AsheThesis Edited2221)
AsheThesis Edited2221)
AsheThesis Edited2221)
February, 2022
MADDAWALABU UNIVERSITY
SUBMITTED TO:
February, 2022
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
Approval Sheet
BY
Ashenafi Tadesse
II
Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
Declaration
I, Ashenafi Tadesse, declare that this research, titled “Assessing The Awareness Level Of
Employees In The Internal Control System On Commercial Bank Of Ethiopia: (The Case Of
Bale Robe District)” is done with my own effort. I have produced it independently except for the
guidance and suggestions of my research advisor. I assure that this study has not been submitted
for any scholarly award in this or any other university.
Ashenafi Tadesse
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
Certification
Here with I state that Ashenafi Tadesse has carried out this research work on the topic entitled
“Assessing The Awareness Level Of Employees In The Internal Control System On Commercial
Bank Of Ethiopia: (The Case Of Bale Robe District) ” under my supervision.
This work is original in nature and has not presented for a degree in any university and it is
sufficient for submission for the partial fulfillment for the award of MSc degree in Accounting
and Finance.
Table of Contents
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
Approval Sheet................................................................................................................................II
Declaration.....................................................................................................................................III
Certification...................................................................................................................................IV
Table of Contents............................................................................................................................V
List of Tables................................................................................................................................VII
List of Figures..............................................................................................................................VII
Acknowledgement......................................................................................................................VIII
Acronyms......................................................................................................................................IX
Abstract...........................................................................................................................................X
CHAPTER ONE..............................................................................................................................1
1. INTRODUCTION...................................................................................................................1
1.1 Background of the Study...................................................................................................1
1.2 . Statement of the Problem................................................................................................3
1.3 Research question.............................................................................................................3
1.4 . Objectives of the Study...................................................................................................4
1.4.1 General objective.......................................................................................................4
1.4.2. Specific objectives of the Study................................................................................4
1.5 Significance of the Study..................................................................................................4
1.6 Scope of the Study............................................................................................................5
1.7 Limitation of the Study.....................................................................................................5
1.8 Organization of the Paper.................................................................................................5
CHAPTER TWO.............................................................................................................................6
2. REVIEWS OF RELATED LITRATURES.................................................................................6
2.1. Concepts of Internal Control................................................................................................6
2.1.1. The Objectives and Role of Internal Control.................................................................6
2.1.2. Components Internal control.........................................................................................8
2.2. Empirical Review...............................................................................................................10
2.3. Conceptual framework........................................................................................................12
CHAPTER THREE.......................................................................................................................14
3. RESEARCH METHODOLOGY..........................................................................................14
3.1. Research Design................................................................................................................14
3.2. Research Approach............................................................................................................14
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
List of Tables
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
Table 7. ANOVA...........................................................................................................................27
List of Figures
Acknowledgement
Primarily, I would like to thank the Almighty God for His help. The completion of this thesis
involved kindly contribution, support and encouragement of many people. I wish to express my
sincere gratitude to my advisor Dr: Hussein Jarso for his encouragement, and support. Without
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
his understanding, patience and useful supervision, it could be more challenging for me to
complete this thesis.
I am also very thankful to family and friends for their support and encouragement. Finally, I also
show my appreciation to CBE, Bale Robe District staff for their patience and cooperation in
filling questioners and providing necessary information through my thesis work.
Ashenafi Tadesse
Acronyms
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
MTM=Mark to Market
Abstract
The main objective of this research was to assess the awareness and perception of employees on
internal control system in the commercial bank of Ethiopia a case of Robe Town In general, the
paper used a mixed research design. Both primary and secondary data were used in the study.
For this study 85 employees were used as a sample respondent. Data are collected by using a
self-administered survey and interview which has both open ended and closed ended question.
The questionnaire was given to employees of commercial banks of Ethiopia, Bale Robe District
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
staffs from both internal auditors and controllers who are found at different level. After feeding
the collected data in to SPSS V25 for analyzing purpose, the researcher found that the awareness
of employees on the company’s internal control activities, risk assessment and monitoring
activities. The study revealed that, all the variables were positively related with the awareness of
employees and their performance of implementing internal control activities. However, there are
major variability of knowledge about the strategy and implementation process between
individual employees. Finally the research recommends that though the bank has a human
resource development plant it has to be strengthen and should be the company priority concern
and the controlling environment through trainings, awareness creation workshops and peer to
peer trainings.
Keywords: Internal Control, Commercial Banks of Ethiopia,
X
CHAPTER ONE
1. INTRODUCTION
Internal control has been recognized as one of the fundamental features essential for the success
of the enterprise as well as for related government agencies. By establishing internal control
system, organizations strive to avoid or minimize their problems of scarce resource,
misappropriation of funds, high risk of fraud, errors and inefficient and ineffective operations of
the business. (Adewale, 2014).
Financial sector is unique sector in the economy. It provides different kind of services to the
customers and handles massive volume of funds daily. All activities in the economy depend on
the strength and stability of the banking sector. Due to these facts the necessity of internal
control system in the banks cannot undermine. A system of tough internal controls can support
to ensure that the goals and objectives of banks will be met, that the bank will help to attain
longterm profitability targets, and maintain reliable financial and managerial reporting. Such a
system can also help to ensure that the bank will comply with laws and regulations as well as
policies, plans, internal rules and procedures and decrease the risk of unexpected losses or
damage to the bank’s reputation. This help bank’s Board of directors and management to
safeguard the bank’s resources, produce reliable financial reports and comply with laws and
regulations (Basle committee, Framework for internal control system in banking organization,
September 1998).
A sound internal control system helps an organization to prevent fraud, errors and minimize
wastage. Custody of asset is strengthened; it provides assurance to the management on
dependability of accounting data eliminates unnecessary suspicion and helps in maintenance of
adequate and reliability data. But now a days in banking area bank fraud are increase and
following same pattern and design have been repeatedly committed in the past year. In addition
to that the bank branches increased necessitating the appraisal of the adequacy and reliability of
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
records, and overall efficiency of operations that is why the researcher is motivated the present
study (Hawaz, 2016).
According to Siayor (2010), Internal control systems(ICS) refers to all the policies and
procedures (internal controls) adopted by the directors and management of an entity to assist
them in achieving their objectives of ensuring, as far as practicable, the orderly and efficient
conduct of a business, including adherence to internal policies, the safeguarding of assets, the
prevention and detection of fraud and error, the accuracy and completeness of the accounting
records, and the timely preparation of reliable financial information. Internal control systems
(ICSs) have become so significant due to the increasing number of business failures and some
widely publicized frauds.
