




































American Interdisciplinary Journal of Business and 

Economics 
ISSN: 2837-1909| Impact Factor : 8.87 

Volume. 12, Number 1; January-March, 2025; 

Published By: Scientific and Academic Development Institute (SADI) 

8933 Willis Ave Los Angeles, California 

https://sadijournals.org/index.php/AIJBE| editorial@sadijournals.org 

 

 

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INTERNAL AUDIT FUNCTIONS AND PROFITABILITY OF DEPOSIT 

MONEY BANKS IN BENIN-CITY EDO STATE 
 

1Eke Robert Ike, PhD, FCA and 2Glory Eghoghon Ihunde, ACA 

1Department of Accounting and Finance School of Management and Social Sciences, Wellspring University 

Benin City, Edo State. 
2Department of Accounting and Finance School of Management and Social Sciences,  Wellspring University 

Benin City, Edo State. 

Email: robbyeke19@yahoo.com; Robert.eke@wellspringuniversity.edu.ng; (+2348034712733)/ 

gloryihunde@yahoo.com (+2348038813134). 

DOI: https://doi.org/10.5281/zenodo.14679693 

Abstract: This research is aimed to examine the effect of internal audit functions on the profitability deposit 

money banks in Edo State. Specifically, it examined the impact of internal auditors' roles in risk management, 

compliance with internal controls and asset safeguarding on the profitability of these banks. A survey research 

design was employed, collecting data from staff members of deposit money banks in Benin City. Responses were 

obtained from 334 participants, and regression method were used to do the data analysis and ANOVA to test the 

hypotheses. The findings indicated that the role of internal auditors in risk management had a positive and high 

impact on the profitability of d banks that accept deposits in Nigeria. Additionally, the enforcement of internal 

control compliance and the application of auditing standards by internal auditors were found to significantly 

influence bank profitability in Edo State. From the results result generated, it is recommended that banks should 

employ internal auditors who report directly to the managing director and effectively carry out their assigned 

roles. This approach would help mitigate various losses and enhance the banks' profitability. 

Keywords: Internal Audit, Risk management, Asset Safeguard, Profitability, Deposit Money Banks 

 

INTRODUCTION 

The duties of the internal auditor have become extensively vital due to the evolving business environment and 

the complexities of modern challenges. These shifts necessitate a heightened awareness of the role of internal 

auditor's in demonstrating the value of the internal audit function. In Nigeria, banks open to commercial 

transactions, also known as deposit money banks, bear the responsibility of safeguarding customer deposits and 

protecting shareholder interests. However, this duty has been undermined in recent years by numerous fraud cases 

reported within the banking sector. The financial crises and collapse of institutions like Afribank Nigeria Plc in 

2009 and Intercontinental Bank (Ajani, 2012; Saidu & Aifuwa, 2020) have cast doubt on the integrity of financial 

institutions in fulfilling these responsibilities. 



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To address these challenges, bank management aims to enhance shareholder wealth while demonstrating 

competence in executing their duties (Egolum & Uchegbu, 2021). Achieving sustainable performance requires 

robust and well-maintained internal control systems. These systems consist of policies and procedures designed 

to safeguard organizational assets, ensure credible financial reports, promote compliance with laws and 

regulations, and facilitate efficient operations. Internal auditors play a pivotal role in establishing and maintaining 

effective internal control systems in banks. Their responsibilities include providing assurance that is objective 

and conducting activities that add value and improve organizational operations. Internal auditing is essential for 

the smooth and efficient functioning of an organization (Alashe & Bello, 2021). 

Despite these efforts, fraudulent practices remain rampant in the Nigerian banking sector, significantly tarnishing 

the reputation and undermining the potential of many banking institutions, particularly deposit money banks. 

According to a report by the Nigeria Deposit Insurance Corporation (NDIC), the value of documented fraudulent 

activities rose by ₦3.33 billion, rising from ₦8.68 billion in 2016 to ₦12.01 billion in 2017. The report revealed 

that internet and card-related fraud accounted for 92% of all reported cases and 63.66% of industry losses in 2017. 

Other reported fraudulent activities included unauthorized transfers, cash suppression, unauthorized credits, and 

fraudulent cheque conversions. 

The quality of internal auditors significantly influences an organization's financial performance. High-quality 

internal auditors positively impact financial outcomes (Heil, 2012). Their primary tasks include tackling 

corruption, analyzing financial activities, safeguarding assets, determining adherence to policy and compliance 

with, and enhancing financial and administrative performance (Staciokas & Rupsys, 2005). Internal audit 

practices add value when they effectively improve board rules, management of risk, and internal controls systems. 

The work of auditors within is considered only when identified malpractices are fully resolved and remain 

corrected (Sawyer, 1995). 

