Internal Control System As A Necessity To Survival And Growth In Public Organisation
This study examines internal control system as a necessity to survival and growth in public organisations. Specifically, the study ascertains the extent to which fraud and errors can be prevented or detected early and highlights areas of under performance, weakness and specific failures connected to internal control system in order that corrections may be effected for performance to improve. The study employs the survey descriptive research design. A total of 50 responses were validated from the survey. The study adopted the inspired confidence theory and the agency theory. From the responses obtained and analysed, the findings reveals that record keeping aids the proper running of business. Furthermore, the ways internal control affects the survival and growth of an organization include establishing the processes, improving process performance, improving operational efficiency and mitigating business risk. This is as the Pearson correlation test showed a positive significant relationship (.922**) between internal control (IC) and orderly and efficient of an organization (OEO). The study recommends that auditors should be well taught, equipped and prepared as their role is essential in the internal control of public organizations. More so, all the internal auditors of public organizations should report to the auditor general.
1.1 Background of Study
According to Oxford Learners Dictionary, Organization can be said to be a group of people who form a business, club etc. together in order to achieve a particular aim. It can also mean two or more people getting together for a purpose. In getting together, they decide to interact with one another to achieve the objectives of the organization (Unamka & Ewurum, 1995:1)
When we discuss organization, we have variclasses among which are service organization and social organization etc. All these organizations have in mind the aim of continuing if not for eternity, a given period of time. (Unamka & Ewurum, 1995 1, 2, 3)
For an organization to carry on its business there must be some factors put in place for the smooth running of the organization management, man-power, materials, money and machines. These need to be well coordinated in order for the success of the organization to be achieved. They are used by a group of persons known as management; neither can management exist without organization- the two are inseparable twin. (Unamka &Ewurum, 1995:65)
Good management weaves together the various parts of organization so that all factors function as a united body. Management refers to the group of executives or officials of a company who directs efforts towards common objectives by using available resources (Unamka & Ewurum, 1995:66) management can also be said to be a process of planning, organization to have an intergrated system that will aid the achievement of organization objectives (Musselman & Hughes, 1981)
Effective management leads to purposeful, well coordinated, goal oriented and goal directed activities. As earlier social organizations have in mind “CONTINUITY” and “SURVIVAL” as they are being run for an organization to survive and continue existing without going bankrupt, or said to be illiquid, i.e. being its inability to meet up with its responsibilities as and when due, it must ensure the safty of its assets, cash and also the accuracy and reliability of its records, it should ensure that it institutes a system of control, strong enough to ensure such. This system is what is known as INTERNAL CONTROL SYSTEM.
According to WIKIPEDIA, the free encyclopedia, in accounting and organization theory, INTERNAL CONTROL is defined as a process effected by an organization’s people and information technology (I.T) system, designed to help the organization accomplish specific goals or objectives. It is a means by which an organization’s resources are directed, monitored and measured. It plays an important role in preventing and detecting fraud and protecting the organization’s resources both physical (e.g. machinery and property) and intangible (e.g. Reputation and intellectual property such as trade marks) the organizational level, internal co9ntrol objectives relate to the reliability of financial reporting; timely feedback on the achievements of operational or strategic goals and compliance with laws and regulations. At the specific transaction level, internal control refers to the actions taken to achieve a specific objective (e.g. how to ensure the organization payments to third parties are for valid services rendered)
There are also a variety of definitions of internal control as it affects a variety of constituencies (stakeholders) of an organization in various ways.
Under the committee of sponsoring organization (COSO) internal control- integrated framework, a widely-used frame work in the United States, internal control is broadly defined as a process effected by an entity’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: Effectiveness and Efficiency of operations; Reliability of financial reporting; and compliance with laws and regulations.
According to Millichamp(2002:85), internal control system is defined as the whole system of controls, financial and otherwise, established by the management in order to carry on the business of the enterprise in an orderly and efficient manner, ensure adherence and management policies, safeguard the assets and secure as far as possible the completeness and accuracy of the records. Internal controls are to be an integral part of an organization’s financial business policies and procedures. Internal control consists of all the measures taken by the organization for the purpose of protecting its resources against waste, fraud and inefficiency, ensuring accuracy and reliability in accounting and operating data, securing compliance with the policies of the organization and evaluating the level of performance in all organizational units of the organization. Internal controls are simply good business practices.
