THE RELATIONSHIP BETWEEN INTERNAL CONTROL SYSTEMS AND FINANCIAL PERFORMANCE OF MICRO AND SMALL ENTERPRISES (MSEs) IN ANGELES CITY, PAMPANGA, PHILIPPINES

Abstract

The study explored the interplay of internal control systems (ICS) and the financial performance of Micro and Small Enterprises (MSEs) in Angeles City, Pampanga. This research used a quantitative, descriptive-correlational approach that used a COSO-Based Questionnaire to collect data from 100 MSEs owners, managers, and finance officers. The data was statistically analyzed through SPSS, employing descriptive statistics, correlation, and regression to evaluate the relationships between the variables. Overall, results indicate that MSEs exhibit strong ethical governance, effective monitoring, and control activities, as well as high financial performance overall. Weaknesses in the management controls include limited external communication and lack of a formal internal audit function. However, understanding and improving these weaknesses will further improve MSEs overall stability and competitiveness.