Internal control is relevant in every business establishment, though its presence may not be a guarantee that fraud and corporate scandals would cease to occur. From the rural banking communities in Ghana, this study examines the significance of internal control element on the performance of elected rural banks. The statistical analysis and inferential judgment is based on the responses gathered from 650 bank employees on the functioning of internal controls. Based on the quantitative results and analysis, the study found a highly significant relationship between internal controls and performance of banks with respect to the principles prescribed by the Committee of Sponsoring Organization of the Treadway Commission framework –COSO. There exist a very strong internal control systems in the rural banks of Ghana, however monitoring, control activities and issues of corporate governance need to be addressed.
This article attempts to explain the factors that affect the board’s behavior when it comes to enhancing internal controls in financial institutions, particularly rural banks. The variables examined in this study are not different from the traditional determinants of board effectiveness or internal controls, but except that between all the five variables measured four are technically board characteristics while one relates directly to internal controls. A total of 459 valid structured questionnaire were analyzed based on the feedback gathered from various banks where employees, management and board members shared their views on the factors that would influence the board’s posture to enhance good governance and internal controls. The outcome of the study provided a convincing evidence that, internal audit, external consultancy and the audit committee are dominant determinants of internal control and good governance. Subsequent, examinations using the R square also confirms accuracy of predictions recorded in the principal component analysis. Further studies may analysis the size of the board relative to the increasing functions of ensuring compliance, independence and strategic decisions. This analysis is based on an African institutional context, but could be a universal tool.
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