Professional Documents
Culture Documents
BY
REG. NO:02/00316/133739
SUPERVISED BY
MAY 2013
Declaration
Student Declaration: I, Hanibol Francis Hassan MAJOK, do hereby certify that; this proposal is
my original work and has not been presented for a degree award or otherwise in any other
university
Sign: .. Date:
Name: Hanibol Francis Hassan Majok
Registration number: 02.00316/133739
Faculty: Business and Management (BBA Accounting and Finance)
Approval
Supervisors Approval: This proposal has been submitted for review with my approval as
supervisor
Sign: Date:
2
Dedication
I dedicate this little piece of work to my late father Francis Hassan Nasser. At my teens, his
words keep trying and you will not fail continued to inspire me since 1985 to date. This was at
his last moment of life in Wau civil hospital. He pause to give me his last advice before he could
pass on and advice has been my major oracle through my life after him.
I wish I would have bigger reminder for him.
3
Acknowledgement
My appreciation also goes to my wife, madam Harriet Burit Henry Boying, she has been morally
and materially supportive to me in pursuit of my study and she had stood in for me when there is
family demand on while in Uganda for study. I also want to acknowledge guardian of Mother
Adelia Abouc Alexander Majok Amet, my mother who is taking care of our house back home in
Aweil in order to give me a change to come this far where I was able interact with Juba
University and subsequently Cavendish University-Uganda too.
I don also appreciate brother Angelo Francis Hassan for his moral support and all relatives,
colleagues and fellow servicemen who have continued to express their unwavering support for
my study.
Finally, many people have helped in the course of my study without realizing how significant
was the impact of their help my success. This includes, transport companies which have been
ferrying me to and from, hoteliers, chefs those providing security at both country Uganda and
South Sudan because I consumed their services every single second I spend at both side of the
border doing my work.
The entire family of Cavendish University is the epicenter of my career advancement. I also feel
like one of them. I therefore say to them you have made me what I am, so I am very much
thankful to that and through this forum, I do encourage to continue your endeavor to
development human brain-they key to overall global development.
4
Acronyms/Abbreviations
SS South Sudan
5
Abstract
This paper is to present a study on the Effects of Internal Control on Profitability of Private Firm
with Kenya Commercial Bank-South Sudan. This paper is to offer a Bachelor of Business
Administration in Accounting and Finance.
The paper focus on KCB South(Sudan) Limited which was incorporated in December 2005 as a
wholly owned subsidiary of Kenya Commercial Bank. However, from the time it started its operations,
the bank has been experiencing rising profit margins. The KCB maintained a momentum for 2011 with a
40% growth in profit before tax as at Sept. 30th 2011(KCB Bank Group (2013), KCB profit up by 40%.
www.kcbbankgroup.com).
Different business firms design different internal controls and at the same time the implementation level
varies from business firm to business firm. Given the profit margins of KCB over the years, one wonders
what internal control measures it has put in place to achieve all these.
This is why the study is focused on the effects of internal control on profitability of private business
firm with KCB SS as a case. For the researcher to be focus, three study questions were identified
which are: what are the components of internal control activities in South Sudan?, What are the
challenges facing the implementation of internal in KCB SS? And what is the relationship
between effective internals and the profitability of Private Business Firm?
The study shows that preventive and detective internal control with application of computer base
system of control. The result of this study show that, 97.54% opinion do either strongly agree or
just agree that KCB SS apply all necessary internal control components with special emphasis on
computer base internal control while, 2.46% expressed strong disagreement or disagreement on
the component applied.
On the same spirit, 94.97% of respondent do strongly agree or agree that, internal control
procedure applies has had a great benefit to KCB South Sudan while 5.03% thinks that internal
control alone would have not score any positive impact or progress in KCB SS endeavor to make
profit if other ethical issues were not adequately considered and also put into play .
6
In shading on the profit aspect, 90.18% opinion concur that the internal control system allied by
KCB SS has indeed made KCB SS much more profitable. Surprisingly however, 9.82% opinion
indicates that KCB SS has been reneging on fulfilling its CSR obligation.
7
Table of Contents
Topic Page
i. Declaration.2
ii. Approval.2
iii. Dedication..3
iv. Acknowledgement.4
v. Acronyms/Abbreviations5
vi. Definition of Key Terms.5
vii. Abstract..6
CHAPTER ONE
INTRODUCTION
Topic Page
1.0. 0. Introduction.
14
1.1.6. Monitoring...19
8
1.2.1. Management.21
1.2.2.Board of Directors21
1.3.0. Background.24
1.4.0. Profitability..25
9
CHAPTER TWO
LITERARTURE REVIEW
2.0.0. Introduction.31
2.2.1. Limitations...33
2.3.0. Key components of Internal Control Activities in Private Business Organizations and
Relation to Profitability..34
10
2.3.8. Corrective Internal Controls.41
CHAPTER THREE
METHODOLOGY
3.0.0. Introduction..42
3.6.2. Questionnaire...44
11
3.9.0. Ethical Considerations.46
CHAPTER FOUR
4.1.0. Introduction..47
CHAPTER FIVE
DISCUSSION OF FINDING
CHAPTER SIX
6.1.0 Conclusions56
6.2.0. Recommendations56
12
References..58
APPENDICES
Budget60
Questionnaire.61
List of Tables
Table Page
13
CHAPTER ONE
INTRODUCTION
1.0 Introduction
This chapter is comprised of five sections and these include; Introduction; background, statement
of the problem, objectives of the study, research questions, scope, and significance of the study.
This chapter is basically the preamble of the study and is very significant in highlighting the
theoretical issues or problem statement and provides a platform for understanding the entire
research.
In economics, the private sector is that part of the economy, sometimes referred to as the citizen
sector, which is run by private individuals or groups, usually as a means of enterprise for profit,
and is not controlled by the state. By contrast, enterprises that are part of the state are part of the
public sector; private, non-profit organizations are regarded as part of the voluntary sector, a
subset of the private sector.
A privately owned enterprise such as Kenya Commercial Bank, refers to a commercial enterprise
that is owned by private investors, shareholders or owners (usually collectively, but they can be
owned by a single individual), and is in contrast to state institutions, such as publicly owned
enterprises and government agencies. Private enterprises comprise the private sector of an
economy. An economic system that contains a large private sector where privately run businesses
are the backbone of the economy is referred to as capitalism. This contrasts with socialism,
where industry is owned by the state or by all of the community in common. The act of taking
assets into the private sector is referred to as privatization. The goal of private enterprise differs
from other institutions, the major difference being private businesses exist solely to generate
profit for the owners or shareholders. A privately owned enterprise is one of the following that
privately owned the property and may take decisions based on its defined objective.