Internal control according to Osita(2002:106) is the whole system of controls, financial or otherwise, established by management in order to secure as far as possible, the accuracy and reliability of the records, run the business in an orderly manner and safeguard the company’s assets, its objectives being the prevention or early detection of fraud and errors. It may include internal auditing.
Everyone within the organization has some roles in internal controls. The roles vary depending upon the level of responsibility and the nature of involvement by the individual. The Kansas Board of regents, president and senior executives established the presence of integrity, ethics, competence and a positive control environment. The director and department heads have oversight responsibility for internal controls within their units. Managers and supervisory personnel are responsible for executing control policies and procedures at the detail level within their specific unit. Each individual within a unit is to be cognizant of proper internal control procedures associated with their job responsibilities.
The internal audit role is to examine the adequacy and effectiveness of the organization internal controls and make recommendations where control improvements are needed. Since internal auditing is to remain independent and objective, the internal audit office does not have the primary responsibility for establishing or maintaining internal controls. However, the effectiveness of the internal controls are enhanced through the reviews performed and recommendations made by internal auditing.
The institution of internal control system is an organization is not without a purpose; these purposes will be discussed later in this sturdy. One of such is to ensure that the organization survives, continue to exist, grows, become vibrant in whatever environment it might be existing or located. It is against this background that this sturdy seeks to unveil and look at the place, importance and inevitable nature of internal control system on the survival and growth of an organization.
1.2 Statement of Problems
When we refer to internal control system, we talk of a system which will enable an organization achieve its objectives, we talk of a system which is very important to the existence of an organization, we talk of a system which will forestall the perpetration of acts that can act as a clog in the wheel to the success of an organization. This system is an all round system, that is to say, it encompasses both financial and non-financial control in realizing the goals and objectives of running the organization in an orderly manner, safeguarding the assets of the organization and also ensuring the accuracy and reliability of the organization’s records.
We might not really understand the impact of internal control system on an organization’s performance until probably, we run an organization void of internal control system. The non-institution of internal control system in an organization is detrimental to the continual growth and survival of that organization. Non institution of internal control system in an organization result in improper keeping of records which could lead to the late preparation of accounts, doctoring of books of accounts, misappropriation of funds which are meant to be used for planning, decision making etc. illegal transactions being transacted, pilferage, misuse of fixed assets etc. improper keeping of records can also lead to inability to ascertain the organization’s actual assets; goods in stock, which could breed pilfering.
Lack of proper record keeping, controlling of proceedings or actions in an organization could lead to concealing of errors and fraud that might crop-up to bring down an organization.
The non-institution of internal control system could lead to inability of the organization to make proper decisions and plan ahead effectively. When an organization fails to plan, definitely it will forestall the growth of the organization; make the organization to start dwindling and struggling for survival, which will then bring the organization to an end.
1.3 Objectives of Study
As earlier said that this sturdy of internal control is not without objectives and as such we shall see some of the objectives for the institution of internal control system in an organization. The objectives of this sturdy are:
- To ascertain the extent to which fraud and errors can be prevented or detected early.
- Highlight areas of under performance, weakness and specific failures connected to internal control system in order that corrections may be effected for performance to improve.
1.4 Research Questions
- Does record keeping aid the proper running of business?
- Does segregation of duties aid averting errors and fraud?
- Does your organization carry out internal check or vouching?
- Are your fixed assets used for other business outside your normal business?
- In what ways does internal control affect the survival and growth of an organization?
1.5 Research Hypothesis
- H01: There are no significant relationships between internal controls and the orderly and efficient running of an organization.
- HA1: There exist significant relationship between internal controls and the orderly and efficient of an organization.
1.6 Significance of the Study
This research is on attempt to survey the constructive parts, which internal auditing can play in Nigeria with reference to public organizations.