COSO (2013) framework identifies five main elements of an ICS, namely: control environment,
risk assessment, control activities, information and communication, and monitoring. The quality
of an organizations ICS has a significant effect on the accuracy of management guidance (Feng
& Mc Vay, 2009). Similarly firms that disclose ineffective ICSs have larger tendencies of
experiencing management errors in their operation than those firms that report effective ICSs
(Feng, 2009). Furthermore, Johnkan, et al., (2016), Mawanda, et al., (2008), Olaoye, et al.,
(2009), and Murale etharan,et al., (2012)inform that the institution and enforcement of proper
ICSs was always lead to improved performance. Moreover, it was a general belief that properly
institute systems of internal control improve the reporting process and also gives rise to reliable
reports which enhances the accountability function of management of an entity (Spira & Page,
2003).
Hence it was necessary to review internal control of some organizations and its relation with
financial performance the paper was try to evaluate internal control system and its impact on
financial performance within commercial banks in Ethiopia. In Ethiopian context, Research on
financial institution showed that there is weak internal control system in their operation
(Doldey, 2001; Yigirem, 2010).
This weakness in internal control system can caused serious damage to the financial institutions
in particular and it hurt the development of the country in general. So, it is imperative to
formulate and implement effective internal control system in the organization. Hence the need
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
for this study is to assess the perception of internal control system of commercial bank of
Ethiopia bale robe district.
Financial institution such as banks have been expanding their operations and activities beyond
the domestic borders as a result of globalization and improved technology. The expansion of
business, globalization and the advanced technology also exposes business to increased risk,
fraud, altercations and other irregularities. This has made internal controls an imperative system
to maintain by every business and for that matter the banking sector (ECOBANK, 2011).
The traditional way of doing business forces banks to rely hugely on the trustworthiness and
integrity of their employees. And dishonest employees have every opportunity to defraud banks.
That is why banks need fundamentally different way of tackling fraud: increased automation and
proactive management. The automation of areas that do not require human judgments would
save banks from being defrauded by their own employees. The manual approach to issuing CPOs
allowed this to happen, as it is possible to bypass the accounting function. Shocking news arrived
when a series of CPOs were presented for payments. Only through investigation could the
number and the total amount be determined. In some cases, the total amount could be devastating
(Abdulmena, 2013).
Admassu and sayehgn (2014) discussed that banking industry in Ethiopia is in a rudimentary and
fragile state. It is small, relatively undeveloped, closed and characterized by a large share of state
ownership. Among the state owned bank, commercial bank of Ethiopia has the highest share in
the banking industry of the country. Its vast transactions and operational activities are exposed to
fraud, misappropriation and other irregularities which can be witnessed by recent publications on
the banks intranet portal as well as reporter magazine.
Thus, in this process the banks internal control system would take significant part. Therefore,
this paper will assess the employee’s awareness level regarding with the banks internal control
system of commercial bank of Ethiopia specifically Bale Robe District.
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
Do employees have awareness about the bank’s strategy of internal control system?
Do employees have sufficient awareness on the internal control activities of CBE?
What are the relationships between internal control activities and employees awareness to
perform internal control activities in the study area?
The general objective of the study is to assess the awareness level of employees on the
internal control system on Commercial Bank Of Ethiopia: (The Case Of Bale Robe
District).
The knowledge of risk management is the back bone of bank industry in generating income; the
result of this study can help the Board of the CBE, policy maker, loan processing and credit
appraisal department, credit administration department and credit risk management department
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
by forwarding relevant information from outcome of the study in order to improve their credit
risk management practice.
The result of this study also has importance for other researchers and other banking business
organizations by providing empirical data that help in improving or formulating the policy
environment for credit risk management practice of the banks and as a base for further research.
This study will emphasize mainly on assessing awareness level of internal control system the
case of Commercial Bank of Ethiopia. Geographically, the study covered only branches located
within Bale robe districts. This is because all the findings are applicable at every branch of
commercial bank of Ethiopia whether they are located at the center or remote areas.
During the course of this study there were some issues affecting the research in generating
expected out comes or information and the lack of experience on conducting research on the side
of researcher will affect the analysis and result of the study.
This study is limited on assessing the employee awareness on the internal control activities in
risk management area of Commercial Bank of Ethiopia, Bale Robe Districts. Other operation of
the CBE is not the subject matter of this research.
The study will organize in to five chapters. The first chapter deals with background of the study,
statements of the problem, objective of the study, the scope of study, significance of the study,
limitation and organization of the research.
Relevant literature related to the study will be reviewed in chapter two. Chapter three focuses
with the description of the study area, materials and methods of the study. In chapter four, the
results obtained from the descriptive statistics and econometric models will try to be presented
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
and discussed. Finally, chapter five presents the conclusion and recommendations and
implication for future research.
CHAPTER TWO
Internal control is a process, affected by an entity’s board of directors, management, and other
personnel, designed to provide reasonable assurance regarding the achievement of objectives
relating to operations, reporting, and compliance (COSO, 2013).
This definition reflects certain fundamental concepts. Internal control is: Geared to the
achievement of objectives in one or more categories; operations, reporting, and compliance. It is
also a process consisting of ongoing tasks and activities; a means to an end, not an end in itself.
In addition it can be affected by people not merely about policy and procedure manuals, systems,
and forms, but about people and the actions they take at every level of an organization to affect
internal control. Internal control used to provide reasonable assurance but not absolute assurance,
to an entity’s senior management and board of directors.
Adaptable to the entity structure; flexible in application for the entire entity or for a particular
subsidiary, division, operating unit, or business process. According to United States Government
Accountability Office, Standards for Internal Control in the Federal Government September
2014, internal control is defined as a process affected by an entity’s oversight body,
management, and other personnel that provide reasonable assurance that the objectives of an
entity will be achieve.
Internal control comprises the plans, methods, policies, and procedures used to fulfill the
mission, strategic plan, goals, and objectives of the entity. Internal control serves as the first line
of defense in safeguarding assets. In short, internal control helps managers achieve desired
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
results through effective stewardship of public resources. These objectives and related risks can
be broadly classified into one or more of the following three categories:
For internal controls pertain to the effectiveness and efficiency of the bank in using its assets and
other resources and protecting the bank from loss. The internal control process seeks to ensure
that personnel throughout the organization are working to achieve its goals with efficiency and
integrity, without unintended or excessive cost or placing other interests (such as an employee’s,
vendor’s or customer’s interest) before those of the bank. (Basle, 1998).