Sole proprietorship: A sole proprietorship is a business owned by one person. The owner may
operate on his or her own or may employ others. The owner of the business has total and
unlimited personal liability of the debts incurred by the business. This form is usually relegated
to small businesses.
14
Partnership: A partnership is a form of business in which two or more people operate for the
common goal of making profit. Each partner has total and unlimited personal liability of the
debts incurred by the partnership. There are three typical different types of classifications for
partnerships: general partnerships, limited partnerships, and limited liability partnerships.
Kenya Commercial Bank (South Sudan), is a commercial bank in South Sudan. It is one of the
commercial banks licensed by the Bank of South Sudan, the national banking regulator in South
Sudan. As of October 2010, Kenya Commercial Bank (South Sudan) maintained its headquarters
in Juba, the capital of South Sudan and the country's largest city. The bank had a total of twelve
(12) branches in the various cities and towns in the country. Over the years of establishment in
South Sudan, Kenya Commercial bank has consistently registered profits. The KCB Group
maintained its profitability momentum for 2011 with a 40% growth in profit before tax as at
September 30, 2011. Profit before tax increased from KSh6.5 billion over the same period in
2010 to KSh9.1 billion in 2011(KCB Bank Group 2013)
15
1.1. Internal Control - Integrated Conceptual Framework
Designing an internal-control system for your business takes planning and an understanding of the
detailed operations of the company. Internal controls serve several purposes, but the main ones are
to ensure that the business operates as intended and to prevent opportunities for employees to
misappropriate goods or money. Internal controls allow a business owner the peace of knowing
everything is working properly without having to personally oversee every facet of the operation.
Senior executives have long sought ways to better control the enterprises they run. Internal
controls are put in place to keep the company on course toward profitability goals and achievement
of its mission, and to minimize surprises along the way. They enable management to deal with
rapidly changing economic and competitive environments, shifting customer demands and
priorities, and restructuring for future growth. Internal controls promote efficiency, reduce risk of
asset loss, and help ensure the reliability of financial statements and compliance with laws and
regulations.
Because internal control serves many important purposes, there are increasing calls for better
internal control systems and report cards on them. Internal control is looked upon more and more
as a solution to a variety of potential problems.
Internal control means different things to different people. This causes confusion among
businesspeople, legislators, regulators and others. Resulting miscommunication and different
expectations cause problems within an enterprise. Problems are compounded when the term, if not
clearly defined, is written into law, regulation or rule.
This report deals with the needs and expectations of management and others. It defines and
describes internal control to:
16
them.
The first category addresses an entity's basic business objectives, including performance and
profitability goals and safeguarding of resources. The second relates to the preparation of reliable
published financial statements, including interim and condensed financial statements and selected
financial data derived from such statements, such as earnings releases, reported publicly. The third
deals with complying with those laws and regulations to which the entity is subject. These distinct
but overlapping categories address different needs and allow a directed focus to meet the separate
needs.
Internal control systems operate at different levels of effectiveness. Internal control can be judged
effective in each of the three categories, respectively, if the board of directors and management
have reasonable assurance that:
They understand the extent to which the entity's operations objectives are being achieved.
Published financial statements are being prepared reliably.
Applicable laws and regulations are being complied with.
While internal control is a process, its effectiveness is a state or condition of the process at one or
more points in time. Internal control consists of five interrelated components. These are derived
from the way management runs a business, and are integrated with the management process.
Although the components apply to all entities, small and mid-size companies may implement them
differently than large ones. Its controls may be less formal and less structured, yet a small company
can still have effective internal control. The components are:
17
1.1.2. Control Environment
The control environment sets the tone of an organization, influencing the control consciousness of
its people. It is the foundation for all other components of internal control, providing discipline and
structure. Control environment factors include the integrity, ethical values and competence of the
entity's people; management's philosophy and operating style; the way management assigns
authority and responsibility, and organizes and develops its people; and the attention and direction
provided by the board of directors.
Every entity faces a variety of risks from external and internal sources that must be assessed. A
precondition to risk assessment is establishment of objectives, linked at different levels and
internally consistent. Risk assessment is the identification and analysis of relevant risks to
achievement of the objectives, forming a basis for determining how the risks should be managed.
Because economic, industry, regulatory and operating conditions will continue to change,
mechanisms are needed to identify and deal with the special risks associated with change.
Control activities are the policies and procedures that help ensure management directives are
carried out. They help ensure that necessary actions are taken to address risks to achievement of
the entity's objectives. Control activities occur throughout the organization, at all levels and in all
functions. They include a range of activities as diverse as approvals, authorizations, verifications,
reconciliations, reviews of operating performance, security of assets and segregation of duties.
Pertinent information must be identified, captured and communicated in a form and timeframe that
enable people to carry out their responsibilities. Information systems produce reports, containing
operational, financial and compliance-related information, that make it possible to run and control
the business. They deal not only with internally generated data, but also information about external
events, activities and conditions necessary to informed business decision-making and external
18
reporting. Effective communication also must occur in a broader sense, flowing down, across and
up the organization. All personnel must receive a clear message from top management that control
responsibilities must be taken seriously. They must understand their own role in the internal control
system, as well as how individual activities relate to the work of others. They must have a means
of communicating significant information upstream. There also needs to be effective
communication with external parties, such as customers, suppliers, regulators and shareholders.
1.1.6. Monitoring
Internal control systems need to be monitored--a process that assesses the quality of the system's
performance over time. This is accomplished through ongoing monitoring activities, separate
evaluations or a combination of the two. Ongoing monitoring occurs in the course of operations. It
includes regular management and supervisory activities, and other actions personnel take in
performing their duties. The scope and frequency of separate evaluations will depend primarily on
an assessment of risks and the effectiveness of ongoing monitoring procedures. Internal control
deficiencies should be reported upstream, with serious matters reported to top management and the
board. There is synergy and linkage among these components, forming an integrated system that
reacts dynamically to changing conditions. The internal control system is intertwined with the
entity's operating activities and exists for fundamental business reasons. Internal control is most
effective when controls are built into the entity's infrastructure and are a part of the essence of the
enterprise. "Built in" controls support quality and empowerment initiatives, avoid unnecessary
costs and enable quick response to changing conditions.
There is a direct relationship between the three categories of objectives, which are what an entity
strives to achieve, and components, which represent what is needed to achieve the objectives. All
components are relevant to each objectives category. When looking at any one category--the
effectiveness and efficiency of operations, for instance--all five components must be present and
functioning effectively to conclude that internal control over operations is effective.