A lot of problems are facing public organizations as not having an effective audit central system. One of these problems is the management seems to gloss over the operation of the public organizations, which are carried out in disorganized manner. This is so because an efficient control system will enable the management to monitor the performances of the executives and take necessary and adequate corrective actions to ensure high performances at all levels.
1.7 Scope of the Study
This study focuses on internal control system as a necessity to survival and growth in public organisation. Specifically, this study focuses on ascertaining the extent to which fraud and errors can be prevented or detected early and highlighting areas of under performance, weakness and specific failures connected to internal control system in order that corrections may be effected for performance to improve.
This study will use staff of the Nigerian Television Authority, Lagos State as respondents for the survey of this study.
1.8 Limitations of the Study
The study has been limited by a number of factors notable among the limitations was our people’s poor reaction to research questions and reading meaning into any attempt at any form of interview.
It took researcher much effort to convince some respondent, that he is not in anyway trying to find out the well or otherwise they are carrying out their work.
This research cost the researcher capital transport fares, buying of materials and browsing the internet to obtain more points.
Most of the respondents were ignorant of giving out information demanded by the researcher, they were ignorant of the research purpose and thought it will be used for negative reasons.
Evasion of Privacy:
Some of the questions that was asked in this study appeared to be evading the privacy of the respondents, for this reason, the researcher did not get all the cooperation he requires in order to conduct a good research
1.9 Definition of Terms
Internal control, as defined by accounting and auditing, is a process for assuring of an organization’s objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies.
Summary, Conclusion and Recommendation
In this study, our focus was to to examine internal control system as a necessity to survival and growth in public organisations. The study specifically was aimed at ascertaining the extent to which fraud and errors can be prevented or detected early and highlighting areas of under performance, weakness and specific failures connected to internal control system in order that corrections may be effected for performance to improve. This study was anchored on the Inspired Confidence theory and the agency theory.
The study adopted the survey research design and conveniently enrolled participants in the study. A total of sixty five (65) questionnaires were administered to respondents of which fifty (50) were returned and validated. Respondents are drawn from the staff of the Nigerian Television Authority, Lagos State.
Based on the finding of this study, the following conclusions were made:
- Record keeping aids the proper running of business.
- Segregation of duties aids averting errors and fraud
- The Nigerian Television Authority, Lagos State carries out internal check or vouching.
- Fixed assets are used for other business outside your normal business.
- The ways internal control affects the survival and growth of an organization include:
- Establishing the processes,
- Improving process performance,
- Improving operational efficiency and
- Mitigating business risk.
In the light of the findings and conclusions, the following recommendations are hereby proposed:
- Auditing departments of Local Governments should be effectively managed as they are a crucial part of management.
- The Nigerian Television Authority should set internal audit units for each branch across the country, so that there shall always be the availability of internal audit personnel’s to ensure compliance to the internal controls that exist in their organization. This is to make the internal audit part of the daily activities of the organization to ensure daily compliance to the internal controls but not wait till month. In as much as possible, this office should be part of the branch management team. In doing so, they will report directly to the country management team. The internal audit personnel should also be rotated at regular intervals to avoid any form of malpractices.
- Auditors should be well taught, equipped and prepared as their role is essential in the internal control of public organizations.
- All the internal auditors of public organizations should report to the auditor general.
- Finally, Internal audit departments should be performed in compliance with the established standards and policies and it should succeeded by achieving the objective of public organizations.
The Complete Material Will Be Sent to You in Just 2 Steps
Quick & Simple…
Make Payment (Through Transfer) of ₦5,000 to Any of the Account Below
|Acc No: 0811003731
|Acc No: 1225513212
|Acc No: 8143831497
Or CLICK HERE To Pay With Debit Card
|FOR STUDENTS OUTSIDE NIGERIA
|CLICK HERE To Purchase Material ($15)
|FOR GHANIAN STUDENTS
|Make Payment of 120 GHS to 0553978005 | Douglas Cloud Osabutey | MTN MoMo
Send the Following Details on WhatsApp ( 08143831497) After Payment
- Payment Details
- TOPIC: Internal Control System As A Necessity To Survival And Growth In Public Organisation
The Complete Material Will Be Sent To You On WhatsApp After Receiving Your Details
T & C Apply