Information objectives:
Basle committee on banking supervision states that information objectives of internal control
address the preparation of timely, reliable, relevant reports needed for decision-making within
the banking organization. They also address the need for reliable annual accounts, other financial
statements and other financial-related disclosures and reports to shareholders, supervisors, and
other external parties. The information received by management, the board of directors,
shareholders and supervisors should be of sufficient quality and integrity that recipients can rely
on the information in making decisions. The term reliable, as it relates to financial statements,
refers to the preparation of statements that are presented fairly and based on comprehensive and
well-defined accounting principles and rules. (GAO, 2014).
Compliance objectives
Ensure that all banking business complies with applicable laws and regulations, supervisory
requirements, and the organization’s policies and procedures. This objective must be met in
order to protect the bank’s franchise and reputation has been used to explain demands for
monitoring controls (Likert. R.A, 1932).
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
Basle Committee on Banking Supervision September (1998) states that a system of effective
internal controls is a critical component of bank management and a foundation for the safe and
sound operation of banking organizations. A system of strong internal controls can help to ensure
that the goals and objectives of a banking organization will be met, that the bank will achieve
long-term profitability targets, and maintain reliable financial and managerial reporting. Such a
system can also help to ensure that the bank will comply with laws and regulations as well as
policies, plans, internal rules and procedures, and decrease the risk of unexpected losses or
damage to the bank’s reputation.
An effective internal control system increases the likelihood that an entity will achieve its
objectives. However, no matter how well designed, implemented, or operated, an internal control
system cannot provide absolute assurance that all of an organization’s objectives will be met.
Factors outside the control or influence of management can affect the entity’s ability to achieve
all of its objectives. For example, a natural disaster can affect an organization’s ability to achieve
its objectives. Therefore, once in place, effective internal control provides reasonable, not
absolute, assurance that an organization will achieve its objectives. (Mwakimasinde, 2014).
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
The components of internal control are no different in many sources. Some sources refer them
the elements or frameworks while some other refer it standards of internal control. The
Committee of Sponsoring Organizations (COSO), Act of Sarbanes Oxley and American Institute
of Certified Public Accountants (AICPA) claim effective internal control should primarily have
five elements namely; control environment, control activities, risk assessment, information and
communication, and monitoring. Each of the elements was discussed as follows.
Control Activity Control activities are the actions established through policies and procedures
that help ensure that management’s directives to mitigate risks to the achievement of objectives
are carried out. Control activities are performed at all levels of the entity, at various stages within
business processes, and over the technology environment. They may be preventive or detective
in nature and may encompass a range of manual and automated activities such as authorizations
and approvals, verifications, reconciliations, and business performance reviews. Segregation of
duties is typically built into the selection and development of control activities. Where
segregation of duties is not practical, management selects and develops alternative control
activities (COSO2013).
According to the frame work for internal control system in banking organization (1998) stated
that control activities should be an integral part of the daily activities of a bank. An effective
internal control system requires that an appropriate control structure is set up, with control
activities defined at every business level. These should include: top level reviews appropriate
activity controls for different departments or divisions; physical controls; checking for
compliance with exposure limits and follow - up on non - compliance; a system of approvals and
authorizations; and, a system of verification and reconciliation.
An effective internal control system requires that there is appropriate segregation of duties and
those personnel are not assigned conflicting responsibilities. Areas of potential conflicts of
interest should be identified, minimized, and subject to careful independent monitoring.
Risk Assessment
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
Every entity faces a variety of risks from external and internal sources. Risk is defined as the
possibility that an event will occur and adversely affect the achievement of objectives. Risk
assessment involves a dynamic and iterative process for identifying and assessing risks to the
achievement of objectives. Risks to the achievement of these objectives from across the entity
are considered relative to established risk tolerances. Thus, risk assessment forms the basis for
determining how risks will be managed.
According to the frame work for internal control system in banking organization (1998),
effective risk assessment identifies and considers internal factors (such as the complexity of the
organization’s structure, the nature of the bank’s activities, the quality of personnel,
organizational changes and employee turnover) as well as external factors (such as fluctuating
economic conditions, changes in the industry and technological advances) that could adversely
affect the achievement of the bank’s goals. This risk assessment should be conducted at the level
of individual businesses and across the wide spectrum of activities and subsidiaries of the
consolidated banking organization.
This can be accomplished through various methods. Effective risk assessment addresses
measurable and non- measurable aspects of risks and weighs costs of controls against the
benefits they provide. The risk assessment process also includes evaluating the risks to determine
which are controllable by the bank and which are not. For those risks that are controllable, the
bank must assess whether to accept those risks or the extent to which it wishes to mitigate the
risks through control procedures. For those risks that cannot be controlled, the bank must decide
whether to accept these risks or to withdraw from or reduce the level of business activity
concerned (etel).
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
According to J. Dubihlela and Lisa (2017) stated that risk management activities protect the
organization, its people, assets, and profits, against the physical and adverse consequences, by
planning, coordinating and directing the internal risk control and the risk mitigation activities.
Majority of studies are focused on the effects of internal control systems on financial
performance in banking business. However, there is no specific study in the area of assessing
awareness level of bank employees to perform internal control strategy of risk management.
A case study was conducted by Mary and Byaruhanga (2014) in their study they investigated and
sought to establish the relationship between internal control component and financial
performance of Kenya’s sugar cane out grower companies. Internal controls were looked at from
the perspective of control environment, risk assessment process, information system and control
activities whereas financial performance focused on cost per unit, goal attainment and
profitability as the measures of financial performance as a result of poor performance of the
management which is illustrated in poor returns they post for their clients. The study result
indicates internal control system has positive significant impact on financial performance. A few
related studies were conducted by few researchers in Ethiopia.
Tsedal (2015) conduct a research on the assessment of internal control effectiveness in selected
Ethiopian public universities. Internal controls were looked at from the perspective of control
environment, control activities, risk assessment, information and communication system, and
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
monitoring. Thus this study focused on assessment of the effectiveness of the internal control
system in the universities to identify the possible areas of deficiencies in the system. Data were
analyzed using descriptive statistics and inferential statistics using SPSS results.