The internal control definition--with its underlying fundamental concepts of a process, effected by
people, providing reasonable assurance--together with the categorization of objectives and the
components and criteria for effectiveness, and the associated discussions, constitute this internal
19
control framework.
Internal control can help an entity achieve its performance and profitability targets, and prevent
loss of resources. It can help ensure reliable financial reporting. And it can help ensure that the
enterprise complies with laws and regulations, avoiding damage to its reputation and other
consequences. In sum, it can help an entity get to where it wants to go, and avoid pitfalls and
surprises along the way.
Unfortunately, some people have greater, and unrealistic, expectations. They look for absolutes,
believing that:
Internal control can ensure an entity's success--that is, it will ensure achievement of basic business
objectives or will, at the least, ensure survival.
Even effective internal control can only help an entity achieve these objectives. It can provide
management information about the entity's progress, or lack of it, toward their achievement. But
internal control cannot change an inherently poor manager into a good one. And, shifts in
government policy or programs, competitors' actions or economic conditions can be beyond
management's control. Internal control cannot ensure success, or even survival.
Internal control can ensure the reliability of financial reporting and compliance with laws and
regulations. This belief is also unwarranted. An internal control system, no matter how well
conceived and operated, can provide only reasonable--not absolute--assurance to management and
the board regarding achievement of an entity's objectives. The likelihood of achievement is
affected by limitations inherent in all internal control systems. These include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the collusion of two or more
people, and management has the ability to override the system. Another limiting factor is that the
design of an internal control system must reflect the fact that there are resource constraints, and the
20
benefits of controls must be considered relative to their costs. Thus, while internal control can help
an entity achieve its objectives, it is not a panacea.
1.2.1. Management
The chief executive officer is ultimately responsible and should assume "ownership" of the system.
More than any other individual, the chief executive sets the "tone at the top" that affects integrity
and ethics and other factors of a positive control environment. In a large company, the chief
executive fulfills this duty by providing leadership and direction to senior managers and reviewing
the way they're controlling the business. Senior managers, in turn, assign responsibility for
establishment of more specific internal control policies and procedures to personnel responsible for
the unit's functions. In a smaller entity, the influence of the chief executive, often an owner-
manager is usually more direct. In any event, in a cascading responsibility, a manager is effectively
a chief executive of his or her sphere of responsibility. Of particular significance are financial
officers and their staffs, whose control activities cut across, as well as up and down, the operating
and other units of an enterprise.
Management is accountable to the board of directors, which provides governance, guidance and
oversight. Effective board members are objective, capable and inquisitive. They also have a
knowledge of the entity's activities and environment, and commit the time necessary to fulfill their
board responsibilities. Management may be in a position to override controls and ignore or stifle
communications from subordinates, enabling a dishonest management which intentionally
misrepresents results to cover its tracks. A strong, active board, particularly when coupled with
effective upward communications channels and capable financial, legal and internal audit
functions, is often best able to identify and correct such a problem.
21
1.2.3. Internal Auditors
Internal auditors play an important role in evaluating the effectiveness of control systems, and
contribute to ongoing effectiveness. Because of organizational position and authority in an entity,
an internal audit function often plays a significant monitoring role.
Internal control is, to some degree, the responsibility of everyone in an organization and therefore
should be an explicit or implicit part of everyone's job description. Virtually all employees produce
information used in the internal control system or take other actions needed to effect control. Also,
all personnel should be responsible for communicating upward problems in operations,
noncompliance with the code of conduct, or other policy violations or illegal actions.
Others providing information to the entity useful in effecting internal control are legislators and
regulators, customers and others transacting business with the enterprise, financial analysts, bond
raters and the news media. External parties, however, are not responsible for, nor are they a part of,
the entity's internal control system.
22
Figure 1 Internal control framework and methodology ( Accounting Information Systems)
23
1.3.0. Back ground
According to Amas (2009), internal controls include all of the control activities which are
performed under the governance and organizational structure established by the banks board of
directors and senior management and in which each individual within the organization must
participate in order to ensure proper, efficient and effective performing of the banks activities in
accordance with the management strategy and policies, and applicable laws and regulations.
published financial statements, including interim and condensed financial statements and
selected financial data derived from such statements, such as earnings releases, reported publicly.
The third deals with complying with those laws and regulations to which the entity is subject.
These distinct but overlapping categories address different needs and allow a directed focus to
meet the separate needs.
According to Sal Bianco (2009) risk-based internal controls are designed to help a company
achieve their objectives, from financial to operational:
Clarify the roles and responsibilities of management and employees, greater controls over the
management of business growth, reducing costs resulting from greater operating efficiency, and
increase operating performance.
Facilitate the availability of more accurate and timely information to better manage the business,
reduce the risk of errors or irregularities, and heighten managements credibility with
stakeholders.
Reduce the risk of employee or customer litigation or business disruption, and create more
credibility in contractual relationships with vendors, customers and regulators.
24
1.4. Profitability
Profitability is the primary goal of all business ventures. Without profitability the business will
not survive in the long run. So measuring current and past profitability and projecting future
profitability is very important.
Profitability is measured with income and expenses. Income is money generated from the
activities of the business. For example, if firms goods or services are produced and sold, income
is generated. However, money coming into the business from activities like borrowing money do
not create income. This is simply a cash transaction between the business and the lender to
generate cash for Figure 2 Whole Farm Financial operating the business or buying
statement (understanding profitability)
assets.
Income
Statement
Made simple
Expenses are the cost of resources used up or consumed by the activities of the business. For
example, procurement of goods for sales or offering service are an expense of a firm business
because it is used up in the production process. Resources such as a machine whose useful life is
more than one year is used up over a period of years. Repayment of a loan is not an expense, it is
merely a cash transfer between the business and the lender.
25
Profitability is measured with an income statement. This is essentially a listing of income and
expenses during a period of time (usually a year) for the entire business. Decision Tool Income
Statement - Short Form, is used to do a simple income statement analysis. An Income Statement
is traditionally used to measure profitability of the business for the past accounting period.
However, a pro forma income statement measures projected profitability of the business for
the upcoming accounting period. A budget may be used when you want to project profitability
for a particular project or a portion of a business.
Accounting profits provide you with an intermediate view of the viability of your business.
Although one year of losses may not permanently harm your business, consecutive years of
losses (or net income insufficient to cover living expenditures) may jeopardize the viability of
your business.
