The Level of Effective Internal Control System of Licensed Commercial Banks in Anuradhapura District of Sri Lanka: A Comparative Study

Abstract

Globalization has resulted in complex business procedures and activities as a result of global organizations. In the case of banking sector procedures, complicated banking transactions and an increase in banking activity fraud have prompted a focus on the Banking Sector's Internal Control System. Every organization relies on an effective Internal Control System. Accordingly, the purpose of this research is to examine and compare the level of effective internal control systems of state-owned and private domestic commercial banks in the Anuradhapura district. The level of effectiveness of the Internal Control System was assessed using the five components of the Committee of Sponsoring Organizations (COSO) framework (Control Environment, Risk Assessment, Information and Communication System, Control Activities, and Monitoring Activities). Structured questionnaires were used to collect data from fifty respondents from state-owned and thirty respondents from private domestic commercial banks, respectively. Managers (76.25 percent response rate) and secondary officers were the most common respondents (response rate was 23.75 percent). Descriptive analysis with one-sample t-test and independent sample t-test were used to analyze the data. The results of the study indicated that the level of the effective control environment, information and communication systems, and control activities are different between State- Owned and Private Domestic Commercial Banks in Anuradhapura district, whereas the level of effective risk assessment and monitoring activities are not different between State-Owned and Private Domestic Commercial Banks in Anuradhapura district. The findings of this study will help practitioners as a guideline to get the maximum benefit of their Internal Control System.