Additionally, there is a notable literature gap as it relates to the link between internal auditors and how banks in 

Benin City, Edo State, Nigeria makes their profits. Existing studies, such as those by Changwony & Rotich (2015), 

Awdat (2015), Kerazan (2016), and Nansamba (2019), have not specifically examined the effect of internal 

auditors on the how banks make profit in this region. The main objective of this research was to ascertain impact 

of internal auditors on profitability in deposit money banks in Benin City. Specifically, it is to; 

I. determine the impact of Internal Auditor’s risk management role on profitability of deposit money banks in 

Edo State; 

II. examine the impact of Internal Auditor’s control compliance role and profitability of deposit money banks 

in Edo State; 

III. examine the effect of Internal Auditor’s asset safeguarding roles on profitability of deposit money banks in 

Edo State; 

Flowing from the research questions and specific objectives above, the hypotheses of the study was stated in 

null of form as follows: 

I. Risk management roles of internal auditors do not have significant impact on profitability in deposit money 

banks; 

II. There is no significant relationship between control compliance roles of internal auditors and profitability of 

deposit money banks; 

III. asset safeguarding roles of internal auditors do not have high impact on profitability of deposit money banks; 

 



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LITERATURE REVIEW 

2.1 Conceptual Review 

 Internal Audit Reports 

Internal auditing is an independent and objective activity aimed at providing assurance and consulting services to 

enhance an organization's operations (IIA, 2022). It involves collecting, analyzing, and evaluating data (audit 

evidence) to determine compliance with applicable standards. The process relies heavily on the quantity and 

quality of evidence gathered to support opinions or recommendations (Rensburg & Coetzee, 2016; Alqudah et 

al., 2023). Through a dynamic and organized approach, internal auditing evaluates and improves how risk is 

managed, controlled, and governed in a system to help organizations achieve their objectives. Effective auditing 

is integral to corporate governance, supporting management and the board in adding value and meeting 

organizational goals (El-Sayed Ebaid, 2011). 

The role of internal auditing gained prominence following some companies that has scandals in the US and UK 

and the financial crises in Asia during the late 1990s. More recently, corporate failures in Africa, such as Algeria’s 

Carrefour, Egyptian Sainsbury, Uchumi Supermarkets in Tanzania & Uganda, Crane Bank, GTB and NBC in 

Uganda, have highlighted concerns about internal audit effectiveness (Mindra, 2017; Kapner, 2001; Muhereza, 

2012; Auditor General’s Report, 2014). Mindra (2017) criticized auditors for failing to detect issues, while Roussy 

and Brivot (2016) described them as “watchdogs” tasked with identifying weaknesses in internal controls. 

Internal auditors typically issue reports summarizing their findings, recommendations, and management's action 

plans. These reports often include an executive summary, detailed findings with recommendations, and 

appendices containing additional data or charts. Recommendations aim to enhance governance, risk management, 

and control processes to meet operational, financial, and compliance objectives (Makuza, 2014). 

 Internal Audit Quality 

Audit effectiveness is closely tied to the standard exhibited in internal audits. According to Institute of Internal 

Audit (IIA), they must plan and implement their plan to deliver meaningful results and make recommendations 

for increasing the standard. The ability of the Audit unit to effectively plan, implement, and make known their 

audit results is often used as a measure of quality of audit. Key factors influencing this quality include experience 

of staff, the appropriateness of the audit coverage, and the effectiveness of audit plan, implementation, and 

reporting. Additionally, Auditing Standard No. 65 (AICPA, 1991) identifies key quality indicators such as auditor 

competence (measured by educational and professional credentials), objectivity (assessed by who reviews the 

audit and who appoints the auditor), and the precision and comprehensiveness of audit assignments. The IIA 

(2003) further emphasizes independence, objectivity, and proficiency as critical factors. 

 Internal Auditors Roles 

Internal audit serves as a vital developmental tool within organizations by operating as an independent function 

designed to assess their internal control systems. Despite its significance, many organizations fail to recognize 

how an effective internal audit can enhance resource management, efficiency, and performance (DeMarco, 1980). 

In contrast, banking institutions have established internal audit departments as independent appraisal units to 

evaluate their control systems. The primary goal of these departments is to support institutional members in 

fulfilling their responsibilities by providing recommendations, advice, and insights based on the reviewed 

activities. To ensure effectiveness, audit processes must adhere to professional standards. Auditors carry out 



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routine tasks such as verifying assets and liabilities, inventory, cash receipts, cash payments, and conducting 

surprise checks on items like petty cash, bills, and vouchers (Douglas, 2003). 

Risk Management Roles 

The concepts of managing risk are central to the success and performance of banking operations. In any business, 

managing risk is crucial, as it is often noted that avoiding risks entirely can itself be a risk (Aifuwa, Enehizena & 

Osazebvaru, 2020). Egolum et al. (2021) define management of risk as a procedure aimed at protecting and 

safeguarding the net worth and income of persons and corporations, serving as an managerial function that 

employs practical strategies to address risks. 