Economic Profits
In addition to deducting business expenses, opportunity costs are also deducted when computing
economic profits. Opportunity costs relate to your money (net worth), your labor and your
management ability. If you were not farming, you would have your money invested elsewhere
and be employed in a different career. Opportunity cost is the investment returns given up by not
having your money invested elsewhere and wages given up by not working elsewhere. These are
deduced, along with ordinary business expenses, in calculating economic profit.
26
Economic profits provide you with a long-term perspective of your business. If you can
consistently generate a higher level of personal income by using your money and labor
elsewhere, you may want to examine whether you want to continue farming.
People often mistakenly believe that a profitable business will not encounter cash flow problems.
Although closely related, profitability and cash flow are different. An income statement lists
income and expenses while the cash flow statement lists cash inflows and cash outflows. An
income statement shows profitability while a cash flow statement shows liquidity.
Many income items are also cash inflows. The sale of crops and livestock are usually both
income and cash inflows. The timing is also usually the same (cash method of accounting) as
long as a check is received and deposited in your account at the time of the sale. Many expense
items are also cash outflow items.. The timing is also the same (cash method of accounting) if a
check is written at the time of purchase.
However, there are many cash items that are not income and expense items, and vice versa. For
example, the purchase of a tractor is a cash outflow if you pay cash at the time of purchase. If
money is borrowed for the purchase using a term loan, the down payment is a cash outflow at the
time of purchase and the annual principal and interest payments are cash outflows each year.
Depreciation calculated for income tax purposes can be used. However, to accurately calculate
net income, a more realistic depreciation amount should be used to approximate the actual
decline in the value of the machine during the year.
KCB South(Sudan) Limited was incorporated in December 2005 as a wholly owned subsidiary
of Kenya Commercial Bank. However, from the time it started its operations, the bank has been
experiencing rising profit margins. The KCB maintained a momentum for 2011 with a 40%
growth in profit before tax as at Sept. 30th 2011(KCB Bank Group (2013), KCB profit up by 40%.
www.kcbbankgroup.com). Different business firms design different internal controls and at the
same time the implementation level varies from business firm to business firm. Given the profit
27
margins of KCB over the years one wonders what internal control measures it has put in place to
achieve all these. This is why the study is focused on the effects of internal controls on the
profitability of private firms in South Sudan.
28
1.6 Objectives of the study
The general objective of the study is to analyze the effect of effective internal controls on the
profitability of private business firms with a case study of KCB South Sudan.
To find out the types of internal control activities of KCB South Sudan
To identify the challenges to the implementation of internal controls in KCB South Sudan
To analyze the relationship between effective internal control and profitability of private
business firms
What are the components of internal control activities in KCB South Sudan?
What are some of the challenges facing the implementation of internal controls in KCB?
What is the relationship between effective internal controls and the profitability of private
business firms?
The study shall analyze the effects of effective internal controls on the profitability of private
business firms with KCB as a case study. The study shall focus on the components of internal
controls, challenges of implementing internal controls and the relationship between effective
internal control and profitability
29
1.8.2 Geographical Scope
There are nine branches of KCB in South Sudan. The study shall cover KCB South Sudan main
branch located in the city centre of Juba. This is the head quarters of KCB South Sudan. This
branch has been selected because of it being the head quarters of KCB South Sudan and its
proximity to the researcher. If the main branch could not provide enough population for samples,
other branches within the city of Juba will be assess for sampling.
The study shall cover a period between 2006- 2012. This period has been selected because it is
when the bank has been in full operation in South Sudan.
The study is going to be beneficial to a number of stake holders as can be seen below:
1.9.1. The study will benefit the management of KCB as it will put forward benefits and
challenges of implementing effective internal controls. The documentation of these
benefits and challenges shall act as a guide to the management in decision making
regarding internal controls
1.9.2. The study will also benefit the government of South Sudan and specifically the
Central Bank of South Sudan because it will be reference point for designing
appropriate internal control guidelines for the rest of the commercial banks in South
Sudan.
1.9.3. The study will also benefit the general public as it will act as additional literature to
the already existing knowledge about internal control and profitability
1.9.4. The study will also benefit the researcher in finalizing his study programme as it is a
partial requirement for the award of the Bachelor of Business administration of
Cavendish University- Uganda.
CHAPTER TWO
30
LITERATURE REVIEW
2.1.0. Introduction
Internal control is all about the policies and procedures management uses to achieve the
following goals.
Safeguard Entitys assets - well designed internal controls protect assets from accidental
loss or loss from fraud.
Ensure the reliability and integrity of financial information - Internal controls ensure that
management has accurate, timely and complete information, including accounting
records, in order to plan, monitor and report business operations.
Ensure compliance - Internal controls help to ensure the entity is in compliance with the
many state and local laws and regulations affecting the operations of the business.
Yes, generally speaking there are two types: preventive and detective controls. Both types of
controls are essential to an effective internal control system. From a quality standpoint,
preventive controls are essential because they are proactive and emphasize quality. However,
detective controls play a critical role by providing evidence that the preventive controls are
functioning as intended.
31
2.1.0. Types of Internal Control
Mainly, there are two types of internal control which we are going to look at each exclusively.
They are; Preventive and Detective internal controls.
2.1.1 Preventive Controls; are designed to discourage errors or irregularities from occurring.
They are proactive controls that help to ensure departmental objectives are being met. Examples
of preventive controls are:
2.1.2 Detective Controls; are designed to find errors or irregularities after they have
occurred. Examples of detective controls are;
32
Reconciliations: An employee relates different sets of data to one another, identifies and
investigates differences, and takes corrective action, when necessary.
2.2.1.Limitations
It is important to keep in mind that internal controls, while effective, are not a guarantee that a
company's objectives will be met. Human errors and computer errors are not accounted for by
internal controls. In addition, internal controls assume employees are honest and that they would
not bypass guidelines or alter data to benefit themselves.
Detective controls relate to company communications and the control policy. The intent is to
create a controlled environment in which employees understand, respect boundaries of their
positions and adhere to the company principles. Poor communication is a problem with directive
controls. When staff lacks a clear understanding in the segmentation of duties, they do not follow
the control in place or they may exceed the control's intent. This limits flexibility and lowers
productivity.
33
34
2.3.0. Key components of internal control activities in private business
organizations and relation to Profitability
According to the Committee of Sponsoring Organization of Tread way (2004), Control activities
are the policies and procedures that help ensure management directives are carried out. They help
ensure that necessary actions are taken to address risks to achievement of the entitys objectives.
