Effect Of Internal Audit On Financial Performance Of Commercial Banks In Uganda; A Case Study Of Stanbic Bank Kansanga Branch

ABSTRACT

Financial performance requires appropriate internal audit practices to enhance efficiency.

For the purpose of this study the researcher sought to determine the effect of internal

audit on financial performance in commercial bank (Stanbic bank). Internal audit was

looked at from the perspective of internal audit standards, professional competency,

internal controls and independence of internal audit. The study selected one senior

manager in the finance department. The researcher administered a survey questionhaire

to each member of the target population since it was the most appropriate tool to gather

information. Quantitative analysis and regression analysis were used as data analysis

technique. Descriptive statistics such as mean, standard deviation and frequency

distribution were used in the analysis of data. Data presentation was done by use of tables

for ease of understanding and interpretation. From the findings, the study concludes that

internal audit standards, independence of internal audit, professional competency and

internal control had a positive relationship with financial performance of commercial

banks, the study found that a unit increase in internal audit standards would lead to

increase in financial performance of commercial banks, a unit increase in independence of

internal audit would lead to increase in financial performance of commercial banks, a unit

increase in professional competency would lead to increase in financial performance of

conunercial banks and further unit increase in internal control would lead to increase in

financial performance of commercial banks. The study recommends that management in

commercial bank (stanbic bank) should adopt effective internal audit practices such as

internal auditing standards, independence of internal audit, professional competency and

internal controls to enhance financial performance of the banks.

ABSTRACT

Financial performance requires appropriate internal audit practices to enhance efficiency.

For the purpose of this study the researcher sought to determine the effect of internal

audit on financial performance in commercial bank (Stanbic bank). Internal audit was

looked at from the perspective of internal audit standards, professional competency,

internal controls and independence of internal audit. The study selected one senior

manager in the finance department. The researcher administered a survey questionhaire

to each member of the target population since it was the most appropriate tool to gather

information. Quantitative analysis and regression analysis were used as data analysis

technique. Descriptive statistics such as mean, standard deviation and frequency

distribution were used in the analysis of data. Data presentation was done by use of tables

for ease of understanding and interpretation. From the findings, the study concludes that

internal audit standards, independence of internal audit, professional competency and

internal control had a positive relationship with financial performance of commercial

banks, the study found that a unit increase in internal audit standards would lead to

increase in financial performance of commercial banks, a unit increase in independence of

internal audit would lead to increase in financial performance of commercial banks, a unit

increase in professional competency would lead to increase in financial performance of

conunercial banks and further unit increase in internal control would lead to increase in

financial performance of commercial banks. The study recommends that management in

commercial bank (stanbic bank) should adopt effective internal audit practices such as

internal auditing standards, independence of internal audit, professional competency and

internal controls to enhance financial performance of the banks.

TABLE OF CONTENTS

DECLARATION

APPROVAL

DEDICATION iii

ACKNOWLEDGEMENT iv

LIST OF ABBREVIATIONS v

TABLE OF CONTENTS vi

LIST OF TABLES ix

ABSTRACT x

CHAPTER ONE 11

1.1 Background of Study 11

1.2 Problem Statement 13

1.3 Research Objective 13

1.4 Specific Objectives 13

1.5 Research Questions 14

1.6 Significance of the Study 14

1.7 Scope of the study 14

1.8 Conceptual Framework 15

CHAPTER TWO 16

LITERATURE REVIEW 16

2.1 Review of Theories 16

2.2 Review of Empirical Studies 18

2.3 Determinants of Internal Audit 21

CHAPTER THREE 26

vi

METHODOLOGY .26

3.1 Research Design 26

3.2 Target Population 26

3.3 Sample Size 26

3.4 Data Collection techniques 27

3.4.1 Questionnaire 27

3.4.2 Interviewing 27

3.5 Validity and reliability 27

3.6 Data Analysis 28

3.7 Ethical considerations ... 28

3.8 Limitations of the Study 28

CHAPTER FOUR 29

DATA ANALYSIS AND INTERPRETATION 29

4.1 Data Presentation 29

4.1.1 Demographic Information 29

4.1.2 Professional Competence 31

4.1.3 Internal Controls 33

4.2.4 Internal audit Standards 35

4.2.5 Independence of Internal Audit 37

CHAPTER FIVE 40

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS 40

5.1 Sun~mary 40

5.2 Conclusion 43

5.3 Recommendations 44

v~ I

5.4 Areas for further study.44

REFERENCES 45

APPENDICES 48