Internal Controls and Liquidity Levels in Selected Commercial Banks in Uganda

TABLE OF CONTENTS

DECLARATION ............................................................................................................................. i

APPROVAL ................................................................................................................................... ii

DEDICATION ............................................................................................................................... iii

ACKNOWLEDGEMENTS ........................................................................................................... iv

TABLE OF CONTENTS ................................................................................................................ v

LIST OF ABBREVIATIONS ........................................................................................................ ix

LIST OF TABLES .......................................................................................................................... x

LIST OF FIGURES ....................................................................................................................... xi

ABSTRACT .................................................................................................................................. xii

CHAPTER ONE ........................................................................................................................... 1

INTRODUCTION ......................................................................................................................... l

1.1 Background to the Study ........................................................................................................... I

1.2 Statement of the problem .......................................................................................................... 2

1.3 Purpose of the study .................................................................................................................. 2

1.4 objectives of the study .............................................................................................................. 2

1.5 Research questions .................................................................................................................... 2

1.6 Scope of the study ..................................................................................................................... 3

1.7 Significance of the study ........................................................................................................... 3

1.8 The conceptual framework ....................................................................................................... 3

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CHAPTER TWO .......................................................................................................................... 5

LITERATURE REVIEW ............................................................................................................ 5

2.0 Introduction ............................................................................................................................... 5

2.1 Internal Controls ....................................................................................................................... 5

2.2 Components of Internal Controls .............................................................................................. 8

2.2.1 Control Environment ............................................................................................................. 8

2.2.1.1 Corporate Culture ................................................................................................................ 9

2.2.1.2 Competence Levels ........................................................................................................... I 0

2.2.1.3 Quality of Audit Committees ............................................................................................ I 0

2.2.1.4 Management Integrity and Ethics ..................................................................................... II

2.2.2 Control Activities ................................................................................................................. II

2.2.3 Risk Assessment .................................................................................................................. 13

2.2.4 Information Flow ................................................................................................................. 14

2.2.5 Monitoring and Evaluation .................................................................................................. 16

2.2.5.1 Reconciliations .................................................................................................................. 16

2.2.5.2 Internal Checks and Audits ............................................................................................... 17

2.3 Accountability ......................................................................................................................... 18

2.3.1 Transparency ........................................................................................................................ 18

2.3.2 Disclosures ........................................................................................................................... 19

2.4 Liquidity Levels ...................................................................................................................... 19

2.4.1 Liquidity and borrowed funds .............................................................................................. 19

2.4.2 Liquidity Ratios ................................................................................................................... 20

2.4.3 Asset Liquidity Management ............................................................................................... 20

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2.5 Deposits with the Central Bank .............................................................................................. 2 I

2.5. I Commercial Deposit and Loan Exposure ............................................................................ 22

2.6 Managing Access to Funds ..................................................................................................... 22

CHAPTER THREE ............................................................ ~ ....................................................... 23

RESEARCH METHODOLOGY .............................................................................................. 23

3.0 Introduction ............................................................................................................................. 23

3. I Research Design ...................................................................................................................... 23

3.2 Population ............................................................................................................................... 23

3.3 Sample Size ............................................................................................................................. 23

3.4 Data Collection Instruments ................................................................................................... 24

3.5 Validity and Reliability of the Instrument .............................................................................. 24

3.6 Data ......................................................................................................................................... 24

3.7 Measuring the Variables ......................................................................................................... 24

3.8 Limitations .............................................................................................................................. 26

CHAPTER FOUR ....................................................................................................................... 27

DATA PRESENTATION, ANALYSIS AND INTERPRETATION OF FINDINGS .......... 27

4.0 Introduction ............................................................................................................................. 27

4.1 Demographic characteristics ................................................................................................... 27

4.1.1 Gender .................................................................................................................................. 27

4.1.2 Age group of the Respondents ............................................................................................. 29

4.1.3 Number of years the respondent has worked in the bank .................................................... 30

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4.1.4 Education levels ................................................................................................................... 31

4.1.6 The respondents' relationship with his/her bank ................................................................. 33

4.2 Market share of commercial banks ......................................................................................... 34

4.2.1 Financial standing of local banks ......................................................................................... 35

CHAPTER FIVE ........................................................................................................................ 39

DISCUSSION/CONCLUSION OF RESULTS/FINDINGS ................................................... 39

5.0 Inti·oduction ........................................................................................................................... 39

5.1 Demographic characteristics of respondents .......................................................................... 39

5.2 Internal controls ...................................................................................................................... 40

5.2.1 Control environment ............................................................................................................ 40

5.3 Accountability ......................................................................................................................... 40

5.4 Monitoring .............................................................................................................................. 40

5.5 Relationship between internal controls and liquidity levels ................................................... 41

5. 6 Relationship between internal controls, monitoring and accountability ................................ 41

5.7 Conclusions of the findings .................................................................................................... 42

5.8 Recommendations ................................................................................................................... 43

REFERENCES ............................................................................................................................. 44

APPENDIX 1 ................................................................................................................................ 55

QUESTIONNAIRE ...................................................................................................................... 55