INTERNAL CONTROL SYSTEMS AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN PERTH, AUSTRALIA
Abstract
Purpose of the Study: the purpose of the study was to determine the impact of internal control systems on financial performance of commercial banks in Perth, Australia
Statement of the Problem: The problem addressed in this study revolves around understanding the intricate relationship between the effectiveness of internal control systems and the financial performance of commercial banks in Perth, Australia. The dynamic banking industry, characterized by evolving regulatory frameworks, technological advancements, and competitive pressures, raises concerns about whether these internal control systems adequately contribute to optimizing profitability, risk management, and operational efficiency within the local banking sector.
Methodology: The study applied desktop review methodology to gather relevant literature.
Findings: The findings of this study underscore the critical role of effective internal control systems in influencing the financial performance of commercial banks in Perth, Australia. It was revealed that banks with well-designed and implemented internal control mechanisms experienced enhanced operational efficiency, leading to cost savings and improved resource allocation. These efficiencies, in turn, positively impacted profitability, risk mitigation, and regulatory compliance, thereby contributing to overall financial stability and success within the competitive banking landscape of Perth.
Conclusion: In conclusion, this study highlights the pivotal significance of an effective internal control system in shaping the financial performance of commercial banks operating in Perth, Australia. The findings affirm that internal control mechanisms play a multifaceted role in optimizing operational efficiency, risk management, and compliance with regulatory standards. By fostering a symbiotic relationship between internal controls and financial outcomes, banks can navigate the complexities of the local banking environment, bolster their profitability, and ensure sustained success within a dynamic and competitive landscape.
Recommendations: Based on the study's findings, it is recommended that commercial banks in Perth, Australia prioritize continuous investment in technology, integrating advanced tools like data analytics and artificial intelligence to enhance real-time monitoring and risk assessment within their internal control systems. Additionally, fostering a culture of internal control awareness through comprehensive employee training programs and communication strategies will empower staff to actively contribute to the effectiveness of control mechanisms, ultimately enhancing financial performance and overall competitiveness.
Keywords: Internal Control Systems, Financial Performance, Financial Performance, China
References
Chen, H., Yang, D., Zhang, J. H., & Zhou, H. (2020). Internal controls, risk management, and cash holdings. Journal of Corporate Finance, 64, 101695.
Elmghaamez, I. K., & Olarewaju, J. I. (2022). Corporate social responsibility and financial performance of product and service‐based firms listed on London Stock Exchange. Corporate Social Responsibility and Environmental Management, 29(5), 1370-1383.
Fernandhytia, F., & Muslichah, M. (2020). The effect of internal control, individual morality and ethical value on accounting fraud tendency. Media Ekonomi Dan Manajemen, 35(1), 112-127.
He, X., Wang, C., Yang, X., & Lai, Z. (2021). Do enterprise ownership structures affect financial performance in China's power and gas industries?. Utilities Policy, 73, 101303.
Herawati, N., & Hernando, R. (2020). Analysis of Internal Control of Good Corporate Governance and Fraud Prevention (Study at the Regional Government of Jambi). Sriwijaya International Journal of Dynamic Economics and Business, 4(2), 103-118.
Kurniawan, Y., & Mulyawan, A. (2023). The Role of External Auditors in Improving Cybersecurity of the Companies through Internal Control in Financial Reporting. Journal of System and Management Sciences, 13(1), 485-510.
Li, X. (2020). The effectiveness of internal control and innovation performance: An intermediary effect based on corporate social responsibility. Plos one, 15(6), e0234506.
Macusi, E. D., Nallos, I. M., Omandam, J. L., & Macusi, E. S. (2023). Fishers’ well-being affected by anthropogenic stressors in Surigao del Sur, Philippines.
Pakurár, M., Haddad, H., Nagy, J., Popp, J., & Oláh, J. (2019). The impact of supply chain integration and internal control on financial performance in the Jordanian banking sector. Sustainability, 11(5), 1248.
Rana, T., Ahmed, Z. U., Narayan, A., & Zheng, M. (2022). An institutional theory perspective on public sector reform and service performance reporting by New Zealand universities. Journal of Accounting & Organizational Change, 18(3), 461-484.
Robin, I., Salim, R., & Bloch, H. (2018). Financial performance of commercial banks in the post-reform era: Further evidence from Bangladesh. Economic Analysis and Policy, 58, 43-54.
Roussy, M., Barbe, O., & Raimbault, S. (2020). Internal audit: from effectiveness to organizational significance. Managerial Auditing Journal, 35(2), 322-342.
Zhang, H., & Don, S. (2023). Digital transformation and firms' total factor productivity: The role of internal control quality. Finance Research Letters, 104231.