The result indicates that internal control in the universities is not effective. Particularly the risk
assessment component of internal control is not practiced in the universities. Though monitoring
is better in the universities, there is in adequate control environment, control activities and
inadequate flow of information and communication in those universities. Hence, it needs
commitment from both universities management and responsible government authorities to
improve those specific areas of deficiencies’ in internal control indicated.
Rahel (2017) conduct a research on the role of internal control systems on performance of
Ethiopian shipping and logistics service enterprise. The main purpose of this study was to
determine the impact of internal control systems on financial performance on Ethiopian shipping
and logistics services enterprises as a case study. Internal controls were looked at from the
perspective of internal control system, control environment, control activities, risk assessment,
monitoring and information and communication whereas financial performance focused on
profitability and ROA.
The descriptive result shows there is weak internal control system in the organization. The study
recommend more commitment by the management in monitoring internal control system and
continue working on improving for the effectiveness of the internal control system so, the
company will achieve better performance
Based on the review of both theoretical and empirical studies on internal controls the following
conceptual framework guiding this study will be developed.
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
INDEPENDET
VARIABL
DEPENDET
VARIABLE
Risk assessment
Awareness of Employees
Monitoring on Internal Control
Control activity
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
CHAPTER THREE
3. RESEARCH METHODOLOGY
This chapter outlines the methodologies that employed in this study. It describes the research
design, target population, sampling techniques, sampling unit, data collection tools, data analysis
and ethical consideration along with an appropriate justification.
The type of research employed in this study was descriptive and explanatory. The major purpose
of descriptive research is properly describing the state of affairs, as it exists at present CBE, Bale
Robe Districts.
For this study both qualitative and quantitative data were used. Triangulation was used for it
helps to increase the reliability of the results by comparing the data obtained from one source
with the other sources.
Both primary and secondary sources of data were used in this research. The primary data were
collected from the sample staffs of commercial banks of Ethiopia.
Secondary data sources such as documents, books reports, journals, research works related to the
topic in CBE and repots of CBE bale robe district offices.
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
The researcher was used questionnaire, interview and focus group discussion. Open ended and
close-ended questionnaire will be presented to sample respondents to collect relevant and written
data from respondents.
On the other hand, close-ended interview was employed to collect specific information/data. In
addition to these, the interview questions were open ended to gather unrestricted ideas from the
sample respondents.
The sampling technique used in this study was Purposive Sampling Technique. Because instead
of using random sampling technique purposive sampling is better in collecting information in
such area of studies. The reason behind is to get currently existing detail information regarding
internal control system that are offered by Commercial Bank of Ethiopia.
Since the questionnaire was developed in English and the information needed requires
knowledge of previous service delivery by the bank, purposive sampling technique was used for
the selection of branches under the districts and staffs of the bank. And simple random sampling
technique was utilized for employees of Commercial Bank of Ethiopia.
The target population of the study was employees and managers from different branches of
Commercial Bank of Ethiopia, technical experts from Internal control departments Commercial
Bank of Ethiopia. The study covered eight branches from Bale Robe Districts of CBE and totally
eighty nine (89) questionnaires were distributed.
These questionnaires were distributed face to face to all the respondents. Because all
branches in the districts are using the same banking technology and all the results are applicable
at every branch of the bank.
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
Based on the objectives of the study, appropriate tools and techniques of analysis such as
descriptive analysis and econometric models were employed.
Multiple regression can establish that a set of independent variables explains a proportion
of the variance in a dependent variable at a significant level a significance test of R 2 and can
establish the relative predictive importance of the independent variables difference of two R 2 s to
determine if adding an in an independent variable to the model helps significantly.
The estimates (b coefficients and constant) can be used to construct a prediction equation and
generate predicted scores on a variable for further analysis (Gujarati, 2004). The analysis and
findings of the study was presented by using table, graph, charts and the like.
Before data collection and during data collection the researcher was employed some ethical
issues. In order to secure the consent of the research, the researcher was communicating with all
concerned bodies about the details and the aims of the study.
And, the researcher was oriented the participants in data collection and encoding that they have
to participate in the research willingly. Moreover, the researcher was ensured to the respondents
not to disclose their names, position and personal information and had apologized all for their
participation.
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
CHAPTER FOUR
During data collection, the researcher was distributed 89 questionnaires to the respondent.
Among these questionnaires only 85 of them was collected and 4 of the respondents were not
returned the questioner because of health and social problems. Thus, the response rate is 95.51%.
Additionally, due consideration was given to obtain consent from each participant about their
participation in the study. So that the study was conducted on voluntary bases that the researcher
tries to respect the participant right and privacy. The finding of the research was presented
without any variation from the outcome of the research.
The respondent’s profiles to this regard consist of gender, respondent age, educational level
(academic qualification), field of study, and working experience in a banking sector.
The gender of the respondents has shown in the following table. Thus, the majority 69 (81.2%)
of the respondents were male while the rest 16 (18.8%) of the respondents were female.
Cumulative
Sex Frequency Percent Valid Percent
Percent
Valid Male 69 81.2 81.2 81.2
Female 16 18.8 18.8 100.0
Total 85 100.0 100.0
Source: Own survey data, 2022
Source; Survey Results, 2022
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
The majority (82.23%) of the respondents were found between age 26 and 35 years old, 14.2%
of the respondents 25 or less than 25 years old, and the rest 3.53% was 36-45 years old as shown
in the following figure.
In terms of educational background, the respondents of the study area indicated their highest
level of education. According to their response, 68.47% of the respondents obtained a bachelor
degree as their highest educational level. In addition, 28.24% of the respondents obtained a post
graduate degree or masters as their highest level of education. The remaining 3.5% of the
respondents obtained diploma as shown in the following figure.
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
Thus the survey made to assess the areas of current working position of the respondents
presented in the following data indicated that, 44.7% of the respondents were BBO, 23.5% of the
respondent were SBBO and the reaming 17.6%, 9% and 3% were CSM, Branch Manager and
credit administrators respectively, in CBE Branches of the study area.
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
Cumulative
Frequency Percent Valid Percent
Percent
Valid BBO 38 44.7 44.7 44.7
SBBO 20 23.5 23.5 68.2
CSM 15 17.6 17.6 85.9
Branch Manager 3 3.5 3.5 89.4
credit administrator 9 10.6 10.6 100.0
Total 85 100.0 100.0
According to analysis result, the respondents working experiences in a banking sector ranged
from the past five year up to above ten years.
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
43.53% of the respondents had 1-5 years working experience in a banking sector, 49.41% of the
respondents had 6-10 years and 7.06% had 11-20 years working experience in a banking sector
as shown in the following table.
