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Home»Articles»A Study on Effectiveness of Internal Control System in Selected Banks in Saudi Arabia

JournalCover

Asian Journal of Managerial Science (AJMS)

Editor Dr. Tan Fee Yean
Print ISSN : 2249 - 6300
Frequency : Quarterly

A Study on Effectiveness of Internal Control System in Selected Banks in Saudi Arabia

Author : Raj Bahadur Sharma and Nabil Ahmed M. Senan
Volume 8 No.1 January-March 2019 pp 41-47

Abstract

The study is to attempt to examine effectiveness of internal control system in selected Saudi Banks in Saudi Arabia. The effectiveness of internal control depends and interrelated to five components viz., Control Environment, Risk Assessment, Accounting Information System and Communication System, Control Activities, and Self-Monitoring. These components derived from management and integrated with the management process. Although the components are applicable to all banks, small and medium, sized banks can apply them separately on a large scale. Its control can be less formal and less structured, yet a small bank can control effective internal controls. The study concluded that the Banks in Saudi Arabia have satisfactory internal control system. The Al Rajhi bank has top most internal control system in selected banks. It recommended that there still need to improve in control environment, risk assessment and communication system in banks. The study statistically proved that there is significant difference in effectiveness of Internal Controls in the Selected Saudi Banks.

Keywords

Internal Control, Control Environment, Risk Assessment, Self-Monitoring

Full Text:

References

[1] Al-Bahaidi, & Essam. (2014). The effectiveness of the internal control system under the electronic accounting information systems is an applied study on the banks operating in the Gaza Strip.
[2] Allegrini, M., D’Onza, G., Paape, L., Melville, R., & Sarens, G. (2006). The European literature review on internal auditing. Managerial Auditing Journal, 21(8), 845-853.
[3] Alzeban, A., & Gwilliam, D. (2014). Factors affecting the internal audit effectiveness: A survey of the Saudi public sector. Journal of International Accounting, Auditing and Taxation, 23(2), 74-86.
[4] Karagiorgos, T., Drogalas, G., & Giovanis, N. (2011). Evaluation of the effectiveness of internal audit in Greek Hotel Business.
[5] Badara, M. A. S., & Saidin, S. Z. (2013). Impact of the effective internal control system on the internal audit effectiveness at local government level. Journal of Social and Development Sciences, 4(1), 16-23.
[6] El Hadi, Omar Mohamed Khaled, & Mostafa Negm El Bashary. (2006). The role of the internal control system in promoting operational efficiency in the Sudanese banking sector (Doctoral dissertation, Sudan University of Science and Technology).
[7] Faten Hanna Kerzan. (2014). The contribution of internal auditing in the application of governance in Syrian public and private banks (comparative study).
[8] Getie Mihret, D., & Wondim Yismaw, A. (2007). Internal audit effectiveness: an Ethiopian public sector case study. Managerial Auditing Journal, 22(5), 470-484.
[9] Hanim Fadzil, F., Haron, H., & Jantan, M. (2005). Internal auditing practices and internal control system. Managerial Auditing Journal, 20(8), 844-866.
[10] Hass, S., Abdolmohammadi, M. J., & Burnaby, P. (2006). The Americas literature review on internal auditing. Managerial Auditing Journal, 21(8), 835-844.
[11] Karagiorgos, T., Drogalas, G., & Dimou, A. (2010). Effectiveness of internal control system in the Greek Bank Sector. The South European Review of Business Finance & Accounting.
[12] Koutoupis, A. & Tsamis, A. (2009). Risk based internal auditing within Greek banks: a case study approach‟, Journal of Management Government, 13, pp. 101-130.
[13] Krishnan, J. (2005) Audit committee quality and internal control: An empirical analysis. The accounting review, 80(2), 649-675.
[14] Mostafa, Abdel Moneim Jameel, & Mohamed Farah Abdel Halim. (2007). Evaluation of the methods and tools of the control applied study on the Sudanese banking system (Doctoral dissertation, Sudan University of Science and Technology).
[15] Olatunji, O. C. (2009). Impact of internal control system in banking sector in Nigeria. Pakistan Journal of Social Sciences, 6(4), 181-189.
[16] Osama Mohammed Saleh, & Supervisor – Babeker Ibrahim Siddiq. (2008). The impact of the application of the rules of corporate governance on the efficiency of the internal control system in the Sudanese banking sector (Doctoral dissertation, Sudan University of Science and Technology).
[17] Palmer, P. (1996). Internal audit in charities: a revolution still awaited. Managerial Auditing Journal, 11(6), 11-17.
[18] Petrovits, C., Shakespeare, C., & Shih, A. (2011). The causes and consequences of internal control problems in nonprofit organizations. The Accounting Review, 86(1), 325-357.
[19] Saleh, Khalid Mohammed Ahmed Mohammed. (2010). Internal control and its role in reducing the risk of auditing in the Sudanese banking sector from the perspective of auditors (Doctoral dissertation, Sudan University of Science and Technology).
[20] Siddiqui, J. & Podder, J. (2002). Effectiveness of bank audit in Bangladesh‟, Managerial Auditing Journal, 17(8), 502-510.
[21] Spira, L. F., & Page, M. (2003). Risk management: The reinvention of internal control and the changing role of internal audit. Accounting, Auditing & Accountability Journal, 16(4), 640-661.
[22] Retrieved from http://www.alrajhibank.com.sa
[23] Retrieved from https://www.riyadbank.com
[24] Retrieved from http://www.alinma.com
[25] Retrieved from http://www.baj.com.sa
[26] Retrieved from http://www.samba.com.sa/
[27] Retrieved from https://www.anb.com.sa
[28] Retrieved from http://www.drogalas.gr/

