EFFECT OF INTERNAL CONTROL SYSTEM ON FINANCIAL PERFORMANCE OF SOME SELECTED BANKS IN NIGERIA

Abstract

This study examines the effect of the internal control system on the financial performance of selected
commercial banks in Nigeria. Specifically, it evaluates the impact of the control environment, control
activities, information technology, and monitoring of controls on financial performance. A survey
research design was adopted, and data were collected from bank employees using a structured
questionnaire based on a 5-point Likert scale. The study utilized descriptive statistics (mean and standard
deviation) and multiple regression analysis, with data processed using Statistical Package for Social
Sciences version 21.0. Findings indicate that a strong control environment, characterized by management
integrity, ethical values, and structured authority, positively influences financial performance by
enhancing transparency and accountability. Control activities, including adherence to policies, risk
management strategies, and segregation of duties, contribute significantly to operational efficiency and
profitability. Additionally, the study reveals that information technology enhances financial performance
by improving transaction accuracy, fraud detection, and regulatory compliance. Furthermore, effective
monitoring of controls, through internal audits and regulatory oversight, strengthens compliance and
reduces financial irregularities, ultimately improving financial stability. The study concludes that a wellstructured internal control system is crucial for sustaining financial performance in commercial banks. It
recommends that banks should continuously improve their internal control mechanisms by integrating
advanced technology, reinforcing compliance measures, and conducting periodic assessments to enhance
efficiency and mitigate risks. These findings provide valuable insights for bank management,
policymakers, and regulatory bodies in strengthening financial controls for improved performance and
stability in the Nigerian banking sector.