The Relationship Between Components Of Internal Control According To The COSO Framework and Financial Performance: An Exploratory Study

Abstract

Given the importance of internal control in achieving the objectives of the economic unit, internal control plays an essential role in all economic units, including the Iraqi Private Bank, where internal control has become a set of interrelated components developed by senior management. The external auditors have relied on the amount of evidence and tests to determine the strength of the internal control system as described in the COSO Council's report on the components of internal control as criteria for evaluating the effectiveness of internal control. The study aimed to clarify the impact of the relationship between the components of internal control according to the COSO framework in the banks listed in the Iraq Stock Exchange and the financial performance indicators represented by (the rate of return on equity) from 2020 to 2021. In order to achieve the objectives of the study, the method was used Analytical descriptive, as well as they used many other statistical methods such as (standard deviation, arithmetic means, T-test, F-test, and multiple linear regression model to analyze the data and verify the validity of the study hypotheses. The results show that the value of one of the internal control components, according to the COSO framework, the control environment variable, increased by one unit. One leads to an increase in the value of the rate of return on equity by 0.942. Therefore, it is necessary to strengthen the inter control according to the (COSO) framework to increase the rate of return on equity. It also recommends strengthening internal control according to the (COSO) framework to improve the rates of return on equity.