To examine the employee’s awareness with regard to bank’s designed strategy of identifying
risks of CBE, Bale Robe District, the descriptive statistics for all the variables considered in the
estimation. The dependent variable, as noted earlier, was employee awareness while the
independent variables were knowledge of internal control activities, Risk assessment and
monitoring activities.
CBE
Internal control activities include methods, preparation of reliable reports; update documentation,
authorization of transactions, independent review and others. Control environment considered as
a “tone on the top” in internal control system. It indicates the general atmosphere of internal
control, which included the policies, and procedures of internal control, management structure,
reporting structure, competence of employees and discharging responsibility and others. The
results of the study indicated in the table below.
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
Based on the data of the table above, the highest mean (4.12) or 88.2% of the respondents agreed
that they have strong awareness on the authorization that will made to know whether employees
confirm to effective and adequate operation, and the second highest mean (4.11) or 93% of
respondent agreed on knowledge about dual control and separation of duties in the organization.
The mean value (4.09) indicated that majority of the respondent agreed that employees have
awareness on the bank reconciliation that are prepared by someone independent of the cash
receiving processing and recording activities. The mean value 3.86 confirmed the awareness of
employees on the existence of the processes for independent verification of transaction and the
mean 3.67 indicated that majority of respondent agreed that they have an understanding on the
existence of a system that organization have duties are rotated periodically.
The mean 3.6, 68.3% of the respondents indicated that awareness on policies and procedures
exist to ensure critical decisions with appropriate approval. Similarly, 75.3% with average mean
22
Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
value of 3.6; confirmed that they have clear understanding to perform adequate control activity
on purchase, cash receipt and cash payments, petty cash management, payroll, fixed asset and
electronic data processing activities.
Generally the majority of the respondent, M=3.86 with Standard deviation of (0.861) agreed that
employees in the company have the knowledge, skill and tools to support them in their duties in
order to effectively manage risk and achieve company objectives by implementing specific
methods and procedures of internal control activities of CBE in the study area. Thus, effective
internal control has a list of those methods and procedures that are to be implemented
consistently. Therefore, the bank under the study would be would perform better and effective
internal control activity.
Risk assessments become an important part of internal control system. The bank management
and employees are responsible to identify and assess control risk caused by failure of internal
control. There should be strategies of identifying Risk, system to respond to risk and reduce the
risk. The survey result on this issue therefore, is presented as follows.
If CBE has clear objectives and these are Strongly Disagree 3 3.5
Neutral 4 4.7
communicated to provide effective direction to
1 Agree 56 65.9 4.11 .787
employees on risk assessment and control Strongly Agree 22 25.9
issues. Total 85 100.0
Strongly Disagree 10 11.8
Importance of sufficient staff members who Disagree 16 18.8
Neutral 17 20.0
2 are competent and knowledgeable to manage Agree 32 37.6
3.19 1.22
company activities Strongly Agree 10 11.8
Total 85 100.0
Disagree 9 10.6
Significant internal and external operational, Neutral 15 17.6
3 financial, compliance and other risks are Agree 44 51.8 3.81 .880
identified and assessed on an ongoing basis Strongly Agree 17 20.0
Total 85 100.0
Strongly Disagree 3 3.5
Disagree 9 10.6
3.71 1.01
Risks are assessed with regarded to each Neutral 14 16.5
4
transaction cycle Agree 43 50.6
Strongly Agree 16 18.8
Total 85 100.0 4.06 .878
Strongly Disagree 3 3.5
23
Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
Disagree 3 3.5
Neutral 3 3.5
5 There is adequate capacity to perform risk Agree 53 62.4
assessment Strongly Agree 23 27.1
Total 85 100.0
Garand Mean (N=85) 3.77 0.955
Source; Survey Results and SPSS (2022) output
From the above table, 91.8% of the respondents with the mean value 4.11, indicated majority of
the employees agreed on their awareness on their organization’s clear objectives, and these are
communicated to all staff for direction on risk assessment. Also, the mean value 4.06 indicated
that employees of the bank have adequate capacity to perform risk assessment activities and,
71.8%, or mean of 3.81indicated that employees have knowledge on significant internal and
external operational, financial, compliance and other risks are identified and assessed on an
ongoing basis .
On the other hand, 69.4% (the mean value 3.71) of the employees are agreed on their
understanding that Risks are assessed with regarded to each transaction cycle. 49.4% of the
respondents indicated that minority of employees agreed on the importance of sufficient staff
members who are competent and knowledgeable to manage company activities.
Generally, the analysis result indicated that, the grand mean 3.77 with standard deviation 0f
0.955, in the areas of risk assessment; the CBE bank employees of the study area have sufficient
awareness. So that the bank has sufficiently designed appropriate strategy of identifying risk and
oriented its employees and management.
The ongoing monitoring of internal control is essential to ensure whether internal control is
achieving desired objectives. The result and interpretation of the survey is presented as follows.
Table 5. Awareness of employees on monitoring activities
Monitoring Frq
No. Measurement % Mean St.D
.
Disagree 3 3.5
There are independent process Neutral 17 20.0
1 checks and evaluations of controls Agree 59 69.4 3.80 .613
Strongly Agree 6 7.1
activities on ongoing basis
Total 85 100.0
Strongly Disagree 3 3.5
24
Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
Disagree 6 7.1
Internal reviews of implementation Neutral 8 9.4
2 of internal controls in units are Agree 54 63.5 3.82 .915
conducted periodically Strongly Agree 14 16.5
Total 85 100.0
Strongly Disagree 11 12.9
Monitoring has helped in assessing Neutral 19 22.4
3 the quality of performance of the Agree 35 41.2 3.62 1.255
organization over time Strongly Agree 20 23.5
Total 85 100.0
Management has assigned Disagree 3 3.5
Neutral 11 12.9
responsibilities for timely for Agree 64 75.3
4 timely review of audit reports and Strongly Agree 7 8.2 3.88 .586
resolutions of any non compliance
Total 85 100.0
items noted in those audit reports
Internal reviews implementation of Strongly Disagree 3 3.5
Disagree 3 3.5
purchases, cash receipts and cash Neutral 8 9.4
payments, petty cash management, Agree 53 62.4
5 3.94 .878
payroll fixed asset and electronic Strongly Agree 18 21.2
data processing, etc in accordance Total
85 100.0
with the policies and procedures
Disagree 14 16.5
Banks financial statements are Neutral 10 11.8
6 audited regularly by external Agree 48 56.5 3.71 .924
auditor Strongly Agree 13 15.3
Total 85 100.0
Internal control deficiencies or Strongly Disagree 3 3.5
Neutral 15 17.6
ineffectively controlled risks should Agree 57 67.1
7 be reported to the appropriate Strongly Agree 10 11.8 3.84 .769
person as soon as they are Total
85 100.0
identified.
