The Impact of Applying the Internal Control System According to the (COSO) Framework on the Profitability Indicators of Industrial Companies Listed on the Amman Stock Exchange

The aim of the present study is to examine the impact of applying the internal control system according to the COSO framework on the profitability indicators of industrial companies listed on the Amman Stock Exchange as the study population. To achieve the objectives of this study, an analytical descriptive approach was followed. The study utilized a questionnaire as the primary tool to answer the research questions and test its hypotheses. The questionnaire was specifically designed to gather data related to the independent variable (internal control system). It was distributed to respondents in industrial companies listed on the Amman Stock Exchange. The study population consisted of Jordanian industrial companies listed on the Amman Stock Exchange, totaling 32 companies. The study sample included 31 companies, representing 90% of the listed companies on the Amman Stock Exchange, whose data were continuously available for the period from 2017 to 2021. As for the study sample of employees in industrial companies listed on the Amman Stock Exchange, it included managers, department heads, and employees working in the finance, auditing, and control departments. Two hundred questionnaires were distributed to the study sample, and 178 questionnaires were retrieved. After excluding 25 questionnaires due to their unsuitability for analysis, the number of valid questionnaires for analysis was 153, representing 77% of the study sample. During the period from 2017 to 2021, the necessary statistical analysis was conducted to analyze the data related to the dependent variable (profitability indicators), using two indicators: earnings per share and return on assets, for 31 industrial companies. This analysis was carried out by reviewing the annual financial reports issued by Jordanian industrial companies. The study findings revealed several important results. Firstly, there is a significant impact of applying the internal control system according to the COSO framework on the profitability of industrial companies listed on the Amman Stock Exchange, measured by earnings per share. The most influential factors were the information and communication system and the monitoring of the internal control system’s quality. Secondly, there is an impact of applying the internal control system according to the COSO framework on the profitability of industrial companies listed on the Amman Stock Exchange, measured by return on assets. The impact was observed in all elements except risk identification and assessment. Based on these findings, the study recommended several actions, including the inclusion of five integrated components in the internal control structure, with full management responsibility for their design and operation, which are the elements examined in the study. Additionally, the company’s management should conduct periodic and continuous risk assessment.