ABSTRACT
There is clarion call for a strong internal control
as a measure for preventing errors in the manufacturing organization to make
sure that, the organization assets are safeguard and that they need up with
their financial obligations as at when due. On the lighter mood, considering
the importance of internal control of life breweries limited Onitsha, the researcher deems it necessary to study the effectiveness of internal
control. Directors and managers of the organization were interviewed and their
records were examined, related tools were also reviewed by the researcher. The
researcher revealed that the organization applies internal control measures
though weak because of the nature of personnel management of the firm. The
researcher recommended that company should review operation; measures applied
and improve in their system of internal control by training their staff and changing
the corrupt ones. It is imperially true that irrespective of the organization
nature structure or size or whether is private or public, it must have one form
of internal control or another which cuts across its operation inform of
accounting system and controls. The main purpose of these controls is to help
management, operate their organization more efficiently and effectively. Thus,
internal control is essentially concerned with the maintenance of efficiency
and effectiveness in the organization Effectiveness and efficiency are separate
concepts and cannot be used interchangeable. It s perfectly possible to have an
effective organization which is influent and vice-versa.
TABLE OF CONTENTS
Title page
Approval page
Dedication
Acknowledgement
Table of contents
List of tables
Abstract
CHAPTER 1:
Introduction
1.1
Background of the study
1.2
Statement of problem
1.3
Purpose / objective of the study
1.4
Significance of the study
1.5
Research Questions
1.6
Scope of the study
1.7
Definition of
terms
CHAPTER 2:
Literature Review
CHAPTER 3:
Research Methodology
3.1 Design
of the study
3.2 Area
of the study
3.3 Population
of the study
3.9 Method
of data Analysis
CHAPTER 4:
Data presentation and Analysis
CHAPTER 5:
SUMMARY OF FINDINGS, CONCLUSION
AND RECOMMENDATIONS
5.1
Summary of the Findings
5.2
Conclusion
5.3
Recommendation
5.4
Limitations of he study
5.5
Suggestions or further research
References
Appendix A
Appendix B
Questionnaires
CHAPTER ONE
1.0 INTRODUCTION
Internal
control is an insupportable part of the accounting profession where importance
to growth and posterity of an organization cannot be over emphasized. It is
incubate that no one can succeed without an effective and efficient internal
control mechanism. Internal control can also be likened to the brake and steering
in a business, which if they are not ther, th business train will crash. It can
be likened to the laboratory or quality control machinery which controls the
quality of production produced by an organization. According to the British
auditing comedian, internal control is the whole system of control, financially
and otherwise, established by the management in order to carry on the business
of the enterprise in an orderly and affluent manner, ensure adherence to
management policies, safeguard the assets and secure as far as possible the
completeness and accuracy of the records. Control are of fundamental importance
to the auditor profession, he must decide to ascertain the best approach to the
plan the test he intend to carryout in his audit program, he should decide o
what extent he can rely on
Internal
system of internal control, he should ascertain the enterprises system of
recording and processing transactions and adequately as a basis for the
preparation of the financial statement. Horgan and Foster (1990:1910) defined
internal control as “the set of accounting and administration control and
practice that help to ensure that approved and appropriate decisions are made
in an organization, the auditor should therefore ascertain record test and
evaluate the operations of any internal control on which he wishes to place
reliance in determining the nature, expent of auditing of his audit work on
which his opinion on the financial statement will be based. internal
control is best regarded as indicating
the whole system of control, financially and otherwise, established by the
management in the conduct of a business including, internal cheeks is best
regarded as indicating the checks on the day to day transaction which operate
continually as part of the routine system, where the work if the one person is
proved independently or is complement to the work of another, the object being
the prevention or early detection of errors and frauds.
This
study is expected to view internal control as a measure of preventing errors in
manufacturing industries with emphasis
on special militating factors against internal control policies which includes
independency of auditor, low balling, poor distribution of the enterprises and
many other factors. Management has recognized internal control as a valuable
tool in effectively crrying out its responsibilities and auditors have pressed
for improvement in internal control to their effects to be of assistance to
management as well as to permit education in audit work made possible by the
increase in the credibility of the accounting records.
internal
control comprises the whole system of financial and other control established
and operating within an organization including internal cheek. internal audit
and all other control established.