In banking, Kerazan (2016) emphasizes the importance of establishing a risk database, fully implementing 

banking governance principles, and ensuring the complete independence of the internal audit department. Internal 

auditors perform a critical duty in ascertaining organizational risks and devising effective strategies to manage 

them. Major risks faced by banks include risks affecting credit, market, operations, risks from electronic banking 

activities, strategic risk, compliance risk, legal risk, and regulatory risk (Basel Committee, n.d.). 

Risk management typically involves four main phases: identifying risks, assessing them, prioritizing them, and 

planning responses, followed by a final stage of evaluation (IRM, 2002; ISO 31000, 2009; BS 31100, 2008; 

COSO ERM, 2004; Moller, 2011). According to Standards risk management (IRM, 2002; BS 31100, 2008; COSO 

ERM, 2004), internal audit should support the evaluation phase. Almost all standard-setting bodies emphasize 

the need for separate and quality assurance in evaluating risk management operations, emphasizing that internal 

audit goal must align with these principles (Hopkin, 2012; Moller, 2011; BSI, 2008; COSO ERM, 2004; IRM, 

2002). 

Internal Control Compliance Role  

Oshisanmi (2007) described the internal control system as the administrative function of outlining and allocation 

of duties while establishing reporting lines to oversee all aspects of operations, ensuring the organization achieves 

its corporate objectives. Okwoli (2004) outlined key objectives of an internal control system, including document 

approval and control, reporting, reconciliation reviews and approvals, restricting access to properties and 

documents, comparison of external and internal information, and maintaining control accounts and trial balances. 

Shehu (2004) and Jenfa (2002) referenced the Operational Auditing Guideline on internal control, which 

categorizes internal control systems into various components such as organizational structure, separation of duties, 

physical controls, authorization and approval processes, financial recording procedures, personnel management, 

and supervision. An effective internal control system incorporates these elements, enabling auditors to rely on 

them. 

Internal control compliance is a key responsibility of internal auditors, who are tasked with performing control 

audits. These audits aim to confirm that effective software and system are in place, ensuring the effectiveness of 

internal controls (Didier, 2016). Control audits may incorporate organs to prevent or detect fraudulent transactions, 

making such activities challenging or impossible. While these audits try to provide proof that controls function in 

the way it was intended do not necessarily identify fraudulent activities. 

Assets Safeguarding Roles through financial reporting 

To analyze the key financial performance of banks and achieve defined objectives, it was essential to establish a 

financial infrastructure guided by 5 "golden principles" outlined by the IMF and the World Bank: open, a robust 

financial mechanism, private sector involvement, carefully planned capital flow liberalization, and modernization 



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of international markets. Financial reports prepared in alignment with these principles serve as a vital tool for 

managers to communicate effectively with users of financial information. 

In today's dynamic business environment, there is an increasing number of stakeholders interested in the data 

presented in financial statements. These stakeholders are being categorized into external and internal users. 

Internal users include managers and people who makes decision within the organization. External users, the 

primary audience for financial statements, are divided into two groups: those that has financial stakes, such as 

current and potential owners and lenders, and those may not have financial stakes, including tax authorities, 

regulatory bodies, clients, and economic managers. To provide a reliable foundation for decision-making, 

financial statements must adhere to specific qualitative standards (Bierstaker & Pacini, 2006). 

2.1.5. Profitability  

Egolum, Ugonabo, and Okonenwa (2021) assert that a firm is considered successful when it effectively 

accomplishes its goals and strategically executes tasks to achieve them. Performance is defined as the capability 

to operate efficiently, remain profitable, sustain improvement, and respond to opportunities and challenges. 

Therefore, growth can be measured by how effective an organization utilizes resources to meet its objectives. It 

serves as a measure of achievement individually, as a team, as an institution, or a process. Consequently, a 

company’s growth strategy can be evaluated through various means, depending on its goals and objectives. For 

some companies, achieving all set objectives by the end of a financial period may indicate excellent performance, 

while for others, maximizing profit may serve as the sole indicator of success. 

2.1.6 Deposit Money Banks 

The primary objective of deposit money banks in Nigeria is to generate profit and enhance the value of 

shareholders' investments. Profitability can be defined as the difference between sales revenue and the costs of 

raw materials, labor, and capital incurred over an accounting period (Pettinger & Richard, 2006). Kimetto (2019) 

emphasized that in a free market system, achieving profitability is vital, as it is the core goal of a profit-driven 

enterprise, which can only be achieved by addressing consumer needs. Profit is typically measured in quantitative 

terms, whereas non-profit organizations focus on resource utilization and cost efficiency rather than profitability 

(Kimetto, 2019). 

