and Middle Eastern Finance and Management. 2012;5(4):340-352.

Ratcliffe TA, Landes CE. Understanding internal control and internal control services. American Institute of Certified Public Accountants. New York; 2009.

Rizaldi A. Control environment analysis at government internal control system: Indonesia case. Procedia-Social and Behavioral Sciences. 2015;211:844-850.

Theophanous A. The Cyprus Question, the EU and the Stakes Involved; 2011.

Shabri SM, Saad RAJ, Bakar AA. The effects of internal control systems on cooperative’s profi tability: A case of Koperasi ABC Berhad. International Review of Management and Marketing. 2016;6(8S):240-245.

Becker J, Eggert M, Bruning D, Saat J. Applicability of business process model analysis approaches–a case study in financial services consulting. Paper Presented at the Proceedings of the 11th International Conference on Wirtschaftsinformatik (WI2013), Leipzig; 2013.

Ejoh NO, Ejom PE. The effect of internal audit function on the financial performance of tertiary institutions in Nigeria. International Journal of Economics, Commerce and Management. 2014;2(10): 1-14.

Mawanda S. Effects of internal control systems on financial performance in an institution of higher learning in Uganda: A case of Uganda Martyrs University; 2011.

Morris JJ. The impact of enterprise resource planning (ERP) systems on the effectiveness of internal controls over financial reporting. Journal of Information Systems. 2011;25(1):129-157.

Hanim Fadzil F, Haron H, Jantan M. Internal auditing practices and internal control system. Managerial Auditing Journal. 2005;20(8):844-866.

Amudo A, Inanga EL. Evaluation of internal control systems: A case study from Uganda. International Research Journal of Finance and Economics. 2009;27(27):124-144.

Jones MJ. Internal control, accountability and corporate governance: Medieval and modern Britain compared. Accounting, Auditing & Accountability Journal. 2008;21(7):1052-1075.

Jensen MC, Heckling WH. Specific and general knowledge and organizational structure. Journal of Applied Corporate Finance. 1995;8(2):4-18.

Bakibinga S. User acceptance of information systems among local governments in Uganda: The pilot of the education management information system in Jinja District; 2011.

Hitt MA, Hoskisson RE, Johnson RA, Moesel DD. The market for corporate control and firm innovation. Academy of Management Journal. 1996;39(5):1084-1119.

Verschoor CC. Corporate performance is closely linked to a strong ethical commitment. Business and Society Review. 1999;104(4):407-415.

Hair JF, Sarstedt M, Ringle CM, Mena JA. An assessment of the use of partial least squares structural equation modeling in marketing research. Journal of the Academy of Marketing Science. 2012; 40(3):414-433.

Bagozzi RP, Yi Y. Specification, evaluation and interpretation of structural equation models. Journal of the Academy of Marketing Science. 2012;40(1):8-34.

Cronbach LJ. Coefficient alpha and the internal structure of tests. Psychometrika. 1951;16(3):297-334.

Olumbe C. The relationship between internal controls and corporate governance in commercial banks in Kenya. Unpublished Thesis, University of Nairobi; 2012.

Barra RA, Savage A, Tsay JJ. Equational zero vector databases, non-equational databases and inherent internal control. International Journal of Business Information Systems. 2010;6(3):354.

Sarens G, De Beelde I. Interaction between internal auditors and the audit committee: An analysis of expectations and perceptions. Sarens, ID Beelde. Ghent University, Faculty of Economics and Business, Belgium; 2006.

Abdulkadir HS. Challenges of implementing internal control systems in Non-Governmental Organizations (NGO) in Kenya: A case of Faith-Based Organizations (FBO) in Coast Region. IOSR Journal of Business and Manage-ment (IOSR-JBM). 2014;16(3):57-62.