What
is to be noted about internal control is that it is established by the
management and it relates to the entire system of control in an orgaizaiton not
limited ot accounting matters. Therefore within an organization, a control is
seen as any action by management to enhance the livelihood that stable
objectives and goals will be achieved.
Therefore
the different types of internal control procedures such as in organizations
which should define and allocate responsibility and identify lines of
reporting, segregation of audits. Physical custody of assets, authorization and
approval automatically and management through these areas of control; a kind of
internal audit and internal cheek is maintained.
Evaluation
of internal control has been of important of any management because of its
objectives in any organization to succeed the management needs consistency and
effectiveness of internal control producers.
1.1 BACKGROUND
OF THE STUDY
Life
Breweries Company Limited Onitsha is a private liability company with above
forty (40) share holders including some separate partners.
It
is a Joint venture between Nigeria
owing 70% and 30% co-Afria (French Company based in France having 30%. The company was
incorporated and was almost completed in 1982 and 1983. the office blocks were
completed and handed over to the company on August 3rd 1983. the
company is located at the head bridge industrial area fegge layout Onitsha. The share capital
has since been increased ot 22 million. The company is a brewery and other
drinks are produced like life continental lager beer 60cl contents for the
purpose of study which is aimed at viewing internal control as a measure of
correcting or preventing errors in manufacturing company. internal control
could be seen as the organization of accounting duties in such a way as to
maximize the chances of accurate accounting and minimizes many chances of
undetected fraud, error and litigation of negligence. Life Breweries sieves for
the related years traced by he study lay credence.
On
the effectiveness of the internal control installed by the management of the
firm and carried out by the auditor and accounting general of the federation.
1.2 STATEMENT
OF THE PROBLEM
By
this the research wishes to confess the main fundamental and popular demands.
Nagging
problem that necessitated the writing of the project. Below are some of the
problems of this educative research work.
1.0 Excessive money laundry, frauds and
misappropriation of fund in most manufacturing companies.
2.0 Lack of
effective control found in Nigeria
industries.
3.0 Problems
encountered by auditors in the course of undertaking their auditing functions
in Nigerian industries.
4.0 the use
of internal control to defect and measure error and poor accountability in
Nigerian manufacturing industries.
5.0 The
essence of internal check and internal audit in Nigeria business organization
6.0 Weakness
of management and internal control as the main reasons for business failure and
low profitability.
1.3 OBJECTIVE
OF THE STUDY
This
research is at least expected to achieve the following objective at the end of
the road.
To
expose, how effective the installation of internal control mechanism could be
used to prevent fraud and errors in life breweries and other manufacturing
companies of the country.
i To
show-case the need for auditors independence integrity and competence in
carrying out all the auditing function and responsibilities.
ii to
enhance and expatiate the benefits and importance of internal control to the
profitability and growth of manufacturing industries.
iii How the
weakness of management could negatively atlest the profitability and
installation of effective country in an industry.
iv to
recommend working measures that could be used ot enhance and positively improve
the internal control structure of most organizations.
v Finally
suggest how effective book keeping and accountability can contribute to the
growth of the organizational internal control policies.
1.4 RESEARCH
QUESTION
There
is no way such a quantity and research investigation can be without the
satisfaction asking him so many questions to other respondents that supplied
solution whitish formed basis for the generation inference and conclusion
arrived at after the exercise.
Below
are the fundamental research questions which the researcher considered quite
adequate to the success of the study.
i What is this internal control all about
ii How is
internal control policies formulated in your firm and what level of management
is responsible for this critical responsibility.
iii How has
internal control helped to detect fraud and prevent errors in your firm so far?
iv What
roles have the auditors and the accountant of your firm played in order to
contribute their respective quota to the growth of internal control.
v Do you
think your company can afford to succeed and meet up with world and management
standard without the aid of internal control.
vi How many accounting departments do you
have?