Deposit money banks offer services like accepting deposits, providing business loans, and delivering basic 

investment products (Beyanga, 2011). They generate profit through loan services and associated fees. According 

to Pandey (1995), without profitability, a business cannot thrive in the long term. As such, the profitability of 

commercial banks is critical to their survival within the financial sector. A business's survival is considered a 

secondary goal, with profit maximization being the primary objective for any profit-driven enterprise. The profits 

generated by banks serve as an important source of equity, particularly when reinvested into the business (Diedier, 

2016), thereby enhancing its financial stability. 

2.2.Theoretical Review 

To offer a comprehensive theoretical framework for understanding the role of internal auditors in improving 

profitability in commercial banks, this study is based on Agency theory. Proposed by Jensen and Meckling (1976), 

the agency theory outlines the relationship between the principal (the owners of organizations) and the agents (the 

managers or administrators of these organizations). Internal auditors are responsible for verifying the accuracy of 

financial and statistical records presented to management, evaluating the effectiveness of current internal controls 

and systems, and recommending improvements. The functions of internal auditors, such as safeguarding assets, 

ensuring compliance with internal controls, and managing risks, directly influence the financial performance of 



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organizations. The work of internal auditors is focused on serving the interests of the principal or the bank's 

owners (Egolum et al., 2021). Furthermore, their role helps in the early detection and prevention of fraud, ensuring 

strict adherence to the organization’s standard accounting practices. 

2.3.Empirical Review 

Natalia, Salwa, and Nurliyana (2023) provided empirical evidence on the factors that influence the quality of 

financial reports, focusing on variables such as internal audits, internal control system implementation, and 

corporate governance practices. They developed a conceptual model to analyze the quality of financial reports 

based on the role of these variables, drawing on established theories. The aim was to make a scientific contribution 

to the field of public sector auditing and address challenges related to improving financial report quality through 

internal audits, internal controls, and corporate governance. Additionally, the findings of this study can assist 

regulators in enhancing financial report quality, ultimately helping to prevent fraudulent financial reporting. 

In Nigeria, Alashe and Bello (2021) examined the impact of internal audits on the financial performance of money 

deposit banks. The study employed a survey research design, administering 360 questionnaires to bank staff using 

a judgmental sampling method. The research utilized Ordinary Least Squares (OLS) regression to test the 

hypotheses and found a significant relationship between internal audits and the profitability of money deposit 

banks in Nigeria. Furthermore, they discovered that internal audit reporting channels positively influence the 

financial performance of these banks. The study concluded that internal audits have a positive impact on the 

financial performance of money deposit banks in Nigeria. 

In Yemen, Hazaea, Tabash, Zhu, Saleh, and Farhan (2021) explored the impact of internal audits on the financial 

performance of commercial banks. The study used a survey research design and distributed 90 questionnaires 

across nine commercial banks in Yemen (23 branches), all under the supervision of the Central Bank of Yemen. 

Descriptive, correlation, and regression analyses were employed to summarize the data and test the study's 

hypotheses. The findings revealed that internal auditing (IA) significantly affects the overall performance of 

Yemeni commercial banks. Additionally, the results showed that the efficiency of auditors, along with their 

financial and accounting knowledge, positively and significantly impacts financial performance. However, the 

independence and objectivity of internal auditors were found to have no significant effect on financial 

performance. On the other hand, the size of the internal audit function and the frequency of auditors' meetings 

were shown to negatively and significantly affect financial performance. 

Kimetto (2019) examined the effect of internal auditing on the profitability of banking institutions in Kenya using 

a descriptive survey research design. Data were gathered through questionnaires and interviews. The study 

sampled 30 employees from various commercial banks in Kericho town, selected using a stratified random 

sampling method. The findings indicated that internal auditors primarily contribute to profitability by detecting 

fraud and advising management on internal control systems. However, the study identified challenges to the 

effectiveness of internal auditing, such as lack of independence and inadequately qualified audit staff. 

Furthermore, the profitability of commercial banks was influenced by factors such as high tax liabilities, low 

employee productivity, and rising production costs. 

In Uganda, Nansamba (2019) investigated the effect of internal auditing on the financial performance of 

commercial banks using a survey research design. The data analysis involved quantitative methods and regression 

analysis, employing descriptive statistics like mean, standard deviation, and frequency distribution. Tables were 

used to present the data for better clarity. The study concluded that internal audit standards, independence, 



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professional competence, and internal control positively impact the financial performance of commercial banks. 

Specifically, increases in these factors were linked to corresponding improvements in financial performance. 

In Syria, Kerazan (2016) studied the role of internal auditing in risk management within both public and private 

banks. The study used a survey research design, distributing 117 questionnaires. Descriptive statistics were used 

to summarize the data, while a T-test was applied to assess the hypotheses. The findings showed that internal 

auditing plays a significant role in risk management across all Syrian banks, with no significant differences 

between public and private banks. The study recommended training programs for internal audit staff and the 

implementation of regulations to better organize internal audit functions in banks. 