Asian Journal of Managerial Science (AJMS) is a quarterly international peer-reviewed journal of Managerial Science. One of the objectives of this journal is to disseminate knowledge on various research issues connected with the topics include, but are not limited to:

Accounting, Auditing, Banking, Business strategy, Corporate governance, Entrepreneurship, Financial structure, Capital markets, Health economics, Human resources management, Information systems,Innovation management, Insurance, Marketing, Organization, Production and logistics, Risk management, and Taxation.

The study is to attempt to examine effectiveness of internal control system in selected Saudi Banks in Saudi Arabia. The effectiveness of internal control depends and interrelated to five components viz., Control Environment, Risk Assessment, Accounting Information System and Communication System, Control Activities, and Self-Monitoring. These components derived from management and integrated with the management process. Although the components are applicable to all banks, small and medium, sized banks can apply them separately on a large scale. Its control can be less formal and less structured, yet a small bank can control effective internal controls. The study concluded that the Banks in Saudi Arabia have satisfactory internal control system. The Al Rajhi bank has top most internal control system in selected banks. It recommended that there still need to improve in control environment, risk assessment and communication system in banks. The study statistically proved that there is significant difference in effectiveness of Internal Controls in the Selected Saudi Banks.

Editor-in-Chief
Dr. Tan Fee Yean
Department of HRM, Universiti Utara Malaysia, Kedah, Malaysia
[email protected]
Editorial Advisory Board
Dr. Aidil Rizal Bin Shahrin
Department of Finance and Banking, University of Malaya, Malaysia
[email protected]
Dr. Amalendu Bhunia
Department of Commerce, University of Kalyani, West Bengal, India
[email protected]
Dr. Ahmad Zahiruddin Bin Yahya
Department of Accountancy, University of Malaya, Malaysia
[email protected]
Dr. Anil Govindrao Suryavanshi
Department of Commerce & Management, The New college, (Shivaji University), Maharashtra, India
[email protected]
Dr. Ong Lin Dar
Department Of Business Strategy And Policy, University of Malaya, Malaysia
[email protected]
Dr.V.Balachandran
Department of Corporate Secretaryship, Alagappa University,Tamil Nadu, India
[email protected]
Dr. Yeong Wai Chung
Department Of Operation and Management Information, University of Malaya, Malaysia
[email protected]
Prof.V.V.Devi Prasad Kotni
Department of Management Studies,GVP College for Degree & PG Courses, Andhra Pradesh, India
[email protected]
Dr. Quah Chee Heong
Department of Business Strategy and Policy, University of Malaya, Malaysia
[email protected].edu.my
Dr.Subrata Roy
Department of Commerce, Rabindra Mahavidyalaya, West Bengal, India
[email protected]
Dr. Norbani Binti Che Ha
Department of Marketing, University of Malaya, Malaysia
[email protected]
Dr. Tey Lian Seng
Department Of Business Strategy and Policy, University of Malaya,  Malaysia
[email protected]
Dr. Mohammad Nazri Bin Mohd Nor
Department of Business Strategy and Policy, University of Malaya, Malaysia
[email protected]
Dr. Binish Qadri
Research Scholar, Department of Economics, Central University of Kashmir, India
[email protected]
Dr. Khaw Lee Hwei
Department of Finance and Banking, University of Malaya, Malaysia
[email protected]
Dr. V. P. Sriram
Department of Management, Balaji Institute of International Business, Maharashtra, India
dr.vpsr[email protected]
Dr. Yusniza Binti Kamarulzaman
Department of Marketing, University of Malaya,  Malaysia
[email protected]
Dr. Kanagi Kanapathy
Department of Operations and Management Information Systems, University of Malaya, Malaysia
[email protected]
Dr. Abd El Salam Mahmoud Abou Kahf
Department of Commerce, Alexandria University, Egypt
[email protected]
Dr. Wong Sek Khin
Department of Business Strategy and Policy, University of Malaya, Malaysia
[email protected]
Dr. Lee Su Teng
Department of Business Strategy and Policy, University of Malaya, Malaysia
[email protected]
Dr. Phoong Seuk Wai
Department of Operation and Management Information System, University of Malaya, Malaysia
[email protected]
Dr. Dennis Palkon
College of Business, Management, Florida Atlantic University
[email protected]

