Abstract:
Internal control systems play a major role in every organization to achieve their
management objectives. In the recent past, some public sector organizations
(specially in baking sector) have been reported some corruptions, frauds and errors,
because of the shortcoming in the internal control systems. This investigation focuses
on public sector banks in Sri Lanka to examine the impact of internal control systems
on financial performance. In the current study, internal controls are measured based
on five component of internal controls namely control environment, control activities,
accounting information and communication, risk assessment and monitoring which
are identified in COSO framework. For the current study, data are is collected using
questionnaire from the employees attached to Accounting, Finance and Audit
divisions of public sector banks in Sri Lanka. Based on the regression estimate
obtained the current study concludes that there is a positive relationship between
internal controls on financial performance of the public sector banks in Sri Lanka
