EFFECT OF INTERNAL CONTROL OVER ACCOUNT RESCEIVABLE THE CASE OF COMMERCIAL BANK OF ETHIOPIA HABTE GEORGIS BRANCH

Abstract

Background: the internal control process which historical has been a mechanism for reducing instance of fraud, misappropriation and errors, has recently become more extensive, addressing all the various activities faced by organization. it is now recognized that assumed internal control process is critical to organization’s ability to meet its established goals and objectives, and to maintain financial viability. Methods: The study sample was selected based on simple random sampling technique and also the data was collected from a sample of 10 respondents. Result: In this study it was found that from a total of 10 respondents, 5(50%) respondents said that the internal control system over receivable in the bank is good and the rest of the respondent said that there is fair internal control system over receivable in the bank. From the total respondents 8(80%) respondents said that the bank have independently collection departments and the rest of the respondent replied that no collection departments independently. All the respondents responded that it communicate with credit customers by phone or remind them the due date of two or three days. From those total respondents 7(70%) respondents said that it’s giving of credit limit to the customer are good and the rest said it’s fair. All the respondents said that it has credit term or agreement on the bank. From the total respondents 9(90%) respondents make known that statements of account receivable is prepared and sent to customers strictly on the bank and the rest said not. From the respondents 8(80%) respondents said that the bank prepare an aging report and the rest said no aging report on the bank.8( 80%) respondents said credit customer pay their agreement highly and rest respondents said that the credit customer pay their agreement lowly and very highly. All the respondents said the bank takes action for those customers who do not pay on due date by forbidding giving of credit and by taking legal action. As all the respondents said the bank does change an account receivable to promissory note receivable and also there is a procedure to writeoff uncollectible. Conclusion: In this research the researcher tries to assess that how the bank treats receivables, what control mechanisms are followed over receivables, reasons that made the collection difficult and what sort of action are taken for those customers who do not pay according to their agreement and due date and also tries to identify the problem that affects receivables to be outstanding for about more than one year and to solve those problem by the management and related body.