Effect of Internal Control on Financial Performance

Abstract

This study is an attempt to empirically investigate the effect of internal control on financial performance. The study selected the banking sector in an emerging economy, specifically the Kurdistan Region of Iraq. Effective internal control systems, encompassing policies, procedures, and risk mitigation, contribute to accurate financial reporting, operational efficiency, and investor confidence, thereby positively influencing a bank’s financial performance. The study relies on evidence from the Kurdistan region. The Kurdistan Region's banking sector encountered issues with its utilization and funding methods. Using internal control will ensure that management and workers adhere to their responsibilities and strive to enhance the success of the banking sector in the Kurdistan Region of Iraq, based on the lessons learned. We conducted regression analysis on the seventy responses using SPSS 26. The results showed that there is a positive relation between financial performance and the control environment, control activities, and internal risk assessments.