Control activities occur throughout the organization, at all levels and in all functions. They
include a range of activities as diverse as approvals, authorizations, verifications, reconciliations,
reviews of operating performance, security of assets and segregation of duties.
According to them, Control activities can be divided into three categories, based on the nature of
the entitys objectives to which they relate: operations, financial reporting, or compliance.
Although some controls relate solely to one area, there is often overlap. Depending on
circumstances, a particular control activity could help satisfy entity objectives in more than one
of the three categories. Thus, operations controls also can help ensure reliable financial reporting,
financial reporting controls can serve to effect compliance, and so on.
For example, a parts distributorships sales manager, to keep abreast of sales of certain products
and geographical locations, obtains daily flash reports from district heads. Because the sales
manager relates that information to recorded sales and salespersons commissions reported by the
accounting system, that control activity addresses objectives relating to both operations and
financial reporting. In a retail chain, credits issued for merchandise returned by customers are
controlled by the numerical sequence of documents and summarized for financial reporting
purposes. This summarization also provides an analysis by product for merchandise managers
use in future buying decisions and for inventory control. In this case, control activities
established primarily for financial reporting also serve operations.
Although these categories are helpful in discussing internal control, the particular category in
which a control happens to be placed is not as important as the role it plays in achieving a
particular activitys objectives.
35
2.3.1 Types of Control Activities
Controls can be either preventative or detective. Preventative controls are proactive in that they
attempt to deter or prevent undesirable events from occurring. Detective controls provide
evidence that an error or irregularity has occurred. While preventative controls are preferred,
detective controls are critical to provide evidence that the preventive controls are functioning as
intended. Basic control activities include:
Budget/Financial Control
Accountability
Separation of Duties
Reconciliations
Physical Security
Basic Principle: Care should be taken to prepare reasonably accurate financial budgets and
projections based on the most reliable data available. Actual financial activity should then be
compared on a regular basis to budgeted and/or projected amounts to provide an early warning
signal as to significant positive or negative variances. Some variances could indicate temporary
or permanent changes in the particular business environment, which may warrant changing
certain aspects of how business is conducted. Other (especially negative) variances could
indicate that processing errors or fraudulent activities are occurring. A minimum variance
threshold should be established for key financial indicators. Variances in excess of the threshold
should be investigated. Examples would include:
36
Unusually low expenses could be merely due to timing delays on the part of vendors, but
could also be the result of internal coding errors or misplaced invoices that have yet to be
paid.
Unusually high expenses may be legitimate and may warrant adjusting the budget plan
accordingly. They could also be the result of coding errors, unauthorized expenditures, or
overcharges by vendors.
Unusually low revenues may indicate a general downturn in business activity due to
some external factor. However, it could also be the result of internal processing errors or
misappropriation of receipts (especially cash) by employees.
Unusually high revenues, which cannot be explained by increased business activity, could
be the result of internal processing or coding errors.
Higher than normal accounts receivable could be the result of higher sales activity, but
could also be indicative of problems in collections or processing cash payments.
Basic Principle: Management review of reports, on-line activity, reconciliations and other
information is an important control activity. Fiscal responsibility may be delegated to the
administrative staff but ultimately is retained by Deans, Directors, Department Chairs and
Principle Investigators who should at minimum:
37
Basic Principle: The action of approving transactions should not be taken lightly. An approval
indicates that the approver has reviewed the supporting documentation, ensured it is appropriate,
accurate and in compliance with university policy and procedures. Thus, responsibility for a
transaction comes along with an approval.
Supporting documentation should be sufficient for the approver to fully understand what
they are approving. Any unusual items should be questioned.
Basic Principle: Review approval levels to ensure they are commensurate with the nature and
significance of the transaction. Persons approving transactions should have the authority and
knowledge to make informed decisions to:
Approve personnel actions such as hiring new employees, terminations, promotions, and
hours worked.
38
Travel expenses.
Entertainment expenses.
Basic Principle: The identity of all individuals involved in a process or transaction should be
readily determinable to isolate responsibility for errors or irregularities. This is known as an audit
trail and can take the form of signatures, initials, date/time stamps, computer login IDs, or other
means of identification. The documents or computer records containing this information must be
kept on file and available for examination for a reasonable time period in line with a record
retention policy.
39
Basic Principle: No one person should be able to control a transaction or process from
beginning to end without intervention or review by at least one other person. Specifically, no one
person should initiate and authorize a transaction nor should one person record and reconcile
transactions. This principle is not limited to financial activities alone (i.e. processing student
grades). Involving two or more people to perform key responsibilities reduces the opportunity for
misappropriation of funds or fraud. Examples include:
Grade changes processed by the Registrar should be verified by the college recorder
and/or the respective instructor
Revenue processing A single person should not handle cash and verify deposits. Ideally
three people are needed to properly segregate duties, one person receives the revenue and
creates a receipt, another person prepares the deposit and a third reconciles it to the
general ledger monthly. If only 2 are available, the cashier can return the validated
deposit slip to the first person to be compared to the receipts generated. If the receipts
were for a payment on an account the deposit process should be separated from posting
the payment to the accounts receivable.
Expenditure processing One person should not process, approve and reconcile
expenditures. At minimum, the approval and reconciliation duties should be segregated.
Payroll processing Ideally, one person should input time, another approve and a third
reconcile. The person who adds new employees on payroll should not also enter and
approve hours worked, distribute paychecks, and manage the departmental budget.
Basic Principle: Periodic comparisons of detail records should be made with an independently
maintained control record. Examples:
40
Monthly transaction reports are sent by the Comptrollers Office summarizing the
revenue, expense and encumbrance activity. In order to validate data integrity and
accuracy, the budget manager of each account should reconcile the amounts to supporting
documentation. (Revenue, expenses, procurement card statements, payroll etc.) Identify
any transactions not yet recorded to obtain accurate budget availability. Indicate this
review was performed (i.e. initials or checklist) and file with the supporting
documentation. Any discrepancies should be investigated.
Detail listing of accounts receivable balances should be totaled and compared to the
balance shown in the general ledger control account at least once per month. Any errors
identified in this process should be corrected.
A physical inventory of goods for resale should be taken at least annually and a total
dollar value determined. The total could then be compared to that shown in the
appropriate general ledger control account. The ledger should be adjusted to agree to the
actual inventory value. Explanations for the variance should be investigated and
documented.
Basic principle: All reasonable efforts should be made to safeguard the physical assets of the
organization from the risk of loss or damage. Examples of these assets include:
41
Important documents, confidential files.
Buildings/offices.
