Accounting Project Topics

The Effectiveness of Internal Control System in the Banking Industry (a Case Study of Guaranty Trust Bank)

The Effectiveness of Internal Control System in the Banking Industry (a Case Study of Guaranty Trust Bank)

The Effectiveness of Internal Control System in the Banking Industry (A Case Study of Guaranty Trust Bank)

Chapter One


The Purpose of the study is to critically look at the problems at land (Business failure) the associated problem bring an interrelationship between those variable and how one lead to the other or its effect and provide deterioration working capital. The amount available for running the days today business if there is uncontrolled wastage writing off to many debts e.g high debt equity, The ratio of outside investor to the share holders is important for business gearing, but when the gearing ratio becomes too high, there could by problems of insufficient profit to pay divided after the deduction of increasing debenture, interest interference of debenture holder in the affairs of a company in respect of non payment, irregularities invading the used of deposit to obtain an illegal or unjust advantages, this could either be cash or sales fraud, these type of fraud relate closely because before a cash fraud may occur a sale must have occurred, purchase fraud could be misuse of order form, creation of non-existing supplier, presentation of two cheques for signature with the same supporting document e.t.c

Wages Frauds: This could occur by including name on payrolls, leading ex-employees on the payroll or overcastting gross and net columns in the wages sheet. Wages fraud can be effective and reliable internal control which help to reduce business failure and other relates problems.




There are various school of thought which discussed the views of internal control system as a measure of perverting business failure and other related sector, financial service sectors building societies, credit consumers, business ventures e.t.c bank represent probably the most important financial sector, this are not just in terms of profit and employment of labour, turnover but also in it paramount impacts on the sphare of the economy.

The need for the internal control system on the organizations, especially banks cannot be undermined due to the fact that the banking sector which has a crucial role to play in the economic development of the nation as now being characterized by macro economic instability, show growth in real economic activities, corruption and the risk of fraud.

Fraud, which is the major reason for setting up on internal control system has become a great pain in the neck of many banking sector managers, it has also becomes an information staple in Nigeria’s international reputation. Fraud is really eating deep into the Nigerian banking system and that any banks with a week internal control system is dangerously exposed to bank fraud.


Implemented to provide reasonable assurance than an organization’s business objectives will be achieved and undesired role events will be prevented or detected and corrected based on either compliance or management initiated concerns (Awe, 2005)

The institute of chartered Accountant of English and Wales (ICAEW) defineds internal control as the whole system of controls financial or otherwise, established by management in order to carry on the business of an enterprise in an orderly and efficient manner, ensure adherence is management policies, safeguard the assets and secure as far as possible, the completeness and accuracy of the records.

MAYO and BPP (1988) defines it as the measure 8taken by an organization for the purpose of protecting its resource against wastes, fraud, inefficiency ensuring accuracy and reliability in accounting and operating data, securing compliance with organization policies data, securing compliance with organization policies and evaluating the level of performances in all division of the organization.

From these definitions, it can be deduced that internal control comprises the plan of an organization and all of the coordinate methods and measure adopted within it, to safeguard it assets, check the accuracy and reliability of its accounting data, promote operational efficiency and encourage adherence to prescribed managerial policies.


Internal control objectives are channelled towards ensuring adherence to managerial policies.

The central bank of Nigeria reported that the background development in Nigeria was attributable to weaknesses in the internal control system of the banks. This has clearly pointed out the picture of how Nigeria banks in a nut-shell, the damage which this menace called fraud has done to the banks in innumerable and needs urgent attention. Therefore the attempt to put and end to this economics degradation gave rise to the topic of this research study the impact of internal control in the banking sector in Nigeria with Guaranty Trust Bank plc as a case study. However, this study is aimed at verifying the conception that and effective and reliable of internal control system is the best control measure for preventing and detecting fraud especially in the banking sector.




This chapter is to highlight and reliability of internal control system in the banking industry such as Guaranty Trust Bank Nigeria Plc Ilorin for simplicity and dear understanding a descripture methods of analysis is adopted.

More so, data are colleted from both primary and secondary sources, Primary source based on composition of questionnaire and personal interview of both the staff of guarantee trust ban PLC and their customer which yield full explanation study of the operation of Guaranty Trust Bank Nigeria PLC (public Limited company).

The personal interview was conducted with the objective of gathering effective data on internal control system of the organization and possible opinion seeking and how problem of the system an he solved.


Internal control like auditing procedure has grown with the passage of time from simple steps taken by properties of business to safeguard cash and to check the accuracy of the book keeping.

Therefore, in the concept of wage the operating of internal control covers all department and every activities of a business concern including:-

  • Method of internal check
  • Internal audit
  • Financial and cost accounting control functions
  • Methods of delegate authority and responsibility for certain functions such as purchasing selling or marketing production research
  • Use of budgeting techniques, time and method, training and personal programs e.t.c.



This chapter presents response obtained from bank officers and customer of the Guaranty Trust Bank Plc.

The result were discusses with particular reference to the research question and hypothesis that had been formulated for the purpose of this study.

The questionnaire were processed and the data presented and analysed in the table which include collecting the personal data of the respondents that is their sex, age, marital status, education qualification in the organization and department.





This study was undertaken to examine the reliability and effectiveness of the internal control system in banking industry and whether it has been fully utilized in the preventing of business failure.

This research gives entrance altogether of what the work all is about and what is ought to find. It give a brief understanding of auditing which involve were cash audit to more move complex issues such as to ascertain whether the balance sheet and profit and loss for auditing objective to achieved as control is needful.

Penlative research question were asked and hypothesis were formulated to be tested in respect of the problem scope of the study was mentioned and limitation which the research were to encounter in this course of study.

This research also reviewed peoples opinion of the said topic, that business to continue functioning.

The business failure could be noticed when employee start resigning, idleness of machines, when capital for running the day to day affairs become difficult to get and when outside interest holder are more than the original owner of organization, causes which were obviously that of an effective and reliable control.

The researcher concluded by suggesting that if there were proper reporting that bad corporate communication sales decline will be erased and adherence to authorization and approval could check excessive frauds, which gradually deteriorate working capital rotational of having capability, commensurate with responsibility segregation of duties, supervisor physical verification of asset, accuracy of record e.t.c .


It is pertinent to note that for an organization to continues functioning properly, responsibilities must be allocated and define, also lines of reporting must be identified, strong adherence to authorization approach location of employee all duties must be segregated supervised, physical verification of assets and accuracy of records. The bank used as a case study was the Guaranty Trust Bank of Nigeria plc. Control exist in the system and adequately but there was room for improvement.

It was shown in our test that, any inefficiency in any aspect of control would lead to one problem or other leading to business failure.


The effectiveness and reliability of internal control system can help in improving the performance and continuity of operations of Guaranty Trust Bank Nigeria plc

  1. The management should organize regular symposium, use of circular new, letter and manuals to  enlighten and educate their employees and checks on the role of internal auditor in the bank.
  2. The system of internal control and its procedures must be evaluate at different state of operations and where loopholes are discovered, adequate steps should be taken to concept the immediately.
  3. The internal auditor department should not noly be honest and objective but must seen to be so, some qualities expect of them as professional qualifications experiences faithfulness and diplomacy.
  4. The internal control system should be reviewed to overcome. Some of its weakness which include all items for batching that must be thoroughly checked and others involved should make sure that all items needed in a batch are well prepared.


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