In Kenya, Changwony and Rotich (2015) examined how internal auditing contributes to improving corporate 

governance within commercial banks. Using a descriptive research approach, the study selected 89 participants 

through stratified random sampling. Data was gathered using structured questionnaires and analyzed using pie 

charts, graphs, and percentages. The findings indicated that factors such as the placement of the internal audit 

function, risk identification, assessment and prioritization, audit independence, and adequate staffing have a 

significant positive impact on corporate governance in commercial banks.  

Summary of empirical literature and gap identified  

From the above review carried out, they dwelt mainly on the link between quality of accounting report and internal 

audit, board governance, risk management and financial performance. Other researchers in other countries dwelt 

on the internal audit as it relates to Bank profitability but no study has examined that of Banks in Nigeria more 

so Edo State which this study focused in. 

3. METHODOLOGY 

This study utilized a survey research design. This type of design is defined as "the collection of information from 

a sample of individuals through their responses to questions" (Check & Schutt, 2012, p. 160). The population 

comprised of staff of listed deposit money bank operating in Benin City, Edo State. Nigeria. The total number of 

banks in Benin city, Edo State as at November 1st 2023 is eleven (11) listed deposit money banks (CBN Finance 

and Admin Department, 2023). However, the target population of the study covered 3,453 core staff these banks 

(CBN Benin Office, 2023). The study utilized Taro Yamane's (1967) formula to calculate the sample size, as the 

population size and proportion were known. Once the sample size was determined, it was allocated to various 

ministries and departments using a stratified sampling technique. The formula is as follows: 

n=N/1+N(e)2 

Where: 

 n represents the required sample size from the population under study, 

 N is the total population under study, 

 e denotes the margin of error or precision, typically set at 0.05 for management sciences. 

Therefore; 

  

 
  = 346 

 n= 346 (Rounded) 



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A sample of 346 was arrived at after the computation. Therefore, the study comprised of three hundred and forty-

six (346) staff from selected banks in Benin City, Edo State, Nigeria.  

The questionnaire, comprising two sections, gathered responses from study participants. Section one captured 

respondents' bio-data, while section two focused on study variables. A structured questionnaire was chosen for its 

anonymity and standardized questions. Responses were recorded on a five-point Likert scale, ranging from 'Strongly 

agree' to 'Strongly disagree', facilitating quantitative analysis. 

This study employed content validity, which was ensured by soliciting feedback from accounting lecturers at 

Wellspring University, Benin City. The study also adopted the internal consistency approach, using Cronbach's 

Alpha to measure the consistency of responses. A Cronbach's Alpha value of 0.7 was gotten after the test, 

confirming that the questionnaire items effectively captured the variables under study. 

 Method of Data Analysis  

This study utilized a combination of descriptive and inferential statistical methods. Descriptive statistics, 

presented in tables, included frequency and percentage distributions. To examine relationships between variables, 

the study employed a deductive approach using inferential statistics. Specifically, linear regression analysis was 

conducted to test hypotheses and draw inferences. Data analysis was facilitated by Statistical Package for Social 

Sciences (SPSS) software, version 21. 

Model of the Study 

The study adapted the model of Alashe and Bello (2021) in investigating the effect of internal audit on profitability 

of banks. This study added internal auditing standard as an independent variable of the study. Therefore, the 

model of the study will be specified as; 

Profitability = f (Internal auditors roles) ------------------------------------------------------(4) 

Profitability = (Risk Management roles, Internal Control Compliance roles; and assets safeguarding roles; internal 

audit standards) -------------------------------------------------(5) 

Profi = B0i + B1RMi + B2ICCi + B3ASTi + Ei------------------------------------(6) 

Where:  

PFT = Profitability of commercial banks; 

B0 – Constant; 

RKM = Risk management; 

ICC = Internal control compliance 

AST = Asset safeguarding 

E = Error term 

B1 – B4 = Coefficient of variables 

4.DATA PRESENTATION, ANALYSIS AND RESULTS 

4.1 Data Presentation 

The summary of the responses for the analysis were presented in the Appendix. 

Table 4.1: Questionnaires distribution and returned 

States No of Questionnaires 

distributed  

No of Questionnaires 

returned  

No of Questionnaires 

unreturned  

Percentage of 

Questionnaires 

returned  

Total  346 334 52  



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Source: Computed and Compiled by the Researcher, 2024 

 

Table 4.2 Summary of Responses for Dependent Variable 

S\N Statements SA A D SD 

 Profitability in commercial banks     

1 there is a link between internal audit quality and profitability 120 

36 % 

146 

44% 

60 

18% 

8 

2% 

2  Disclose of problems in internal control by firms leads to a 

significant increase in cost of capital reflected in the market. 

