Effect of internal controls on performance of rural banks in central region

Abstract

The study sought to examine the effect of internal control practices on the performance of rural banks in Central Region. The study applied the explanatory research design to conducting the study which perfectly supported the quantitative orientation used for the measurement of the constructs and the analysis of the objectives through inferential statistical means. Primary data was collected through structured questionnaires. The study employed descriptive statistics and structural equation model in analysing the objective of the study. The study found that holistically, all the dimensions of internal control practices were perceived as effective regarding their implementation by the rural banks given the threshold of the mean scores obtained. The study also found that there was a positive and significant correlation between monitoring activities and firm performance. Similarly, the study showed that there was a positive and significant correlation between control activities and firm performance. Furthermore, it was found that there was a positive significant correlation between risk management practices and firm performance. Finally, there was a positive and significant correlation between information and communication practices and firm performance. Control activities, control environment and risk management failed to make any significant contributions to the change in firm performance although their contributions were positive. The study recommends that there is the need for the rural banks in the Central Region to intensify their system of corporate governance to ensure the effective implementation of internal control systems.