Internal Control As A Tool For Effective Management Of An Organization (A Case Study Of Guaranty Trust Bank Plc Owerri Branch)

Project and Seminar material for Accountancy

Project and Seminar material for Accountancy


Abstract


Internal control systems are considered to be the tool for effective management of an organization. It is therefore the essential aim of this projects research work, to find out through the research hypothesis and questionnaire whether effective use of internal control system enables management to achieve their organization objectives or not. Hypotheses were formulated and tested using percentage and chi-square statistically techniques.

The percentage tables were used to analyze the key questions and statement in the questionnaire and also for easy comparison while chi-square (x2) statistical techniques were used to validate the research were that adequate internal control system helps management make sound decision.


Table Of Contents


Preliminary Page(s)

  • Title page
  • Approval page
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of contents

Chapter One

1.0 Introduction

  • 1.1 Background of the study
  • 1.2 Statement of the problem
  • 1.3 Objective of the study
  • 1.4 Research questions
  • 1.5 Significance of the study
  • 1.6 Scope of the study
  • 1.7 Limitations of the study
  • 1.8 Definitions of terms

Chapter Two

2.0 Literature Review

  • 2.1 Brief history of Guarantee trust bank, Owerri

Chapter Three

3.0 Research Design and Methodology

  • 3.1 Research design
  • 3.2 Sources/ method of data collection
  • 3.3 Population and sample size
  • 3.4 Sampling techniques
  • 3.5 Validity and reliability of measuring instrument
  • 3.6 Method of data analysis

Chapter Four

4.0 Presentation and Analysis of Data

  • 4.1 General characteristics of responses
  • 4.2 Presentation of data
  • 4.3 Analysis of data

Chapter Five

5.0 Summary, Conclusion and Recommendation

  • 5.1 Summary of findings
  • 5.2 Conclusion
  • 5.3 Recommendations
  • Bibliography
  • Appendix / Questionnaire

Chapter One


1.0 Introduction

1.1 Background Of The Study

There has been increasing attention in the system of internal control in the recent past. This has been as a result of the increasing size and the complex nature of most modern business units which has necessitated the adoption of different system of internal control. The development of these systems leads to efficient performance of these businesses and subsequently the output of the management process.

Systems such as internal control, accounting control, electronic data processing system are adopted by the management for the purpose of achieving their goals and objectives, safeguarding their assets and the efficient performance of the business which is aided by completeness and accuracy records.

The history of internal control systems could be traced back to the time human being began to form organization to achieve goals which they could not have achieve themselves as single individuals. The question of management and co-ordination of efforts became necessary immediately when more individuals came together to achieve a common goal.

Over the years, these organizations have grown in size and expanded vastly in operations. As a result of these, various kinds of irregularities ranging from international errors, frauds and either major international manipulation and falsification records or even to the extent where individuals connive to undermine the system of internal control in operating.

Daily reports illustrations in the media clearly indicated how some chief executives and top management personal of some organizations have embezzled and misappropriated the fund of such organizations as a result of weakness in the system of internal control in such organization.

According to Anderson (1977:143) it should exist for clear that “internal control does not exist for the sake of the auditor alone, but for the sake of the organization as a whole and its management”. So even small organizations that may not require statutory publication of their financial accounting statements and audit report still need the existence and effective operation of a good system of internal control are important tools by which an organization can achieve its objectives of ensuring as far as possible the orderly and efficient conduct of the organization activities.

The system of internal control plays a vital role as a tool for efficient performance of an organization and it has also proved its worth in organizations where they are well established.

According to Mohammed (1982:20) “where an internal control is employed in an organization, it does not make irregularities impossible by any means but makes it more difficult and the chance of detection more great”. Assets are better safeguarded accountability in existence, an organization can perform better, owing to the accurate records of financial transactions, and auditors could also base their audit work and subsequent audit reports on the system of internal control existence. But were internal control systems are absent or ineffective, fraud is suspected.

Due to increase in acquisition of financial assets, physical assets and increased sophistication in financial recording, the need arises for increased watch and adherence to management plans and policies in the various business. These call for routine study and innovations on the system of internal control in existence in most organizations to guard against weakness and loopholes.


1.2 Statement Of Problems

There is a popular adage that says “knowing the problem is half cure” some of the problems of internal control are:

  1. Many banks do not maintain adequate internal control system.
  2. Internal control system doesn’t help management to safeguard the assets of the organization.
  3. Internal control system does not facilitate management decision making.
  4. Internal control does not help management to achieve its organization goal.

1.3 Purpose Of The Study

The purpose out-lined below:

  1. To find out if there is adequate internal control system in the firm.
  2. To find out if internal control system help management to safeguard the assets of the organization.
  3. To find out of internal control system facilitate management decision making.
  4. To find out if it produces reliable and accurate organizational information for the management and all those who need it.