110 

33% 

135 

40% 

75 

22% 

14 

4% 

3 banks are facing increased cost of acquiring raw materials 119 

36% 

125 

37% 

75 

22% 

15 

4% 

4 Auditing Standards practices in related services affects bank 

performance. 

122 

37% 

142 

43% 

65 

19% 

5 

1% 

5 The independence of the internal auditors affects the profitability 

of the bank 

115 

34% 

125 

37% 

89 

27% 

5 

1% 

6 Professional competence of the internal auditors affects the 

profitability of the bank 

100 

30% 

145 

43% 

74 

22% 

15 

4% 

Source: Field Survey, 2024 
From the above analysis, majority of the respondents agreed that internal audit functions can impact on 

profitability of deposit money banks. 

Table 4.3: Summary of Responses for Independent Variable1 

 Statements SA A D SD 

 Risk Management Roles     

7 The appointment of skilled and competent internal auditors lies 

with the management of a company.  

108 

32% 

152 

46% 

69 

21% 

14 

4% 

8 Qualification and experience play a key role in the appointment 

of auditors in deposit money banks. 

111 

34% 

151 

45% 

61 

18% 

11 

3% 

9 effective internal audit reduces on fraud and embezzlement in 

banks 

201 

60% 

78 

23% 

24 

7% 

31 

9% 

10 Internal audit plays a key role in risk management through proper 

evaluation. 

119 

36% 

145 

43% 

62 

19% 

8 

2% 

Source: Field Survey, 2024 
The above analysis from respondents it is evident that majority agreed that internal auditor’s risk management 

role can have high effect on deposit money bank profitability. 

Table 4.4: Summary of Responses for Independent Variable 2 

 Internal Control Compliance Roles     

11 One of the critical role of internal auditor of deposit money 

banks evaluation of internal control system of the bank. 

91 

27% 

161 

48% 

61 

18% 

21 

6% 

12 In deposit money banks internal auditors perform their 

duties without interference  

100 

30% 

138 

41% 

91 

27% 

5 

1% 

13 Internal auditors of deposit money banks follows up on 

their reports and recommendations. 

109 

33% 

146 

44% 

69 

21 

10 

3% 

14 Few intentional errors are detected during routine audit by 

internal auditors and they are predictable. 

121 

36% 

142 

43% 

60 

18% 

11 

3% 

15 Professionalism is highly emphasized in the bank 118 146 63 7 



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35% 44% 19% 2% 

Source: Field Survey, 2024 

 

The summary of the reponses above showed that majority agreed that auditor’s compliance role has significant 

effect on the profitability of deposit money banks. 

Table 4.5: Summary of Responses for Independent Variable 3 

 Asset Safeguarding Roles     

16 Independence of an internal auditor is guaranteed by shielding 

him from the personnel and activities of the banks. 

119 

36% 

145 

43% 

62 

19% 

8 

2% 

17 The internal audit department in a deposit money bank must be 

guaranteed of independence for it to function properly. 

109 

33% 

146 

44% 

69 

21 

10 

3% 

18 Internal auditors should not have anything that will conflict with 

his own interest in course of working for the bank. 

91 

27% 

161 

48% 

61 

18% 

21 

6% 

19 The internal auditor report issue of fraud and error to 

management frquently 

110 

33% 

135 

40% 

75 

22% 

14 

4% 

20 There is reduce fraud occurrence in the bank 115 

34% 

125 

37% 

89 

27% 

5 

1% 

Source: Field Survey, 2024 

The above responses as regards the effect of asset safeguarding role of internal auditors showed that majority of 

the respondents agreed or strongly agreed that the positively affect profitability. 

Data Analysis 

The table below is the descriptive statistics that was computed to show the mean, median, standard deviation, 

minimum, and maximum values, statistics, etc. 

Table 4.6 Descriptive Statistics 

 N Minimum Maximu

m 

Mean Std. 

Deviation 

Skewness Kurtosis 

Statisti

c 

Statistic Statistic Statistic Statistic Statist

ic 

Std. 

Error 

Statis

tic 

Std. 

Error 

PFT 4 62.00 818.00 501.0000 332.36727 -.847 1.014 -.272 2.619 

RKM 4 33.00 448.00 252.7500 180.15803 -.316 1.014 
-

1.312 
2.619 

ICC 4 54.00 733.00 417.5000 289.73379 -.417 1.014 -.438 2.619 

AST 4 40.00 752.00 414.0000 304.70204 -.292 1.014 -.760 2.619 

Valid N (listwise) 4         

Interpretation  

The descriptive statistics for the independent variables, including profitability (PFT), are presented in Table 4.2.1. 

