THE EFFECTS OF INTERNAL CONTROLS ON FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA CASE STUDY: EQUITY BANK BOMET BRANCH

Abstract

In the recent past, a number of commercial banks in Kenya have stopped operating and others put into receivership. The main reason for this failure has been cited as poor financial performance and major frauds committed within the banks. Weakness in the internal control paves way for committing these frauds and thus negatively affects the financial performance of these commercial banks. This research was done to seek to identify the roles played by the internal controls in preventing these frauds and hence positively impacting the financial performance of commercial banks in Kenya and in this case Equity bank was the case study. The internal controls focused on the control environment, risk assessment, and monitoring activities. Secondary and primary data were both collected for the purpose of this research. A research questionnaire was issued to the respondents to collect their views and the information they know concerning the internal controls system. A descriptive research design will be used for the same process. A total of 48 respondents were targeted who were both employees of Equity bank Bomet branch. A sample of 30 individuals was taken as a sample across all levels of management. The study found that Equity Bank reviewed its internal controls on a need basis and the research found out that the staff of Equity bank is trained to implement accounting and financial management systems and safeguard the organizational assets. The study recommended that: the control environment has a positive relationship with the financial performance of the commercial bank