Impact of Internal Control in Accordance with COSO Commission’s Decisions on the Analysis of Credit Risk According to the 5C'S Approach in the Jordanian Commercial Banks

Abstract

This study aimed to look at the impact of internal control in accordance with COSO Commission’s decisions based on the analysis of credit risk according to the 5C’S approach in Jordanian commercial banks. To achieve the objective of the study, it relied on the descriptive analysis approach. A questionnaire was designed to collect data on internal controls in accordance with the COSO Commission’s decisions. The sampling frame consisted of all 13 Jordanian commercial banks. Here, a purposive sample was selected out of 303 individuals (directors, departmental heads, internal auditors and credit officers) in the audit department. The researcher distributed 240 questionnaires, where 4 out of the 198 which were returned were excluded due to lack of response. Then, data analysis was carried out through the use of some appropriate statistical methods to analyze the 194 valid questionnaires. At the level of significance (α ≥0.05), the study concluded that there exists a statistically significant impact of all combined internal control dimensions (regulatory environment, regulatory actions, risk assessment, information and delivery system, supervision and guidance) on credit risk analysis in accordance with the 5C’S approach in all Jordanian commercial banks. Of the most important recommendations of the study is to increase personnel efficiency within internal control departments in Jordanian commercial banks. This would lead to the improvement of the internal control environment. In addition, the study concluded the need for ongoing monitoring and evaluation of internal control systems, as well as the maintenance and continuous development of these systems, which will help understand the risks of credit granting decisions before they occur.