INTERNAL CONTROL SYSTEM IN BANKS PROSPECTS AND PROBLEMS
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Study Level: BTech, BSc, BEng, BA, HND, ND or NCE
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:
- To find out if there is internal control in union bank plc
- To investigate the effectiveness of internal control system in union bank plc
iii. To find out factors that affect internal control system in union bank plc
- 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.
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