Neutral 11 12.9
Monitoring is built in to the normal Agree 63 74.1
8 3.95 .653
operating activities Strongly Agree 11 12.9
Total 85 100.0
Management of banks review long Neutral 11 12.9
Agree 63 74.1
9 outstanding items in financial Strongly Agree 11 12.9 4.00 .512
statements Total 85 100.0
Disagree 14 16.5
Neutral 10 11.8
The timing of the audit in this
10 Agree 43 50.6 3.76 .972
company is appropriate Strongly Agree 18 21.2
Total 85 100.0
Garand Mean (N=85) 3.76 .0.97
Source; Survey Results and SPSS (2022) output
From the above table, the majority of the respondents, 87%, with the mean value 4.00 indicated
that they have awareness as a management of banks review long outstanding items in financial
statements, 83.6% (M=3.94) of the respondents agreed on their understanding on internal
reviews implementation of purchases, cash receipts and cash payments, petty cash management,
25
Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
payroll fixed asset and electronic data processing, etc in accordance with the policies and
procedures. Similarly, the mean value 3.95, 87% of the employees had awareness that in their
organization, monitoring is built in to the normal operating activities.
Additionally, the mean value, 3.88, (83.5%) of the response indicates that employees of the CBE
bank under the study know that, management has assigned responsibilities for timely for timely
review of audit reports and resolutions of any non compliance items noted in those audit reports,
and mean value 3.84, (78.9%) of the response indicates that employees of the CBE were
understand about the internal control deficiencies or ineffectively controlled risks and how to
reported to the appropriate person as soon as they are identified.
Likely, the mean value 3.82, 80% of response shows that employees have knowledge about
internal reviews of implementation of internal controls in units that conducted periodically.
About 76.5% with mean value of 3.8, of response indicates the agreement of the employees on
understanding and implementation of the independent process checks and evaluations of controls
activities on ongoing basis.
On the other hand, the awareness of employees were low about the timing of the audit in bank, if
monitoring has helped in assessing the quality of performance of the organization over time and
if the bank’s financial statements are audited regularly by external auditor with mean value 3.76
(61.8%), 3.62 (64.7%) , 3.71 (71.8%) respectively; while relate to other variables.
This study was also conducted the relationship between internal control system and employees
awareness and performance in the case of CBE, Bale Robe District. The analysis applied the
statistical package for social sciences (SPSS V25) to compute the measurements of the multiple
regressions for the study. The study evaluated the independent variables and the dependent using
questionnaires. The results were as shown below:
26
Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
The model summary shows the summary of the regression analysis as shown in the regression
model present in the following table.
Model Summaryc,d
Std. Change Statistics Durbin
R Error of R
Mode Adjuste Sig. F
-
R Square the Square F df df
l d R2 Chang Watso
b
Estimat Chang Change 1 2
e e n
e
.983 799.32
1 .967 .966 .714 .967 3 82 .000 1.790
a
0
a. Predictors: Monitoring Process , Control Activity Process, Risk Assessment Activity
b. For regression through the origin (the no-intercept model), R Square measures the proportion of the variability
in the dependent variable about the origin explained by regression. This CANNOT be compared to R Square for
models which include an intercept.
c. Dependent Variable: Employees Awareness Level
d. Linear Regression through the Origin
The researcher was used coefficient of determination that was obtained from the model
summary. Thus, the Coefficients of determination were used to explain whether the model is a
good predictor. From the results of the analysis, the findings show that the independent variables
(Control Activities, Risk Assessment and Monitoring) contributed to 96.6% of the variation in the
level of awareness employees for better performance as indicated by adjusted R 2 of 0.966 which
shows that the other variables not included in this study.
In order to test the impact of the relationship between internal control system and employees
awareness for better performance of internal control activities in commercial banks in Ethiopia,
Bale Robe District, the analysis results were shown in the following table.
27
Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
Table 7. ANOVA
Model Sum of Squares df Mean Square F Sig.
1 Regression 1224.140 3 408.047 799.320 .000c
Residual 41.860 82 .510
Total 1266.000 d
85
a. Dependent Variable: Employees Awareness Level
b. Linear Regression through the Origin
c. Predictors: Monitoring Process , Control Activity Process, Risk Assessment Activity
d. This total sum of squares is not corrected for the constant because the constant is zero for regression
through the origin.
The analysis of this study depends on participant’s perception which collected through
questionnaire. Therefore, R-squared value more than 25% can be respectable and good to fit
(Thompson, 2002).
The results of the findings in the analysis of variance in the above table revealed that the level of
significance is .000(a), this implies that the regression model is significant in predicting the
relationship between internal control activities and employees awareness level. By the help of an
F-test table, the tabulated value for F (40.8%, 3, and 85) is 12.66 which was less than 79.932
meaning that the model was statistically significant.
This table shows the level of significance on the variables, it also provides the standardized and
Un-standardized coefficients are shown below:
Table 8. Taste of Coefficients
Coefficientsa,b
Standardize
Unstandardized Collinearity
d
Coefficients Statistics
Model Coefficients t Sig.
Std. Toleranc
B Beta VIF
Error e
1 Control Activity .274 .079 .279 3.47 .001 .063 15.96
Process 6 5
Risk Assessment .328 .080 .328 4.08 .000 .063 15.98
28
Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
Activity 4 9
Monitoring .387 .091 .389 4.23 .000 .048 20.97
Process 4 9
a. Dependent Variable: Employees Awareness Level
b. Linear Regression through the Origin
Source; Survey Results and SPSS (2022) output
From the above table, the researcher wants to establish the extent to which increasing or
decreasing internal control activities knowledge impact on the bank’s employee’s awareness to
perform the internal control strategies of commercial banks in Ethiopia, Bale Robe District.
From regression result in the above table; control activities have a positive coefficient that means
that all other thing constant a unit increase in knowledge of control activities for employees the
awareness of the bank employees and their performance was increased by .274 (27.4%). These
shows that a strong relationship between the employees awareness and control activities, the
positive beta sign and a statistically significant result of control activities related with the
performance (β= .274, t =3.476, P<0.05 i.e Significant).
