Internal Controls and Financial Performance of United Bank for Africa in Kampala-Uganda

ABSTRACT This study on internal controls and financial performance of United Bank for Africa in KampalaUganda aimed at examining the relationship between internal controls and financial performance and it was guided by four objectives: to examine the relationship between internal audit and financial performance; to examine the relationship between control environment and financial performance; to examine the relationship between control activities and financial performance; and lastly to examine the relationship between risk assessment and financial performance of United Bank for Africa. The study took a quantitative research design with a cross sectional and correlational research design. Questionnaires were used to collect data on a sample of 118 respondents selected from 126 employees from UBA. A pilot test was done on 21 employees and the Cronbach's alpha obtained is 0.739. Data were presented using tables and analyzed using descriptive and inferential statistics. To examine the relationship between the variables Pearson’s Linear Correlation Coefficient was used. Concerning the objectives of the study, it was revealed that there is a positive and significant relationship (r = 0.242**) between internal audit and financial performance; a positive and significant relationship (r = 0.203* ) between control environment and financial performance; a significant and positive relationship (r = 0.218* ) between control activities and financial performance; lastly, a significant and positive relationship (r = 0.626**) between risk assessment and financial performance was revealed. Concerning the purpose, the findings indicated a significant and positive relationship (r = 0.446**) between internal controls and financial performance of United Bank for Africa. Further, the study considered the following recommendations: the management should make sure that staffs are aware of the functions of internal audit and their implications; making sure that the problems identified by internal audit department are worked up on immediately; close monitoring of implementation of internal control systems should be put in place; there should be supervision of junior staffs by senior staffs; and they should make sure the repayment of loans by borrowers plus interest is made on time so as to avoid liquidity problems. As far as the contribution to the body of existing knowledge is concerned, the study has shown the importance of internal controls in UBA and the study considered risk assessment as a measure of internal controls and brought about how risk assessment as part of internal controls affects financial performance and its relationship with financial performance of United Bank for Africa.