The Effect of Internal Control Components on Mitigating the Impact of COVID-19 Risks in Healthcare Organizations in Ethiopia
DOI:
https://doi.org/10.14414/jebav.v23i3.2517Keywords:
Internal control in healthcare organizations, impacts of COVID-19, ordered logistic regressionAbstract
The COVID-19 pandemic hit the world’s economy and created significant risks from which many sectors, including the healthcare sector, are adversely affected. This study is aimed to evaluate the reliability of internal control systems in healthcare organizations and the effect of internal control components on mitigating the impacts of risks created by the pandemic. The study used a cross-sectional primary data collected from 241 healthcare organizations in Addis Ababa, Ethiopia. Descriptive statistics and ordered logistic regression analysis methods was applied. Internal control system in the Ethiopian healthcare organizations is found to be moderately reliable. In addition, the ordered logistic regression results show that control environment, risk assessment, control activities, information and communication, and monitoring activities have a statistically significant and negative effect on impact of COVID-19 risks. This implies as the reliability of internal control components increases, the impact of COVID-19 risks on the overall performance of healthcare organizations decreases.References
References
Ajao, O. S., and Oluwadamilola, A. O. (2020). Internal Control Systems and Quality of Financial Reporting in Insurance Industry in Nigeria. Journal of Finance and Accounting, 8 NO 5(5), 218–226. https://doi.org/10.11648/j.jfa.20200805.12
Akhtaruddin, M. and Ohn, J. (2016) ‘Internal control deficiencies , investment opportunities , and audit fees’, Int. J. Accounting and Finance, 6(2), pp. 127–144.
Akwaa-Sekyi, E. K., and Gené, J. M. (2016). Effect of internal controls on credit risk among listed Spanish banks. Intangible Capital, 12(1), 357–389. https://doi.org/10.3926/ic.703
Alam, M. S. (1995). A Theory of Limits on Corruption and some Applications. KYKLOS, 48, 419–435.
Amankwah-amoah, J., Khan, Z. and Wood, G. (2020) ‘COVID-19 and business failures : The paradoxes of experience , scale , and scope for theory and practice’, European Management Journal. Elsevier Ltd. doi: 10.1016/j.emj.2020.09.002.
Ashbaugh-Skaife, H., Collins, D. W., Jr., W. R. K., and Fond, R. (2009). The Effect of SOX Internal Control Deficiencies on Firm Risk and Cost of Equity, 47(1). https://doi.org/10.1111/j.1475-679X.2008.00315.x
ASHRM. (2016). American Society for Healthcare Risk Management . Retrieved from ASHRM: https://www.ashrm.org/system/files%3Ffile%3Dmedia/file/2019/06/ERM-Tool_final.pdf
Cancedda, A., Minardi, C., Wolsey, J., Vinci, V., and Abdella, A. (2020). COVID-19 socio-economic Vulnerability Assessment of Ethiopia.
Chen, H., Dong, W., Han, H., and Zhou, N. (2016). A comprehensive and quantitative internal control index: construction, validation, and impact. Review of Quantitative Finance and Accounting, 49(2), 337–377. https://doi.org/10.1007/s11156-016-0593-x
Committee of Sponsoring Organizations of the Treadway Commission. (2013). Internal control-integrated framework.
Craven, M., Liu, L., Mysore, M., and Wilson, M. (2020). COVID-19 : Implications for business. McKinsey and Company.
Ellul, A., and Yerramilli, V. (2013). Stronger risk controls, lower risk: Evidence from U.S. bank holding companies. Journal of Finance, 68(5), 1757–1803. https://doi.org/10.1111/jofi.12057
FICCI. (2020, April 14). Coronavirus impact on healthcare sector. Retrieved from The Economic Times: https://economictimes.com/markets/stocks/news/coronavirus-impact-on-healthcare-sector/articleshow/75136714.cms
GAO - Government Accountability Office. (2014). Standards for Internal Control in the Federal Government - GAO 14-704G (The Green Book) (Issue September).
Hajiha, Z. and Bazaz, M. S. . (2016) ‘Impact of internal control material weaknesses on executive compensation : evidence from Iran’, Int. J. Accounting, Auditing and Performance Evaluation, 12(1), pp. 70–84.
Hay, D. (1993). Internal control: How it evolved in four English speaking countries. Accounting Historians Journal, 20(1), 79–102. https://doi.org/10.2308/0148-4184.20.1.79
Hogan, C. E. and Wilkins, M. S. (2008) ‘Evidence on the Audit Risk Model : Do Auditors Increase Audit Fees in the Presence of Internal Control Deficiencies?’, Contemporary Accounting Research, 25(1), pp. 219–242. doi: 10.1506/car.25.1.9.
Institute of Internal Auditors. (2015, March). Global technology Audit Guide. Retrieved from The Institute of Internal Auditors North America: na.theiia.org/standards-guidance/recommended-guidance/practice-guides/pages/GTAG3.aspx
INTOSAI. (2004). Guidelines for internal control standards for the public sector. Budapest: International Organization of Supreme Audit Institution.
Jiang, H.J., Lockee, C. and Fraser, I., 2012. Enhancing board oversight on quality of hospital care: an agency theory perspective. Health care management review, 37(2), pp.144-153.
