INFLUENCE OF INTERNAL CONTROL COMPONENTS AND EFFECTIVENESS OF INTERNAL CONTROL SYSTEM OF PEOPLES’ BANK IN SRI LANKA

Abstract

This study aims to examine the effect of internal control components on effectiveness of internal control
system of Peoples Bank in Sri Lanka. While strong internal control system establishes and practice in the banking sector
in Sri Lanka, there are indications of frauds and exploitations and corruptions. It is required to examine to what extend
the established internal control system is effectively practice. The study considered five independent variables such
Control environment, risk assessment, control activities, information & communication system and monitoring and a
dependent variable effectiveness of internal control system. Data was collected using structured questionnaire which was
circulated to bank branch managers who are more conscious in the practice of internal control system in banking sector.
173 middle level bank branch managers’ contributed to the study. Descriptive statistics and inferential statistics were
used to analyze the collected data. The results revealed that there are significant and positive relationships among the
internal control components (such as control environment, risk assessment, control activity, information and
communication system and monitoring) and effectiveness of internal control system and it revealed that the management
of Peoples Bank has recognized and practiced the strong internal control system.