DETERMINANTS OF INTERNAL CONTROL SYSTEM EFFECTIVENESS IN COOPERATIVE BANK OF OROMIA

Internal control is the priority to detect assets misuse, ensuring efficiency of operations and adherence to rules and regulation. It comprises the plans, methods, and procedures used to meet missions, goals, and objectives, in doing so, supports performance-based management. Audit reports in recent years showed unfavorable audit findings on usage of budgets and compliance to rules and regulations in most public banks. Thus this study focused on the effectiveness of internal control system in Cooperative Bank of Oromia. To achieve these objectives, both primary and secondary data were collected from Accountants, Auditors and customer server who are working in the bank. And also interview was conducted with manager and vice manager of the bank who were selected purposively based on their role and involvement in the control Process. Primary data were collected through questionnaire and interview whereas secondary data were collected through documentary evidence, websites and analyzed by using frequency, percentages and tables. The finding of the study revealed that the control environment of the internal control system is inadequate to be judged as effective, particularly; all employees in charge of the bank program are not aware of the guidelines of the banks program. In addition the control environment of the bank lacked a clear line of responsibility and stipulated structure of reporting. The control activities of the bank has also number of deficiencies like lack of updated asset register and documentation, substantial doubt on the separation of duties, and lack of effective procurement and disposal of assets in the bank. Risk assessment is considered to be new for the bank; the managements were not adequately identified risk and developed clear procedures to control risks. Information necessary in the bank are not adequately communicated to all stakeholders. Finally, the researcher recommends that due emphasis should be given to improve the internal control system in the bank. Hence there should be a clear line of responsibility and structure of reporting to discharge any risk of collusion and fraud. Moreover, there should be a frameworks how bank identify possible risks and strategies to control the risks. Thus, necessary information should be communicated to all stakeholders, transactions should be recorded promptly