Jokipii, A. (2010). Determinants and consequences of internal control in firms: A contingency theory based analysis. Journal of Management and Governance, 14(2), 115–144. https://doi.org/10.1007/s10997-009-9085-x
Joseph, O. N., Albert, O., and Byaruhanga, J. (2015). Effect of Internal Control on Fraud Detection and Prevention in District Treasuries of Kakamega County. International Journal of Business and Management Invention, 4(1), 47–57.
Khullar, D., Bond, A. M., and Schpero, W. L. (2020). COVID-19 and the Financial Health of US Hospitals. JAMA - Journal of the American Medical Association, 323(21), 2127–2128. https://doi.org/10.1001/jama.2020.6269
Li, S., and Nadeem, M. (2010). Risk Management and Internal Control: A CASE STUDY OF CHINA AVIATION OIL CORPORATION Ltd. [University West]. In Chambers’ Corporate Governance Handbook. https://doi.org/10.5040/9781784514471.chapterg2
Liu, X. (2018) ‘Discussion on Internal Accounting Control in Hospital’, Research in Medical and Engineering Sciences, 3(3), pp. 230–231. doi: 10.31031/RMES.2018.03.000563.
Lu, H. A. I., Richardson, G. and Salterio, S. (2011) ‘Direct and Indirect Effects of Internal Control Weaknesses on Accrual Quality : Evidence from a Unique Canadian Regulatory Setting’, Contemporary Accounting Research, 28(2), pp. 675–707. doi: 10.1111/j.1911-3846.2010.01058.x.
Monday, J. U., Inneh, G. E., and Ojo, V. O. (2014). Internal Controls and Operating Performance of Small Businesses in Lagos Metropolis. International Conference on Accounting, Finance and Management, March, 237–256.
Mary, A. I. (2017). Impact of Effective Internal Control in the Management of Mother and Child Hospital Akure, Ondo State. Journal of Finance and Accounting, 5(1), 61–73. https://doi.org/10.11648/j.jfa.20170501.16
O’Leary, C. (2007). Developing a Standardised Model for Internal Control Evaluation Dr. Journal of Nuclear Cardiology, 11(2), 35–57. https://doi.org/10.1016/j.nuclcard.2007.06.010
Omri, M. A. and Nefissa, G. E. M. Ben (2011) ‘Determinants of weaknesses in internal control in Tunisian context’, Int. J. Managerial and Financial Accounting, 3(3).
Oseifuah, E. K., and Gyekye, A. B. (2013). Internal control in small and microenterprises in the Vhembe District, Limpopo Province, South Africa. European Scientific Journal, 9(4), 241–251.
Perotti, L. (2012). Economia aziendale online. Economia Aziendale Online, 0(3), 77–107. http://riviste.paviauniversitypress.it/index.php/ea/article/view/1289/1414
Pevzner, M. and Gaynor, G. (2016) ‘The impact of internal control weaknesses on firms ’ cash policies’, Int. J. Accounting, Auditing and Performance Evaluation, 12(4), pp. 396–421.
Said, J., Alam, M. M., Radzi, N. B. M., and Rosli, M. H. (2020). Impacts of accountability , integrity , and internal control on organisational value creation : evidence from Malaysian government linked companies. Int. J. Business Governance and Ethics, 14(2), 206–223.
Sandra, L. (2001). Enterprise Risk Management and the Healthcare Risk Manager. JOURNAL OF HEALTHCARE RISK MANAGEMENT, 202, 29–38. hitp://www.ashrm.org
Schandl, A., and Foster, P. L. (2019). COSO INTERNAL CONTROL – INTEGRATED FRAMEWORK: An Implementation Guide for the Healthcare Provider Industry.
Scott, G. C., Eric, J. R., and Rebecca, W. M. (2020, June 30). Top Risks for Healthcare Organizations in 2020. Retrieved from Crowe: https://crowe.com/insights/healthcare-connection/top-risks-healthcare-organizations-2020
Sim, M. R. (2020) ‘The COVID-19 pandemic : major risks to healthcare and other workers on the front line’, Ocupational and Environmental Medicine, 77(5), pp. 281–282. doi: 10.1136/oemed-2020-106567.
Subramanian, S. (2018). Stewardship Theory of Corporate Governance and Value System: The Case of a Family-owned Business Group in India. Indian Journal of Corporate Governance, 11(1), 88–102. https://doi.org/10.1177/0974686218776026
Suh, S. and Fernando, G. D. (2013) ‘The effect of reporting internal control weakness on predicting future performance using discretionary accruals’, Int. J. Accounting, Auditing and Performance Evaluation, 9(4), pp. 307–325.
Tang, D.Y., Tian, F. and Yan, H., 2015. Internal control quality and credit default swap spreads. Accounting Horizons, 29(3), pp.603-629.
Tuan, N., and Hung, D. N. (2015). A theoretical model studying the Impact of Internal Control on Performance and Risks of Vietnam Commercial Banks. IInternational Conference on Accounting, 5(12), 1–13. https://www.researchgate.net/publication/306323176
Tuan, T. T. (2020). The effect of internal control on the performance of Vietnamese construction enterprises. Accounting, 6(2020), 781–786. https://doi.org/10.5267/j.ac.2020.6.005
Woodward, J. (1958) ‘Management and Technology’, HM Stationery Off, (3).
Xiaofang, C., and Huili, N. (2016). Research on the Internal Control of Small and Medium Manufacturing Enterprises under Comprehensive Risk Management. Proceedings of the 8th International Conference on Innovation and Management, 2, 680–684.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2021 Enyew Mulu Zelie
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