1.4 Research Question/Hypothesis

Based on the information in the statement of the problem the research questions are:

  1. Does the firm maintain adequate internal control system?
  2. Does the internal control system help management to safeguard the assets of the organization?
  3. Does it help management to achieve its organization goals?

The hypothesis will however be tested for significance with the data to be generated during the study, the following hypotheses are formulated for the study.

Hypothesis 1
  • Ho: Internal control system does not help management to achieve its organizational objective.
  • Hi: Internal control system helps management to achieve its organizational objectives
Hypothesis 2
  • Ho: Internal control system does not aid management to define the duties of staff.
  • Hi: Internal control system helps management to define the duties of staff.

1.5 Scope Of The Study

This research on the problems and prospects of internal control system is designed to cover all the principles and procedures of an organization as lay down by experts in the field of accounting. The internal control system being the whole system of control is a vast topic that control is exhaustively dealt with in one research work.

The study is restricted to Guaranty Trust Bank plc Owerri branch. It is however, believed that the result from this bank will be used to generate data on the effect of neglect or otherwise of internal control system in Guarantee Trust Bank plc Owerri branch.

It is however, believed that the result from this bank will be used to generate data on the effect of neglect or otherwise of internal control system in Guaranty Trust Bank plc Owerri branch.


1.6 Limitation Of The Study

The researcher encountered a problem when he went to the bank to obtain data on a recent internal control report of the bank as required by the work. When I got there, I met with the security man who introduced me to the credit control officer; who later explain my mission to the accountant, he notified me that such information is not made known to the public, he made it clear to me that it is strictly for internal use only not for external use.

Another problem is the time period given to do this work is not sufficient for such research work, and insufficient fund is another factor militating against this research work because it will limit most of the areas the researcher are supposed to have covered.


1.7 Significance Of The Study

The significance of the study cuts across many interest groups. It will generally reveal how any business management can use sound internal control system to achieve its set goals. It will also help business organizations to understand more about the benefits and impacts of internal control system.

It will help the government to set adequate and proper internal control in its public organization because, it produces reliable information. Again, the study is significant because it will serve as reference source to future researchers on the problems of internal control system in any organization it will add to body of knowledge already in existence in the academic world.


1.8 Definition Of Terms

Decision:

This is the process of choosing one course of acting in the face of many alternatives.

Efficiency:

This denotes the state of minimizing cost but maximizing quality without additional resources

Operating Procedure:

This refers to the approved means of carrying out businesses of the organization.

Tool:

This is used to describe any instrument with which a specific objective is achieved.


Chapter Five


5.0 Summary, Conclusion And Recommendations

5.1 Summary Of Findings

The data collected through the questionnaire were analyzed and the hypotheses were tested. The following findings were made evident.

  1. Internal control report to management on the effectiveness of the systems of control.
  2. Internal control makes recommendations to management where necessary.
  3. Internal control helps to implement management policies
  4. Management place high degree of reliability on internal control report.
  5. Most firms have witnessed, find and fund embezzlement when they reflect internal control. Such cases (s) are rampant in firms that does not have internal control department.
  6. An effective internal control helps to check fraud and embezzlement of fund in firms.

5.2 Conclusion

The following conclusions were drawn from the rust of the findings.

  1. Internal control helps management to utilize fully their resources.
  2. Internal controls enforce management policies and ensure that they are fully implemented.
  3. Internal controls strictly monitor the system of control in other to check fraud and fund embezzlement.

From the conclusion made, the need for internal control department of an enterprise abounds, it also stimulates the growth of firms.


5.3 Recommendations

Based on the findings of this research, the researcher made the following recommendations to firms.

  1. Every firm both private and public should establish an effective and efficient system of control.
  2. A monitory team (internal control department) should be established to monitor the system.
  3. Internal control should be given the necessary co-operation needed in the exercise of their duties.
  4. Internal control should be allowed independent of their own so that they can make report fearlessly. A situation where internal control is constantly in fear of victimization for discharging the duties should not exist.
  5. There should be a periodic review of systems of control to ensure that no loopholes have been developed in the system to accommodate fraud, fund embezzlement and resources wastage.
  6. Internal control should receive good remuneration.
  7. Internal control recommendations should be strictly adhered to
  8. Internal control staff should be properly trained on their field of work. Professionals and experienced staff should be made adequate too.
  9. Internal control should make their reports more often so as to avoid delay on the part of management on urgent issues
  10. Investigations should be carried out immediately where fraud is suspected.

5.4 Areas For Further Study

The following areas are recommended for further study

  1. Limitations of the effectiveness of internal auditing in firms.
  2. Attitude of small companies (limited liability) towards establishments of internal control department.
  3. Effects of non compliance to internal control recommendations.

Internal Control As A Tool For Effective Management Of An Organization (A Case Study Of Guaranty Trust Bank Plc Owerri Branch)


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