In addition to this, in the areas of employees Risk assessment awareness, there is positive
coefficient that means that all other thing constant a unit increase in the knowledge of risk
assessment activities, the awareness of employees was increased by .328 (32.8%). This shows
that a relationship between employees awareness and knowledge of risk assessment activities.
The positive beta sign and a statistically significant result of risk assessment related with the
employee awareness (β =.328, t =4.084, P<0.05). So that, this result is support the proposed
acceptable level at 5% significant level.
On the other hand the third variable, Monitoring activity, was supported by the regression result.
That is, the regression results insignificantly related with the employees awareness level at
(P<0.05). Working to increase the knowhow of the employees by one unit will increase the
awareness of employees by 37.8% to properly perform internal control strategies of CBE of the
study area.
29
Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
CHAPRTER FIVE
In this study, the researcher was distributed 89 questionnaires to the respondent. Among these
questionnaires only 85 of them was collected and 4 of the respondents were not returned the
questioner because of health and social problems. Thus, the response rate is 95.51%. he majority
(82.23%) of the respondents were found between age 26 and 35 years old, 14.2% of the
respondents 25 or less than 25 years old, and the rest 3.53% was 36-45 years old.
The result of the study revealed that, the majority of the respondent, M=3.86 with Standard
deviation of (0.861) agreed that employees in the company have the knowledge, skill and tools to
support them in their duties in order to effectively manage risk and achieve company objectives
by implementing specific methods and procedures of internal control activities of CBE in the
study area. Thus, effective internal control has a list of those methods and procedures that are to
be implemented consistently. Therefore, the bank under the study would be would perform better
and effective internal control activity.
Additionally, about 91.8% of the respondents with the mean value 4.11, indicated majority of the
employees agreed on their awareness on their organization’s clear objectives, and these are
communicated to all staff for direction on risk assessment. Also, the mean value 4.06 indicated
that employees of the bank have adequate capacity to perform risk assessment activities and,
71.8%, or mean of 3.81indicated that employees have knowledge on significant internal and
30
Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
external operational, financial, compliance and other risks are identified and assessed on an
ongoing basis.
The study result also shows that, the grand mean 3.77 with standard deviation 0f 0.955, in the
areas of risk assessment; the CBE bank employees of the study area have sufficient awareness.
So that the bank has sufficiently designed appropriate strategy of identifying risk and oriented its
employees and management.
The result shows that, the majority of the respondents, 87%, with the mean value 4.00 indicated
that they have awareness as a management of banks review long outstanding items in financial
statements, 83.6% (M=3.94) of the respondents agreed on their understanding on internal
reviews implementation of purchases, cash receipts and cash payments, petty cash management,
payroll fixed asset and electronic data processing, etc in accordance with the policies and
procedures. Similarly, the mean value 3.95, 87% of the employees had awareness that in their
organization, monitoring is built in to the normal operating activities.
Additionally, the mean value, 3.88, (83.5%) of the response indicates that employees of the CBE
bank under the study know that, management has assigned responsibilities for timely for timely
review of audit reports and resolutions of any non compliance items noted in those audit reports,
and mean value 3.84, (78.9%) of the response indicates that employees of the CBE were
understand about the internal control deficiencies or ineffectively controlled risks and how to
reported to the appropriate person as soon as they are identified.
Likely, the mean value 3.82, 80% of response shows that employees have knowledge about
internal reviews of implementation of internal controls in units that conducted periodically.
About 76.5% with mean value of 3.8, of response indicates the agreement of the employees on
understanding and implementation of the independent process checks and evaluations of controls
activities on ongoing basis.
On the other hand, the awareness of employees were low about the timing of the audit in bank, if
monitoring has helped in assessing the quality of performance of the organization over time and
if the bank’s financial statements are audited regularly by external auditor with mean value 3.76
(61.8%), 3.62 (64.7%) , 3.71 (71.8%) respectively; while relate to other variables.
31
Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
5.2. Conclusions
The general objective of the study is to assess the perception of internal control system of
commercial bank of Ethiopia. Specifically, the study was tried to examine the employee’s
awareness with regard to bank’s designed strategy of identifying risks of CBE Bale Robe district,
assess the employee’s level of awareness of the bank’s monitoring activities of internal control
systems and tried to the relationship between dependent and independent variables.
In banking business, internal control failures that resulted in significant losses for banks could
have been substantially lessened or even avoided if the board and senior management of the
organizations had established strong control cultures. So that, senior management of the bank
should emphasize on the importance of a strong system of internal control through their words
and actions, and most importantly, through the criteria used to determine compensation and
promotion. Additionally, ensuring the organizational structure and managerial accountabilities
would be well defined.
The result of this study revealed that the awareness of employees in the CBE bank under the
study was moderately fair that the grand mean of the three variables is 3.8. However, the
understandings of the employees are varying based on the main variable and their elements in
general. In the study, the Coefficients of determination were used to explain whether the model
is a good predictor. From the results of the analysis, the findings show that the independent
variables (Control Activities, Risk Assessment and Monitoring) contributed to 96.6% of the
variation in the level of awareness employees for better performance as indicated by adjusted R 2
of 0.966 which shows that the other variables not included in this study.
The results of the ANOVA analysis of the variance in the above table revealed that the level of
significance is .000(a), this implies that the regression model is significant in predicting the
relationship between internal control activities and employees awareness level. By the help of an
F-test table, the tabulated value for F (40.8%, 3, and 85) is 12.66 which was less than 79.932
meaning that the model was statistically significant.
32
Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
The regression result also shows that; control activities have a positive coefficient that means
that all other thing constant a unit increase in knowledge of control activities for employees the
awareness of the bank employees and their performance was increased by .274 (27.4%). These
shows that a strong relationship between the employees awareness and control activities, the
positive beta sign and a statistically significant result of control activities related with the
performance (β= .274, t =3.476, P<0.05 i.e Significant).
In the areas of employees’ awareness level of performing risk assessment activities, there is
positive coefficient that means that all other thing constant a unit increase in the knowledge of
risk assessment activities, the awareness of employees was increased by .328 (32.8%). This
shows that a relationship between employees awareness and knowledge of risk assessment
activities. The positive beta sign and a statistically significant result of risk assessment related
with the employee awareness (β =.328, t =4.084, P<0.05). So that, this result is support the
proposed acceptable level at 5% significant level. On the other hand the third variable,
Monitoring activity, was supported by the regression result. That is, the regression results
insignificantly related with the employees awareness level at (P<0.05). Working to increase the
knowhow of the employees by one unit will increase the awareness of employees by 37.8% to
properly perform internal control strategies of CBE of the study area.