The mean serves as a baseline measure, while the maximum and minimum values help identify potential data 

issues. The standard deviation indicates the variation from the mean and acts as a risk measure; a higher standard 

deviation implies greater risk. This metric, widely regarded as the most reliable and commonly used, reflects how 



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much each data point deviates from the mean. For the firms analyzed, the standard deviations for PFT, RKM, 

ICC, and AST 332.37, 180.16, 289.73, and 304.70, respectively. 

 

 Regression Result  

The research model was estimated using multiple regression analysis, and the resulting finding were then used to 

test the study's hypotheses  

Table 4.7 Regression Model Summary 

Model Summaryb 

Model R R Square Adjusted R Square Std. Error of the 

Estimate 

1 .991a .981 .972 55.42474 

a. Predictors: (Constant), Risk management, Internal Control Compliance, Asset Safeguarding,  

b. Dependent Variable: Profitability of Deposit Money banks 

Source: Regression Output, 2024 

The table above provides the model summary of the study. The adjusted R-squared value is 0.972, indicating that 

approximately 97.2% of the systematic variation is explained by the study's independent variable. Meanwhile, 

2.9% of the variation is attributed to other variables not included in the model but is adequately addressed by the 

regression's standard error, SE = 55.42474. 

Table 4.9: Model Fitness 

ANOVAa 

Model Sum of Squares Df Mean Square F Sig. 

1 Regression 325260.197 1 16245.140 105.401 .009b 

Residual 6143;803 2 3071.901   

Total 331404.000 3    

a. Dependent Variable: Profitability of Deposit Money banks 

b. Predictors: (Constant), Risk management, Internal Control Compliance, Asset Safeguarding, . 

Source: Regression Output, 2024 

The ANOVA table showed that the model was statistically fit, F = 105.401, df = 1, p = 0.009 < 0.05.  

Table 4.10: Coefficient Summary 

Model Unstandardized Coefficients Standardized 

Coefficients 

T Sig. 

B Std. Error Beta 

1 (Constant) 39.053 52.758  .740 .536 

Risk 

management 

1.828 .178 .991 10.290 .009 

Control 

Compliance 

1.138 .100 .992 11.404 .008 

Asset 

Safeguarding, 

1.079 .113 .989 9.578 .011 



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Source: Regression Output, 2024 

The table of coefficient shows how the independent variables are related. From the table above, it shows that Risk 

management role, Internal Control Compliance, Asset Safeguarding role, have positive impact on profitability of 

Deposit Money banks in Benin city, Edo State.  

Test of Hypotheses  

1. Risk management roles of internal auditors do not have significant impact on profitability in deposit money 

banks; 

Table 4.3.3 indicates that the p-value of 0.009 is highly significant at the 5% significance level, as it is less than 

the alpha value (0.009 < 0.05). The regression results in the same table reveal that the risk management roles of 

the explanatory variable have a positive and statistically significant impact. This is evidenced by the coefficient 

value of 0.991 and a t-statistic of 10.290, indicating a significant positive relationship between risk management 

roles and bank profitability at the 5% significance level. 

Decision: 

Since the p-value of the test statistic is less than or equal to the alpha value, the null hypothesis is rejected, and 

the alternative hypothesis is accepted. This confirms that the risk management roles of internal auditors 

significantly impact the profitability of deposit money banks. 

Hypothesis Two  

Ho2: There is no significant relationship between control compliance roles of internal auditors and profitability in 

deposit money banks; 

Table 4.3.3 shows that the p-value of 0.008 is statistically significant at the 5% significance level, as it is less than 

the alpha value (0.008 < 0.05). The regression results further indicate that the control compliance roles of the 

explanatory variable have a positive and statistically significant effect. This is supported by a coefficient value of 

0.992 and a t-statistic of 11.404, demonstrating a significant positive relationship between control compliance 

roles and bank profitability at the 5% significance level. 

Decision: 

Since the p-value is less than the alpha value, the null hypothesis is rejected, and the alternative hypothesis is 

accepted. This confirms that the control compliance roles of internal auditors have a significant impact on the 

profitability of deposit money banks. 

Hypothesis Three 

Ho3: Asset safeguarding roles of internal auditors do not have significant impact on profitability in deposit money 

banks. 

Table 4.3.3 shows that the p-value of 0.011 is statistically significant at the 5% significance level, as it is less than 

the alpha value (0.011 < 0.05). The regression results further demonstrate that the asset safeguarding roles of the 

explanatory variable have a positive and statistically significant effect. This is reflected in a coefficient value of 

0.989 and a t-statistic of 9.578, indicating a significant positive relationship between asset safeguarding roles and 

bank profitability at the 5% significance level. 

Decision: 
Since the p-value is less than the alpha value, the null hypothesis is rejected, and the alternative hypothesis is 

accepted. This confirms that the asset safeguarding roles of internal auditors significantly impact the profitability 

of deposit money banks. 

