The Internal Control System and the Performance of Financial Institutions in Uganda

Abstract

Internal control systems and the performance of financial institutions have received much attention in recent times owing to the increased recognition accorded to internal control systems as a source of financial performance. Researchers and practitioners have been increasingly interested in striving to understand how these two notions can be harnessed in order to attain a firm’s success. The aim of the study was to assess the internal control system and the performance of financial institutions in Uganda. The study was guided by specific objectives, which include establishing the relationship between the internal control system and the performance of financial institutions and finding out the relationship between corporative governance and firm performance. A mixed research design was applied to achieve the set objectives utilising both quantitative and qualitative approaches. Using simple random and purposive sampling techniques, a total of 118 respondents were selected to participate in the study. There is a significant positive correlation between the internal control system and firm performance (r = .407; p< 0.01), meaning an increased internal control system in Uganda’s financial institutions is associated with positive firm performance. There is a significant positive correlation between corporate governance and financial performance (r = .649; p< 0.01). This implies that as the level of corporate governance improves, the financial performance of the company tends to improve as well. Thus, financial firms in Uganda should endeavour and put in place functional internal control systems if they are to realise better institutional performance