Assessment of Internal Control System in Selected Micro Finance Institution in Addis Ababa.
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Date
2017-06
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Addis Ababa University
Abstract
Current business trends have made it imperative for almost all organization to maintain an
internal control system. Internal control system is one of the important functions of every
business enterprise to detect accuracy & reliability of financial reporting, misuse of assets,
ensuring efficiency of operations and adherence to rules and regulation. Micro finance
institutions have a critical role on the growth and development of a country by providing
different financial services to the poor and low income people in both rural and urban area. The
previous studies on micro finance institution showed that the main problem of micro finance
institution were weakness of their internal control system. This study focused on assessment of
the internal control system in the micro finance institution to identify the possible areas of
deficiencies in the system. The population for the study was made of the nineteen (19) micro
finance institutions in Addis Ababa of which three (3) of them was selected as a sample using a
purposive sampling techniques based on the year of establishment and the number of branch
they have in Addis Ababa. The study used survey method of data collection through
questionnaires to employees of the institution and semi-structured interview with the institution
management. The data gathered from the respondent was analyzed and interpreted by the help of
SPSS software program with the help of bar frequency table, minimum & maximum value, mean
and standard deviation. The result indicated that internal control in the institution is
satisfactory. Though risk assessment elements with the average mean value of 3.81 is better in
the institution, there is adequate control environment, control activity, information &
communication and monitoring activity components in the institution.
Hence, it needs commitment from both the institution management and responsible authority to
improve those specific areas of deficiencies in the internal control elements indicated in the final
chapter of the study
Key word: internal control system, micro finance.
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Keywords
Internal control system; micro finance.