INTERNAL AUDIT AND INTERNAL CONTROL IN RURAL/COMMUNITY BANKS, CHALLENGES AND THEW AY FORWARD

Abstract

Internal Audit and Internal Controls Systems have become very crucial and indispensable in Business Organizations due to their fundamental roles in the achievement of organizational objectives. On the contrary, Rural and Community Banks (RCBs) are characterized by inadequate and unsound internal controls and ineffective internal audit units as evidenced by rampant cases of frauds, irregularities and at worse, collapse of some RCBs. Instituting effective internal audit and internal controls in RCBs is a very challenging one due to a number of reasons.This research work is aimed to unearth the challenges that confront internal audit and internal controls in RCBs that have rendered them ineffective and recommend ways of making them work more effective.The population for the purpose of this work was made up of Internal Auditors, Management members, Audit Committee members and other Operational Staff of Sekyere Rural Bank. A total sample size of Thirty One was selected using the random sampling procedure. Data were collected from both primary and secondary sources. Questionnaire and interviews were used to collect data from the primary source. The secondary sources included books, training manuals, journals and articles on internal audit and internal control.Some of the findings on challenges confronting Internal Auditors of RCBs included lack of support from Board and Management, inadequate training to Internal Auditors, lack of independence, non-existence of policy and operational manuals and poor placement and recognition of the Internal Auditors. Override of internal controls by Board and Management, resistance to change, non-appreciation of relevance of internal controls and human factor were found to be the challenges confronting internal controls. It also came to light that lack of independence is the paramount among the challenges confronting Internal Auditors of RCBs and non-existence of policy manuals been the least. Override of internal controls by Board and Management was ranked to be the paramount challenge confronting internal controls and ranked least is non-appreciation of internal controls by management and staff.It was recommended that effective operational policies on all operational areas should be put in place. These policies should be made know to every member of staff to ensure adherence to them.Another recommendation was that Board and Management of RCBs should endeavor to avoid interference in the work of Internal Auditors for the Auditor to be Independent.The study further recommended that Board and Management should lead exemplary lives by adhering to internal control systems. This will scare other staff members from flouting internal controls since they are aware of the importance placed on internal controls by Board and Management. This will help strengthen internal controls.Internal Auditors should also be given adequate training to equip them enough to handle more effectively the internal audit functions .