Basic Principle: Original data entry into production computing systems should be checked,
verified or edited in some way to identify errors to ensure accuracy and reliability of the data.
The most appropriate or efficient method will depend on the particular computing system and the
type of data. Examples of methods used include:
Built-in computer system edits to check for reasonableness of data in key fields.
Reconcilements.
As the name suggests, corrective internal controls are put into place to correct any errors that
were found by the detective internal controls. When an error is made, employees should follow
whatever procedures have been put into place to correct the error, such as reporting the problem
to a supervisor. Training programs and progressive discipline for errors are other examples of
corrective internal controls.
42
CHAPTER THREE
METHODOLOGY
3.0.0. Introduction
This chapter covers the methodology used in this study. It is exclusively revealing the research
design, approach used, the population, sample size and selection, the data collection methods like
observation, interviews and questionnaires, secondary data sources used, data analysis
techniques used and finally the criteria for analyzing the data.
43
This research design will be case study. It is a very useful way of investigation into the casual
relationship of social phenomena. The study will investigate the impact of internal controls on
profitability of private businesses in South Sudan with KCB as a case study. From the many
KCB branches in South Sudan, one of them was singled out as a case to be studied. Research
tools like questionnaires, interviews and observation will be used to gather primary data for the
research.
The study population shall comprise the management and the staff of Kenya Commercial Bank.
This population was selected because it was thought that these categories of people have the
information necessary for the study. For this study, the population of 50 or even more will be
tested to draw a reasonable conclusion
The selection of elements from a big population was according to Morgan and Krejcies method
of sample size determination as can be seen from the table 1 below:
44
Table 2: Categories of samples
The techniques which shall be used are random and purposive techniques. This techniques were
used depending on which kind of respondents the study targeted.
Random sampling was applied on the employees of Kenya Commercial Bank. Numbers 1 and 2
will be written on small pieces of paper and squeezed to conceal the figures at first sight. The
small pieces of paper will then be mixed in a basket where by each person will be asked to pick
one piece of paper. Those who will pick the lucky number 2 will be given the questionnaire and
those who will pick the unlucky number 1 will be not given.
Mean while, for commercial bank management and the board of directors, purposive sampling
will be used. The reason for this type of sampling is for purposes of getting the information from
the people thought to possess it.
45
Data is raw information or information that has not been analyzed or processed in a more
meaningful state. Data will be sourced from both primary and secondary data
The primary data will be gathered directly from the respondents through questionnaires,
interviews and discussion. This information will be used to write the dissertation. The primary
data collection methods to be used include the following;
The secondary data will be gathered from documents such as; audit accounts, journals, news
papers, magazines, reports, internet, and other research records about the commercial banks
internal controls and profitability.
The study will use a number of data collection methods. The methods of data collection to be
used include interview method and questionnaire.
This method of research is informal and involves face-to-face interaction between the
interviewer and the interviewee. The researcher opts for this method specifically for the purpose
of having face to-face conversation with the top management officials of the bank, the banks
heads of departments and a few members of staff from the various departments. The interviews
will focus on areas of interest and how they run the activities of the bank and how these activities
have improved on the profitability of KCB.
3.6.2. Questionnaire
The researcher, under this method, will design a list of open and closed ended questionnaire
which will guide the interviewee in providing the researcher with the necessary information for
the study. This method will be used to ascertain internal controls and their impact on the
profitability of KCB.
46
3.7.0. Data Presentation and Analysis
This section presents the methods to be used for the presentation of findings and how the
findings shall be interpreted.
Data will be presented according to the objectives of the study. Data will also be presented
theoretically and statistically. Tables, graphs and charts will be used to summarize the findings
which then shall be explained theoretically.
Data will be entered and analyzed in both word and excel. Both qualitative
and quantitative methods will be used to analyze the data. Barographs and
pie charts will be generated to present quantitative data.
Non response rates Some respondents may not respond to questionnaires in time or may not
respond at all. This may be a challenge to the study. However, the researcher will print the
research instruments in excess in order to take care of non response rates.
Financial Constraints Research is a very expensive venture and therefore the researcher expects
to face some challenges relating to finance especially when it comes to secretarial services,
transport in the field, and many others. However, the researcher will work within the budget
constraints.
Time constraints Research takes a lot of time and yet limited time has been allocated to
research. For that reason the researcher has used a case study approach rather than carrying out a
survey.
47
The ethical considerations in the study cover the consent of the respondents to the data collection
process and the confidentiality to the information given by the respondents. The questionnaires
that will be drafted by the researcher shall include a letter from the administration of the
university that explains the purpose of the research and the use of the information obtained from
the study.
The researcher shall take the respondents in his confidence given the confidential or exclusive
nature of information related to banking. In addition, by not revealing the identity of the
respondents and information provided during the interview process, it will help extend their
cooperation and participation in the research that will be carried out.
48
CHAPTER FOUR
4.1.0. Introduction
After the painstaking reviews of the data collected and proper study of the product, the
researcher has come up with the following results outlined in the following tabloid analysis;
The researcher in the table below presents other Gender Respondent Distribution
Male count 9 18 27
Percentage
(%) 33.33 66.67 100.00
Female count 4 24 28
Percentage
(%) 14.29 85.71 100.00
Total Count 13 42 55
Percentage
(%) 23.64 76.36 100
Male respondents constitutes the major portion in both management and teller respondent
category, with the proportion of 33.33% and 66.67% respectively. However, teller makes
66.67% and 85.71% of male and female respondent respectively.
49
4.1.2. Marital status Respondent Category distribution
The researchers present in the below table, the respondent category distribution based on
their marital status
Married count 11 27 38
Percentage
(%) 28.95 71.05 100.00
Single count 2 15 17
Percentage
(%) 11.76 88.24 100.00
Total Count 13 42 55
Percentage
(%) 23.64 76.36 100
Based on marital statue arrangement; married respondent constitute 28.95% and 71.05% of
management and teller respectively. Mean while single respondent makes 11.76%and
88,24% management and teller staffer. In aggregate, management constitutes 23.64% and
76.36% teller.