 Discussion of Findings 

a.  b. Dependent Variable: Profitability of Deposit Money banks 



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Hypothesis One: 

The first hypothesis posits that the risk management roles of internal auditors significantly impact on deposit 

money banks profit. This aligns with the findings of Aifuwa, Enehizena, and Osazebvaru (2020), who emphasized 

that management of risk is crucial for the good performance of banking operations. Risk management is essential 

in any business, as failing to address risks is itself risky. Similarly, Egolum et al. (2021) highlighted that risk 

management safeguards assets and income while serving as an administrative function that employs practical 

strategies to mitigate risks. Changwony and Rotich (2015) further demonstrated that factors such as the 

positioning of internal audit functions, risk identification, measurement and prioritization, audit independence, 

and staffing significantly contribute to effective corporate governance. In Syria, Kerazan (2016) found that 

internal audit functions do not contribute significantly in managing risk to both national and private banks. 

Hypothesis Two: 

The second hypothesis asserts that the control compliance roles of internal auditors significantly influence the 

profitability of deposit money banks. This finding is consistent with Didier (2016), who noted that control audits 

can incorporate mechanisms to detect or prevent fraudulent transactions, enhancing corporate income by ensuring 

the effectiveness of control systems. However, such audits primarily assure functionality rather than detecting 

fraud or corruption. Alashe and Bello (2021) similarly concluded that internal audits positively correlate with the 

financial performance of Nigerian deposit money banks. 

Hypothesis Three: 

The third hypothesis states that the asset safeguarding roles of internal auditors have a significant effect on the 

profit of deposit money banks. Bierstaker and Pacini (2006) observed that financial statements must meet 

qualitative criteria to provide a reliable foundation for decision-making processes, highlighting the importance of 

safeguarding assets. 

5. Summary of Findings 

From the analysis of the study and hypotheses tested, the following findings were drawn; 

1. The outcome showed that risk management roles of internal auditors have significant impact on profitability in 

deposit money banks.  

2. The study found that control compliance roles of internal auditors have significant impact on profitability in 

deposit money banks.  

3. It was also found that asset safeguarding roles of internal auditors have significant impact on profitability in 

deposit money banks.  

Conclusion  

The main objective of the research was to ascertain impact of internal auditors on profitability in deposit money 

banks in Benin City, using risk management roles of internal auditors, control compliance roles of internal 

auditors, asset safeguarding roles of internal auditors and internal audit standards compliance as a proxy for 

internal auditors. A sample of 386 staff of the deposit money banks in Benin City. The research data were 

generated from the questionnaires distributed to the respondents. Hypothesis testing was done using rregression 

analysis via SPSS. The study found that risk management roles of internal auditors, control compliance roles of 

internal auditors, asset safeguarding roles of internal auditors and internal audit standard compliance has 

significant impact on profitability in deposit money banks. 

We therefore conclude that internal auditors play a significant role in determining bank’s profitability. 

Recommendations  



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From the outcome of the study, we make the following recommendations; 

1. The banks internal auditors should continue with their risk management strategy presently being 

implemented as it has impacted positively to their profitability. 

2.  Internal auditor should continue with their compliance roles and should step up the role as it goes a long 

way in improving the profitability of banks. 

3. Internal Auditors should continue to uphold auditing standards and should regularly update themselves 

with new developments in auditing standard issued from time to time and ensure it is implemented in the 

bank. This will provide a conducive atmosphere for external auditors when they carryout out end of the 

year audit of banks. 

4. Internal Auditor’s role in safeguarding the assets of the organization should be strengthened to ensure 

there is no loss and enhance company’s performance. 

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corporate governance in Banks. 

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statement fraud likelihood: Evidence from quoted international licensed banks in Nigeria. International 

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Eke Robert Ike and Glory Eghoghon Ihunde (2025) 
 

35 
American Interdisciplinary Journal of Business and Economics | 

https://sadijournals.org/index.php/AIJBE 
 

Heil, D. (2012). The influence of the auditor on the earnings quality of their clients (Master’s Thesis). Retrieved 

from https:// thesis.eur.nl/pub/10237/MA006- Heil_306477.docx 

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structure. Journal of Financial Economics, 1(1), 305-360. 

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Commercial Banks in Kericho County, Kenya. Scientific Research Journal (SCIRJ), 7(5), 46-62.  

Kerazan, F. H. (2016). The contribution of the internal audit function in risk management. Journal of Management 

Research, 8(3), 178-202. 

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and financial performance of Yemeni commercial banks: Empirical evidence. Banks and Bank Systems, 

16(2), 137-147 

Saidu, M. & Aifuwa, H. O. (2020). Board characteristics and audit quality: The moderating role of gender 

diversity. International Journal of Business & Law Research, 8(1), 144-155. 

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