Journal
Metropolitan Journal of Academic Multidisciplinary Research
MJAMR
Effect of Internal Control Systems on Financial Performance: A Case Study of Commercial Banks in Kampala City
Asiimwe Isaac Kazaara, Ahumuza Audrey
| Journal | Metropolitan Journal of Academic Multidisciplinary Research (MJAMR) |
| Volume / Issue | Vol. 5, No. 3 |
| Published | 31 March 2026 |
| ISSN | 3006-4384 |
Abstract
Internal control systems constituted fundamental mechanisms for ensuring operational efficiency, financial integrity, and regulatory compliance in banking institutions. In Kampala City, commercial banks operated within increasingly complex regulatory environments while facing competitive pressures that demanded superior financial performance. This study investigated the effect of internal control systems on financial performance of commercial banks in Kampala City, conducted between May 2023 and January 2024. The research examined 24 licensed commercial banks operating in Kampala, which collectively controlled approximately 85% of Uganda's banking sector assets. Internal control systems were analyzed across five components based on the COSO framework: control environment, risk assessment, control activities, information and communication, and monitoring activities. Financial performance was measured using both accounting-based metrics including return on assets, return on equity, net profit margin, and market-based indicators including asset quality and operational efficiency ratios. The study employed a descriptive correlational research design utilizing mixed methods approaches. From 24 licensed commercial banks in Kampala, 20 banks participated in the study, representing an 83.3% institutional response rate. Purposive sampling selected 180 respondents including internal auditors, risk management officers, finance managers, and compliance officers from participating banks. Data collection utilized structured questionnaires administered to bank officials and document analysis of audited financial statements for the period 2020-2023. Key informant interviews were conducted with 15 senior bank executives and 5 Bank of Uganda supervision officials. The questionnaire demonstrated excellent reliability with Cronbach's Alpha of 0.891. Data analysis employed SPSS version 29, utilizing descriptive statistics, Pearson correlation analysis, and multiple regression models to establish relationships between internal control components and financial performance indicators. Findings revealed that internal control systems significantly affected financial performance of commercial banks (r=0.816, p
Keywords
Internal control systems
financial performance
commercial banks
Kampala
COSO framework
risk management
internal audit
banking sector
return on assets
operational efficiency
Cite This Article
Asiimwe Isaac Kazaara & Ahumuza Audrey (2026). Effect of Internal Control Systems on Financial Performance: A Case Study of Commercial Banks in Kampala City. Metropolitan Journal of Academic Multidisciplinary Research, 5(3). https://journals.miu.ac.ug/pages/article.php?article_id=303
More in This Issue
View full issue →
36
Relationship between School Location and Student Academic Performance of Secondary Schools in Makindye Division
School location
academic performance
secondary schools
Makindye Division
37
Relationship between School Size and Student Academic Performance of Secondary Schools in Makindye Division
School size
enrolment size
academic performance
secondary schools
38
Relationship Between Staff Discipline and Pupils’ Academic Performance at Primary Leaving Examination Level in Selected Primary Schools of Nyakinama Sub-County, Kisoro District, Uganda
Staff Discipline
Academic Performance
PLE
Primary Schools
39
Relationship Between Teachers’ Professional Responsibility, Teacher–Learner Relationships, and School Performance in Primary Schools of Nyakinama Sub-County, Kisoro District, Uganda
Professional Responsibility
Teacher–Learner Relationship
School Performance
Primary Schools
40
Relationship between Urban Livelihood Adaptation Within The PDM Framework And Local Economic Development Outcomes In Kampala District.
Urban livelihood adaptation
Parish Development Model
enterprise innovation
market adaptation