50
4.1.3. Age respondent Category Distribution
The researcher present in the table below, age respondent category distribution
Mgt Count 0 5 7 1 13
Percentage 100.0
(%) 0.00 38.46 53.85 7.69 0
Teller Count 11 21 9 1 42
Percentage 100.0
(%) 26.19 50.00 21.43 2.38 0
Total Count 11 26 16 2 55
Percentage 100.0
(%) 20.00 47.27 29.09 3.64 0
In this presentation, management has 0.00% employees aged 21-30 years, 38.46% aged 31-
40 ears, 53.85% aged 41-50 years and 7.69% aged 51-65 years. Tellers on the other hand,
26.19% respondent aged 21-30 years, 50.00% aged 31-40 years, 21.09% teller respondent
aged 41-50 years and 2.38% teller respondents aged 51-65 years old. This indicates that,
management respondents have high proportion of aged respondent while teller has high
number of young respondent and less aged respondent. However, the summation shows
that, 20.00% respondent are aged 21-30, 47.27% are aged 31-40, 29.09% and aged 41-50
and 3.64% are aged 51-65 years old.
51
4.1.4. Period of Service Respondent category Distribution
In this table, researcher presents the extend of the experience displayed by the respondents
as a manager or teller
Mgt Count 0 0 6 6 1 13
Percentage
(%) 0.00 0.00 46.15 46.15 7.69 100.00
Teller Count 6 15 19 1 1 42
Percentage
(%) 14.29 35.71 45.24 2.38 2.38 100.00
Total Count 6 15 25 7 2 55
Percentage
(%) 10.91 27.27 45.45 12.73 3.64 100.00
At this table, management has 0.00% in period of service ranging from less than two years
to 4 years service. 46.15% managers respondent has experiences of 5-6 years and other
same percentage of 46.15% served for 7-8 years while 7.69% has service record of above 8
years. Teller staff on the other hand shows 14.21% period for employed less than two years,
while 2-4 years period makes 35.71%, 5-6 years period has been served by 45.24% tellers,
2.38% served for 7-8 years and finally 2.38% had services period of above 8 years.
However, the aggregate shows that, 10.91% of respondent staff have service for period of
less than two years, 27.27% served for 2-4 years, 45.45% served for 5-6 years, 12.73%
served for 7-8 years and 3.64 served for over 8 years respectively.
52
4.1.5. Responses of Candidates for Internal Control Component Question
Responden
t count
Sub questions answered so far
SA A SDA DA Total
Mgt Count 13 93 86 1 2 182
Percentage
(%) 23.64 51.10 47.25 0.55 1.10 100.00
In this table and the subsequent two others, respondents remained at 23.64% and 76.36% of
managers and tellers respectively. In reaction to 14 questions set to address component of
internal control employed by KCB SS, manager has 51.10% strong agree on the internal
control components suggested by the researcher, 47.25% Agreed on, 0.55% strongly
disagreed and 1.10% Disagreed on. Tellers have 39.97 strongly agreed on propositions,
57.25% agreed, 1.53% Strongly Agreed while 1.19% disagreed. In aggregate though,
42.60% has strong agreement on proposed component with special emphasis on computer
based internal control, 54.94% agreed while 1.30% and 1.17% do strongly disagreed and
disagreed respectively.
53
4.1.6. Benefit and Challenges of Internal Control to KCB SS
In this table, the researcher, is trying to outline how the respondent perceived the impact of
internal control on profitability of KCB SS
Responden
t count
Sub questions answered so far
SA A SDA DA Total
Mgt Count 13 110 51 4 4 169
Percentage
(%) 23.64 65.09 30.18 2.37 2.37 100.00
In the above table, the respondents remained at constant representation of 23.64% and
76.36% to managers and teller respectively. However, with regards to the above subject of
Internal control benefit to KCB, (13) questions were offered for both managers and teller to
express their strong agreement, agreement, disagreement or strong disagreement over them.
Managers has 65.09% strong agreement that internal control has immense benefit on KCB
SS profitability and 30.18% do also agreed while 2.37% and other same portion of 2.37%
do strongly disagree and disagree that, internal control alone without other factors could not
drive KCB SS to her bottom-line. The group strongly agrees by 35.53% to the notion of
internal control being so much beneficial to KCB SS profit making, 59.34% agree while
2.38% and 2.75% strongly disagree and disagree respectively. I aggregation, 42.52%
strongly agreed to vitality of internal control to profit making by KCB SS, 52.45% agree,
2.38% strongly disagree and 2.66% disagree.
54
4.1.7. Profitability as Function of Internal Control
In this table, the researcher tries to find out how much the KCB is profitable, the factors
guiding profitability and other obligations such social responsibility
Respondent
count
In this section, the percentage for respondent remains constant. However, 87.69% of
managers and 48.10% tellers strongly agreed the internal control was instrumental in KCB
profit surge, and KCB may suffer lost if such control fail., they concur that KCB needs to
enhance its current level of control to increase profitability and that KCB sole objective is
profit maximization. 12.13% managers and 39.05% teller agree on the same but there is
strong disagreement of 4.76% and disagreement of 6.18% form tellers that KCB is less
concern about its Corporate Social Responsibility.
In aggregation, 57.45% strongly agree that strongly agreed the internal control was
instrumental in KCB profit surge, and KCB may suffer lost if such control fail., they concur
that KCB needs to enhance its current level of control to increase profitability and that KCB
sole objective is profit maximization. 32.73% agree on the same. However, 3.64% do
strongly disagree and 6.18% disagree that KCB is less concern about its Corporate Social
Responsibility.
55
CHAPTER FIVE
DISCUSSION OF FINDINGS
In the light of study in the chapter four above, it is imperatively clear that Kenya Commercial
Bank South Sudan (KCB SS) has been applying to maximum the standard Internal control
measures which has ultimately yield it a reason bottom-line throughout its period of operation in
South Sudan.
Internal control is all about the policies and procedures management uses to achieve the
following goals: Safeguard Entitys assets - well designed internal controls protect assets from
accidental loss or loss from fraud. Ensure the reliability and integrity of financial information -
Internal controls ensure that management has accurate, timely and complete information,
including accounting records, in order to plan, monitor and report business operations. Ensure
compliance - Internal controls help to ensure the entity is in compliance with the many state and
local laws and regulations affecting the operations of the business. Promote efficient and
effective operations - Internal controls provide an environment in which managers and staff can
maximize the efficiency and effectiveness of their operations. Accomplishment of goals and
objectives - Internal controls system provide a mechanism for management to monitor the
achievement of operational goals and objectives.
Generally, there are two types: preventive and detective controls. Both types of controls are
essential to an effective internal control system. From a quality standpoint, preventive controls
are essential because they are proactive and emphasize quality. However, detective controls play
a critical role by providing evidence that the preventive controls are functioning as intended.
56
As such, the result of this study show that, 97.54% opinion do either strongly agree or just agree
that KCB SS apply all necessary internal control components with special emphasis on computer
base internal control while, 2.46% expressed strong disagreement or disagreement on the
component applied.
