ASSESSING THE CONTRIBUTION OF INTERNAL CONTROLS TO COMMERCIAL BANKS IN UGANDA: A CASE STUDY OF CENTENARY BANK, ENTEBBE ROAD BRANCH

Abstract

ABSTRACT With a case study of Centenary Bank, Entebbe Road Branch, the major goal of this study was to examine the contribution of internal controls to commercial banks in Uganda. It contributed in the examination of the specific internal control measures utilized by Centenary Bank, their benefits, shortcomings, and potential approaches to reinforce these measures in Ugandan commercial banks. The study was conducted to provide banks with more knowledge, skills, and understanding of internal controls and financial performance of organizations; to be used by scholars as a reference for future studies or to shed more light on their research; and to provide banking institutions with an understanding of the relationship between internal controls and finance, which will lead to policy formulation. The study's methodology featured a descriptive survey research design, which used primary research methodologies to collect primary data in a non-experimental manner. The population included sixty (60) male and female permanent staff members of Centenary Bank's Entebbe Road Branch, resulting in a sample size of 52. From a total of 52 respondents, 50 were able to respond, while the other two were unable to, resulting in a 90% response rate. A standardized questionnaire and a systematic review of secondary literature were used to obtain data. The majority of those who participated in the survey were males (52 %), while the rest were females (48 %), with the bulk of them being between the ages of 31 and 40 (48 %). The majority of study participants (74 %) had completed a Bachelor's degree as their highest level of schooling. The maximum, mean, and standard deviation of the control environment were 0.779, 0.206, and 0.116, respectively, according to the study results. Since the standard deviation was less than 1, it implied very small deviations in control environment costs for the bank. The risk assessment had a maximum value of 0.531, an average of 0.084, and a standard deviation of.068 showing little variation. Among the benefits of internal controls, the majority of participants strongly agreed that banks with effective internal controls can easily address agency problems, reduce agency costs, and mitigate against scandalous reporting that could result in resource loss. As an internal control weakness, the majority of respondents strongly agreed that an internal control material weakness could result in greater profitability of insider trading. Due to the banking sector's riskiness and role to Uganda's economic growth, the report recommends, among other things, that commercial banks in Uganda efficiently build and maintain internal controls.