Internal Auditing and Financial Performance of Commercial Banks in Uganda: A Case Study of Equity Bank Kampala Uganda TABLE OF CONTENTS
DECLARATION ................................................................................................................ i
APPROVAL ....................................................................................................................... ii
DEDICATION .................................................................................................................. iii
ACKNOWLEDGMENT ................................................................................................... iv
TABLE OF CONTENTS ................................................................................................... v
LIST OF TABLES ............................................................................................................ ix
ABSTRACT ....................................................................................................................... x
CHAPTER ONE ............................................................................................................... I
1. 0 Introduction .................................................................................................................. 1
1.1 Background of the study .............................................................................................. 1
1.1.1 Historical background ............................................................................................... 1
1.1.2Theoretical back ground ............................................................................................. 6
1.2 Problem statement ........................................................................................................ 7
1.3 Purpose of the study ..................................................................................................... 7
1.4 Research objectives ...................................................................................................... 8
1.5 Research questions ....................................................................................................... 8
1.6 Scope ofthe study ........................................................................................................ 8
1.6.1 Subject scope ............................................................................................................. 8
1.6.2 Geographical scope ................................................................................................... 8
1.6.3 Time scope ................................................................................................................ 8
1.7 Significant of the study ................................................................................................ 9
1.8Conceptual Framework ............................................................................................... 10
CHAPTER TW0 ............................................................................................................ 12
LITTERATURE REVIEW ........................................................................................... 12
2.0 Introduction ................................................................................................................ 12
2.1 Nature of internal auditing in commercial banks ....................................................... 12
2.1.1 Role ofintemal audit standards ............................................................................... 12
2.1.2 Effect of professional audit competency ................................................................. 13
2.1.3 Effect of intemal controls audits ............................................................................. 14
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2.2 Challenges to the internal audit function in financial perfotmance of commercial
banks ................................................................................................................................. 16
2.3 Relationship between internal auditing and financial performance of organizations
.......................................................................................................................................... 17
CHAPTER THREE ....................................................................................................... 21
METHODOLOGY ......................................................................................................... 21
3. 0 Introduction ................................................................................................................ 21
3.1 Research Design ......................................................................................................... 21
3.2 Population of the study ............................................................................................... 21
3.3 Sample size ................................................................................................................. 21
3.3.1 Sample size .............................................................................................................. 21
3.3.2Sampling procedure .................................................................................................. 22
3.4 Data collection methods ............................................................................................. 23
3.4.1 Self-administered questionnaires ............................................................................ 23
3.4.2 Interview .................................................................................................................. 23
3 .4.3 Documentary Review .............................................................................................. 23
3.5 Research instrument ................................................................................................... 23
3. 5 .I Questionnaires .......................................................................................................... 23
3.5.2 Interview Guide ....................................................................................................... 23
3.6 Validity and Reliability of the instrument.. ................................................................ 24
3.6.1 Validity .................................................................................................................... 24
3.6.2 Reliability of the instrument... ................................................................................. 24
3. 7 Sources of data ........................................................................................................... 24
3.7.1 Primaty data ............................................................................................................ 24
3.8 Data collection Procedure .......................................................................................... 25
3.9 Data Processing and analysis ..................................................................................... 25
3.9.1 Data Processing ....................................................................................................... 25
3.9.2 Ethical considerations ............................................................................................. 25
3.10 Data Presentation and Analysis ................................................................................ 26
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CHAPTER FOUR .......................................................................................................... 2 7
PRESENTATION, INTERPRETATION AND AN ANALYSIS OF FINDINGS
·········································································································································· 27
4.0 Introduction ................................................................................................................ 27
4.1 Demographic characteristics ...................................................................................... 27
4.1.1 Gender ofrespondents ............................................................................................. 27
4.1.2 Academic Qualifications ......................................................................................... 28
4.1.3 Age of respondents ..................................................................................................... 28
4.1.4 Findings period of work .......................................................................................... 29
4.2.1 Nature of the internal auditing function and financial performance of Equity bank .
.......................................................................................................................................... 29
4.3 Challenges faced in the internal audit function in financial performance of Equity
bank .................................................................................................................................. 32
4.4 Effect of internal auditing on financial performance of organization ........................ 34
CHAPTER FIVE ............................................................................................................ 3 7
DISCUSSION AND SUMMARY OF FINDINGS ...................................................... 37
5. 0 Introduction ................................................................................................................ 3 7
5.1 Discussion of findings ................................................................................................ 3 7
5.1.1 Discussion on the nature of the internal auditing function and financial
performance of Equity bank ............................................................................................. 3 7
5.1.3 Discussion on the effect of internal audit function on financial performance of
Equity bank ...................................................................................................................... 38
5.2 Summaryoffindings .................................................................................................. 38
5.2.1 Summary on the nature of the internal auditing function and financial performance
of Equity bank .................................................................................................................. 38
5.2.2 Summary on challenges faced in the internal audit function in financial
performance of Equity bank ............................................................................................. 3 9
5 .2.3 Effect of internal auditing on financial performance of organizations ................... 3 9
5.3 Discussion on the challenges faced in the internal audit function in financial
performance of Equity bank ............................................................................................. 40
5.4 Conclusion .................................................................................................................. 41
ABSTRACT The study was set to examine the impact of internal auditing on financial performance of commercial banks in Uganda: A case study of equity bank Uganda, examine the challenges faced in the internal audit function in financial performance of Equity bank and determine the effect of internal audit function on financial performance of equity banlc. The study is conduced basing on the use of a descriptive correlation design. This design was selected because there is an intention to establish facts that already existed as opposed to creating new information that would have necessitated expe1imental research. The data is collected from the respondents using questionnaires from 100 respondents of the bank. The study conclude the nature of auditing in the banks was coupled by the use of internal auditing standards suitable for auditing in the banks, the internal auditing standards are sufficient to enable bank operations, bank periodically review the audit standards, professional audit competency. The study on the second objective conclude that a series of the factors challenges include high degree of frauds and errors hinder effective auditing, high degree of banking interruptions affect the auditing function. The third objective conclude that there is need for enhancing the communication within the organization, increase effectiveness in credit control, improves the marketing activities of the organization and detection of failure for redress in the organization. The study recommended that the management of commercial banks should keep organizing seminars and workshops whereby these internal auditors would be trained frequently by experts either internally or externally. Internal auditors must have sufficient proficiency and training to carry out the tasks assigned to them. The auditors work must be carefully directed, supervised and reviewed. The amount of supervision required should correspond to the experience and skills of the auditor. The management of the banlc should also procure the latest ICT audit software's that would enl1ance fast delivery of services and detection of frauds or any mischief in this field.