On the same spirit, 94.97% of respondent do strongly agree or agree that, internal control
procedure applies has had a great benefit to KCB South Sudan while 5.03% thinks that internal
control alone would have not score any positive impact or progress in KCB SS endeavor to make
profit if other ethical issues were not adequately considered and also put into play .
In shading on the profit aspect, 90.18% opinion concur that the internal control system allied by
KCB SS has indeed made KCB SS much more profitable. Surprisingly however, 9.82% opinion
indicates that KCB SS has been doing nothing or at least none to meet it Corporate Social
Responsibility obligation despite huge profit it scoop.
57
CHAPTER SIX
6.1.0. Conclusions
Based on the findings, KCB SS applies Internal control components in the mode of top level
review, direct functional or activity management, information processing indicators
performances, segregation of duties and integrated risk assessment. Control of information,
policies and procedures based on computer system control do make central factor of KCB SS
internal control system
Internal control is beneficial to KCB SS in term of meeting her aim (profit surge) however, it
play no role in reduces the rate of labour turnover. Internal Control helps KCB safe guard assets,
increase profit, prevent frauds and errors, ensure timely and accurate financial data for decision
makers. Internal control creates more efficient value added audit and reduce substantive testing
during stature audit.
Internal control system apples by KCB SS management contributes to its profitability. If such
control fails, the bank would probably suffer loss. Therefore, KCB SS needs to enhance and
strengthen these control systems to increase and sustain profitability. Profit maximization the
prime objective of KCB SS and little or no concern is paid it its corporate social responsibility.
6.2.0. Recommendations
KCB SS may need this multi-approach internal control systems to effective necessary controls
but, I suggest that used of different control functions on different areas of functional engagement
may elaborately enhance KCB ability to efficiently control with minimum efforts exerted to meet
the objective desired.
58
This institution should maintain and improve on the current phase of internal control systems to
earn more benefits out of these control mechanicism.
KCB SS has to sustain current control in place because losing them may render the institution
bankrupt. All the progresses made by the KCB SS in yielding those profits which amount 40%
growth in profit before tax in 2011 are all pitched to current internal controls in which neglecting
in may yield bad result and lead to firm demise.
Finally, this piece of study is conclusively the final work of KCB SS Internal control in relation
to profitability boosting. It can be a basis for further studies that would widely and
comprehensively provide more inside to internal controls and their positive or otherwise effects
on profits of private business firm
59
References
5. Rezaee, Zabihollah (2002) Financial Statement Fraud: Prevention and Detection. New
York: Wiley;
12. Galloway, D. J. (1994). "Control Models in Perspective." Internal Auditor December: 46-
52.
13. Information Systems Audit and Control Foundation. (1995). CobiT: Control Objectives
and Information Related Technology. Rolling Meadows, IL: Author.
60
14. Institute of Internal Auditors Research Foundation. (1994). Systems Auditability and
Control. Altamonte Springs, FL: Author.
61
Appendices
Budget
ACTIVITY BUDGET
CORE ITEMS/PARTICIP COST FOREX COST
ACTIVITIES ANTS IN RATE UGX
USD
Consolidation Library and
of literature internet (10 per
day for 7 days) 204,800.
80.0 2,560.0 0
typing, printing
Designing and and photocopying
developing of of research
research instruments and 179,200.
instruments binding 70.0 2,560.0 0
Coaching Inquiries on
individuals with
experience and
review of other
research material 384,000.
for 150.0 2,560.0 0
transport and bus fares to and
accommodation fro Kampala 1,024,00
Uganda 400.0 2,560.0 0.0
Fuel and motor fuel consumed
vehicle ware during field work
256,000.
and tare
100.0 2,560.0 0
Total
2,560. 2,048,00
800.0 0 0.0
62
Questionnaires
RESEARCH QUESTIONNAIRE
Dear Respondent,
My name is Hanibol Francis Hassan, Majok, a student of Cavendish University offering a
Degree in Business Administration-Accounting and finance.
Research Topic; Effects of Internal Controls on Profitability of Private Firms: Case Study -
Kenya Commercial Bank, South Sudan
In relation to that, I kindly request for support in filling of this questionnaire as a requirement
for completing my study. This research is purely academic and all information attained shall be
treated with utmost confidentiality.
Please tick the relevant cages according to your choice
Please tick the relevant cages according to your choice.
SECTION A:
BACKGROUND INFORMATION OF THE RESPONDENTS
1. Bio-Data:
Age:
21-30 31-40 41-50 51-65
Sex:
Marital Status:
Female Male
Single Married Divorce/estrange Widow/widow
2. Position in the bank
Code 1 2 3 4 5
Position Branch Corporate Credit Business Teller
Manager Business Manager Risk
Manager Manager
Tick
Code 1 2 3 4 5
Period Less than Between 2- 5-6 years 7-8 years Above 8
two years 4years years
Tick
63
SECTION B:
COMPONENETS OF INTERNAL CONTROL ACTIVITIES IN KENYA COMMERCIAL
BANK
Do you believe that KCB South Sudan has effective Internal Controls? Circle: No or yes
If yes, which kind of internal controls are being implemented by Kenya Commercial Bank?
In this section the respondent should select any of the four options which he/she deemed
appropriate
SA A SD D
A A
1 Preventive Controls: are designed to discourage errors or
irregularities from occurring. They are proactive controls that help
to ensure departmental objectives are being met.
2 Detective Controls: are designed to find errors or irregularities after
they have occurred. Example of detective controls are; review of
performance to which goals and objectives are being achieved and
to identify unexpected results or unusual conditions that requires
follow-up
3 Reconciliations by an employee relate different sets of data to one
another to indentify and investigates differences and take corrective
action when necessary
4 Acquiring and developing computer software that are user friendly
contributes immensely to effective internal control
1 KCB internal control system applies Top Level Reviews
2 Direct functional or activity management
3 Information processing
4 Performance indicators
5 Segregation of duties
6 Policies and procedures
7 Integration with Risk Assessment
8 Control over Information System
9 Policies and Procedures to effect the policies
1 Computer based internal control system
0
64
Any other internal controls being implemented by Kenya Commercial bank, please
specify
65
In this section the respondent should select any of the four options which he/she deemed
appropriate
SA A SD DA
A
1 Internal Control system applied by KCB Management contributes to
it profitability
2 Should such control fail at appoint, the bank will probably suffer
loss of profit
3 KCB need to enhance her current level of control to increase the
profitability.
4 Financial Profit maximization is the primary objective of KCB
66