The purpose of this study is twofold. Firstly, through a theoretical research to provide the role of the internal audit and the relationship with the internal control system and then by a strongly quantitative research to investigate whether the components of the internal control system affect the profitability, the riskiness and the compliance of US banking sector. Specifically, the second objective of this study is unconventional since most of the studies in this field up to now investigate these topics by theoretical approaches and qualitative researches. To this direction, based on COSO Framework, on Basel Committee Frameworks and on the literature, the components of the internal control system were quantified via 8 independent variables. Moreover, 3 more bank’s characteristics were included. These 11 independent variables were analyzed in three different regression models, with the credit risk, the profitability and the compliance being the dependent variable in each model. After cleaning the data from outliers, several tests were performed, while a panel set of data was used comprising by the 210 biggest Bank Holding companies. The Fixed-effects regression was applied in the three models, while the years under examination were the 5 fiscal years 2013-2017. The results indicated that all five components of internal controls have a significant effect on the credit risk of the banks. As for the other two models, the research showed that the components of the internal control system significantly affect the profitability and the compliance of US banks, except from the Risk Assessment component in the first case, and the Control Environment component in the second case respectively. Finally, the size, the age and the external audit of the banks were taken into consideration for a more comprehensive study.
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