Analysing internal control practices of Maltese financial institutions

Abstract

A crucial aspect that helps an organisation to be successful, is that of having a good understanding of internal controls. This helps in identifying and managing risks within an institution and increase the possibility that the objectives of the organisation are met. The purpose of this research, is to analyse different internal control practices and identify any differences between them. Moreover, to identify if financial institutions in Malta adopt any internal controls practices, mainly the COSO Framework, the Three Lines of Defence and the ISO 31000 Standard and analyse if there is any association among internal controls of different financial institutions, in relation to their size and the sector in which they operate.

An online survey was constructed for the purpose of this study and was distributed throughout the financial industry in Malta; mainly credit, insurance and financial institutions which are enrolled with the Malta Financial Services Authority. Statistical analysis was then used to analyse the results obtained. The main findings indicate that Maltese financial institutions implement internal control practices throughout their organisations irrespective of their size and sector in which they operate. The main reason for this, apart from being a regulatory requirement is that internal controls contribute towards achieving adequate and effective operations, provide reliable reporting of financial information and help to comply with laws and regulations.