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    Editorial Note

    Editorial Dr. Tan Fee Yean

    Editor-in-Chief
    Dr. Tan Fee Yean
    Department of HRM, Universiti Utara Malaysia, Kedah, Malaysia
    [email protected]
    Editorial Advisory Board
    Dr. Aidil Rizal Bin Shahrin
    Department of Finance and Banking, University of Malaya, Malaysia
    [email protected]
    Dr. Amalendu Bhunia
    Department of Commerce, University of Kalyani, West Bengal, India
    [email protected]
    Dr. Ahmad Zahiruddin Bin Yahya
    Department of Accountancy, University of Malaya, Malaysia
    [email protected]
    Dr. Anil Govindrao Suryavanshi
    Department of Commerce & Management, The New college, (Shivaji University), Maharashtra, India
    [email protected]
    Dr. Ong Lin Dar
    Department Of Business Strategy And Policy, University of Malaya, Malaysia
    [email protected]
    Dr.V.Balachandran
    Department of Corporate Secretaryship, Alagappa University,Tamil Nadu, India
    [email protected]
    Dr. Yeong Wai Chung
    Department Of Operation and Management Information, University of Malaya, Malaysia
    [email protected]
    Prof.V.V.Devi Prasad Kotni
    Department of Management Studies,GVP College for Degree & PG Courses, Andhra Pradesh, India
    [email protected]
    Dr. Quah Chee Heong
    Department of Business Strategy and Policy, University of Malaya, Malaysia
    [email protected].edu.my
    Dr.Subrata Roy
    Department of Commerce, Rabindra Mahavidyalaya, West Bengal, India
    [email protected]
    Dr. Norbani Binti Che Ha
    Department of Marketing, University of Malaya, Malaysia
    [email protected]
    Dr. Tey Lian Seng
    Department Of Business Strategy and Policy, University of Malaya,  Malaysia
    [email protected]
    Dr. Mohammad Nazri Bin Mohd Nor
    Department of Business Strategy and Policy, University of Malaya, Malaysia
    [email protected]
    Dr. Binish Qadri
    Research Scholar, Department of Economics, Central University of Kashmir, India
    [email protected]
    Dr. Khaw Lee Hwei
    Department of Finance and Banking, University of Malaya, Malaysia
    [email protected]
    Dr. V. P. Sriram
    Department of Management, Balaji Institute of International Business, Maharashtra, India
    [email protected]
    Dr. Yusniza Binti Kamarulzaman
    Department of Marketing, University of Malaya,  Malaysia
    [email protected]
    Dr. Kanagi Kanapathy
    Department of Operations and Management Information Systems, University of Malaya, Malaysia
    [email protected]
    Dr. Abd El Salam Mahmoud Abou Kahf
    Department of Commerce, Alexandria University, Egypt
    [email protected]
    Dr. Wong Sek Khin
    Department of Business Strategy and Policy, University of Malaya, Malaysia
    [email protected]
    Dr. Lee Su Teng
    Department of Business Strategy and Policy, University of Malaya, Malaysia
    [email protected]
    Dr. Phoong Seuk Wai
    Department of Operation and Management Information System, University of Malaya, Malaysia
    [email protected]
    Dr. Dennis Palkon
    College of Business, Management, Florida Atlantic University
    [email protected]

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