INTERNAL CONTROL SYSTEM, GOVERNMENT POLICY, AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN NIGERIA

Abstract

This study examined the effect of internal control systems and government policy on the financial performance of commercial banks. A descriptive survey research design was adopted, specifically a cross-sectional technique. A total of 125 managerial staff from commercial banks in the Bauchi South Senatorial Zone were selected for the study. Structured questionnaires were used and distributed with a stratified proportional random sampling procedure. The collected data were analysed using the Statistical Package for the Social Sciences (SPSS). The hypotheses were examined by regression analysis, which demonstrated that risk assessment, control activities, and monitoring had a considerable favourable impact on the financial performance of commercial banks. However, the control environment and information and communication were found to have no significant influence. Furthermore, government policy does not regulate or influence the connection between ICS and financial performance. It was recommended that commercial banks' management, particularly the senior risk manager and senior operations manager, should establish a robust security network to minimise theft and threats to the bank's operations and property and should consistently prioritise ethical decision-making and strive to enhance integrity and competence. Furthermore, it is imperative to establish a very proactive and consistent internal control monitoring system to verify the presence and effectiveness of controls.