Effective Internal Control Systems and Return on Assets (ROA) of Deposit Money Banks in Nigeria

Abstract

This study investigated the impact of effective internal control systems on the Return on Assets (ROA) of deposit money banks in Nigeria. Internal controls are crucial for ensuring the accuracy and reliability of financial reporting, compliance with laws and regulations, and the overall operational efficiency of financial institutions. The study adopted an ex-post facto research design. Secondary data were extracted from the audited financial statements of 10 deposit money banks, listed on the Nigerian Exchange Group (NGX). Data were subjected to descriptive statistics (mean, median, mode, and standard deviation) and inferential statistics (fixed effect regression analysis). Results from the analysis revealed that the internal control system affects the return on assets significantly, which means that any slight reduction in the internal control system will affect the rate at which the assets will generate revenue to the banks negatively, especially when the risks that may arise are not properly assessed and mitigated by the risk management committee. The paper concludes that there is a statistically significant relationship between the two variables; it can be inferred that there is an established connection between the internal control system and the financial performance of the sampled deposit money banks in Nigeria at a significant level.