Generally, the awareness of the employees on performing the strategies of CBE in internal
control activities were good, but their understandings were varied between individual employees
fro, lower to higher level. So that the CBE bank should undertake further detailed research and
bring their knowledge on similar level.
5.3. Recommendation
The Board and senior management of the CBE Bank under the study should identify their
employees with weak understanding of implementing internal control activities; and then
providing them with sufficient short-term and long term trainings, awareness creation
workshops, peer to peer trainings and etc.
33
Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
The banks with internal control problems had organizational structures in which
accountabilities were not clearly defined. As a result, a division of the bank was not
directly accountable to anyone in senior management. This meant that no senior manager
monitored the performance of these activities closely enough to notice unusual activities,
financial and otherwise and no senior manager had a comprehensive understanding of the
activities and how profits were being generated. If management had understood the
activities of the division, they may have been able to recognize warning signs investigate
the operations and take steps to reduce the eventual losses. These problems could also
have been avoided if line management had reviewed transactions and management
information reports and held discussions with appropriate personnel about the nature of
business transacted. Such approaches provide line management with an objective look at
how decisions are being made and ensures that key personnel are operating within the
parameters set by the bank and within the internal control framework.
In reviewing major banking losses caused by poor internal control, supervisors typically
find that these banks failed to observe certain key internal control principles. Of these,
segregation of duties, one of the pillars of sound internal control systems, was most
frequently overlooked by banks that experienced significant losses from internal control
problems. Often, senior management assigned a highly regarded individual responsibility
for supervising two or more areas with conflicting interests. For example, in several
cases, one individual supervised both the front and back offices of a trading desk. This
permitted the individual to control transaction initiation as well as the related
bookkeeping function. Assigning such conflicting duties and miss understanding to one
34
Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
individual gives that person the ability to manipulate financial data for personal gain or to
conceal losses.
Financial information may be misreported internally; incorrect data series from outside
sources may be used to value financial positions; and small, but high-risk activities may
not be reflected in management reports. In some cases, banks failed to adequately
communicate employees’ duties and control responsibilities or disseminated policies
through channels, such as electronic mail, that did not ensure that the policy was read,
understood and retained. Often the systems did not have the necessary built-in ongoing
monitoring processes and the separate evaluations performed were either not adequate or
were not acted upon appropriately by management and the employees. Thus, the
concerned bodies of the CBE should pay attention on day to day follow up and awareness
creation activities.
The absence of monitoring began with a failure to consider and react to day-to-day
information provided to line management and other personnel indicating unusual activity,
such as exceeded exposure limits, customer accounts in proprietary business activities, or
lack of current financial statements from borrowers. In one bank, losses associated with
trading activities were being concealed in a fictitious customer account. If the
organization had a procedure in place that required statements of accounts to be mailed to
customers on a monthly basis and that customer accounts be periodically confirmed, the
35
Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
concealed losses would likely have been noticed long before they were large enough to
cause major problems for the bank.
While internal audit can be an effective source of separate evaluations, it was not
effective in many problem banking organizations. A combination of three factors
contributed to these inadequacies: the performance of piecemeal audits, the lack of a
thorough understanding of the business processes, and inadequate follow-up when
problems were noted. The fragmented audit approach resulted primarily because the
internal audit programs were structured as a series of discrete audits of specific activities
within the same division or department, within geographic areas, or within legal entities.
Moreover, it would have provided the opportunity to verify and test the adequacy of
controls at every step of the process.
Inadequate knowledge and training of internal audit staff in trading products and markets,
electronic information systems, and other highly sophisticated areas Internal control
systems also contributed to internal audit problems. Because the staff did not have the
necessary expertise, they were often hesitant to ask questions when they suspected
problems, and when questions were asked, they were more likely to accept an answer
than to challenge it.
Generally, internal control activity may be render ineffective when management does not
appropriately follow-up on problems identified by auditors. The delays may have
occurred because of a lack of acceptance by management of the role and importance of
internal audit. In addition, the effectiveness of internal audit was impaired when senior
management and members of the board of directors failed to receive timely and regular
tracking reports that indicated critical issues and the subsequent corrective actions taken
by management. This type of periodic tracking device can help senior management
confront important issues in a timely manner.
36
Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
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Annexes
This survey questionnaire aims to study “Assessing the awareness level of employees in the
internal control system of commercial bank of Ethiopia”(CBE).It is purely conducted for
academic purpose. The responses to this questionnaire will be kept strictly confidential and is
42
Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
subject to ethical rules of research at Madda Walabu University. Therefore, I kindly request you
to fill the questionnaire honestly and neatly assuring that the data will be used solely for the
intended academic purpose only. Your response is very crucial to gather data for this study.
Please read the instructions carefully and answer all questions and if you have any inquiry call
the researcher,
Yours sincerely!
Ashenafi Tadesse
Please circle the alternative that most closely represents your personal information:
1. Gender: 1) Male 2) Female
2. Age: 1) below 25 2) 26-35 3) 36 – 45 4) Above 45
3. Education level 1) Diploma 2) 1st Degree 3) Masters 4) PhD
4. To which group your employment type belongs?
1) Clerical 2) Non clerical
5. How long have you served in CBE? (Work experience in years)
1) 1- 5 years 2) 6 – 10 3) 11 – 20 4) Above 20 years
6. What is your current working position …………………………
43
Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
2. Please, tick in the appropriate box to extent to which your awareness to perform your
organization’s management in risk assessment.
Strongly Dis
Neutral Strongly
RISK ASSESSMENT disagree Agree Agree(4)
(3) agree(5)
(1) (2)
44
Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
3. Please, tick in the appropriate box to extent to which the following statements relate to
your organization’s monitoring procedures
1. Have you sufficient awareness on all activities and processes of internal control activities
in your CBE branch?
2. Do you believe that, the internal control met the required goal of the banks? (Explain)
3. What is your idea about the effectiveness of the internal control and where is/ are areas of
the control you suggest for an improvement?
4. What kind of capacity building program may be performed by your organization to
increase the awareness level of employees to better perform internal control activities?
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Assessing The Awareness Level of Employees In The Internal Control System on Commercial Bank of Ethiopia
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