1.5 SIGNIFICANCE
OF THE STUDY
The importance and significance of
this educative and qualitative analysis cannot be over emphasized as internal
control is an insupportable through internal part of the accounting profession.
Below are some of the reasons and
relevant significant which triggered the conditions of the research
investigation.
- The rate
of incessant frauds, errors and misappropriation of fraud recorded by most
organization and manufacturing industries as a result ineffective internal
control.
- The sudden
collapse, winding off, liquidation, bankruptcy
and premature manufacturing firms.
- To applause the inseparable function
rendered by auditors and accounting officers of industries
- It is equally expected of this study to
suggest to management how best to improve or rather effectively enhanced their
internal control.
- To administer justice and punish those
persons responsible for over shadowing and infringing on auditors independence
and integrity.
1.6 SCOPE
OF STUDY
The
research if not because of the minute period of time and few months given by
the management of any school for it’s completion, it could have covered some
other non-production organization, including non-profit making entities like
churches, cleanable organization, clubs etc.
However,
the scope of this research is only limited
to manufacturing companies of this country. With the life breweries of Onitsha as a case study
but,, it time could be expended or it wont be easy to accomplish. This exercise
may have covered also, some service rending and financial institutions, like
banks, insurance, commerce, stock exchange etc.
1.7 LIMITATION
OF THE STUDY
So many
constants draw backs, stumbling blocks and limitations were accrued upon the
research the research consequent upon carrying out this educative study.
The
following are some of the nagging draw backs which later became a stepping
stone necessary for the execution of this civic function:
FINANCE: Even the holy book of reading said
it, that money answers all things. The above statement never made any sense to,
nit until one entered into rusticity of this quantitative study, at the mid sea
of this study defined sources of income apart form hundred percent dependence
on parents. I got lost financially. This is a mattr of fact, delayed the
production and collections of this work typed. Educated and photocopied this
job.
TIME CONSTRAINTS: Time ahs already been
defined by time series managers as the most costly commodity the world has ever
known. The school management ave us between now nad the end of this academic
section, whose period is nothing to write home about. As a result of this
phenomenon, I was handicapped by the dilemma of timeconstraint which remained
on it wind that bellowed the good to the successes of this exercise.
RESPONDENT ATTITUDE: The type of
behaviours portrayed by the respondents expected to complete the questionnaire
and return some as fast as possible, demoralized my spirit. So many of them
lfft theirs uncompleted, while lot of others refused bluntly to write any thing
on theirs, not to talk of completion of the questionnaire. As a result of this
unscrupulous reactions of the respondents some of my questionnaires were returned
exactly without any effort made on them.
DIFFICULTY IN COLLABORATING MY ACADEMICS WITH THE
STUDY: Also a great down trodden was equally recorded at mid sea of
this study, when I was about to study and get fully prepared for my exams.
I found it extremely difficult to cope
with them for I had ot give myself many sleepless nights and day to ensure
that, I maintained equilibrium between my
academic pursuit and this research work.
HIGH TRANSPORTATION COST AND BAD ROADS: I equally
recorded so many draw backs and stumbling blocks during the process of sourcing
for data materials, journals, annuals dailies publications and other
relevancies which contributed in one way or the other to the success of this
job. I traveled far and near, across the boundaries of many states in the
federation sourcing for materials.
1.9 DEFINITION
OF OPERATIONAL TERMS:
INTERNAL CONTROL: This is a whole system of
controls, financial and otherwise established by the management in other to
carry on the business of an entity in an orderly effective and effluent manner
and in adherence to management policies.
ERRORS: This is a state of effecting
mistakes and misappropriation of fact and figures.
EFFICIENCY: This is concerned with doing
things right and in the most orderly and acceptable manner, void of errors,
mistakes and litigations of negligence.
CONTROL: This consist of verifying whether
everything occurs in conformity with the plans adopted, the instruction issued and principles established.
EFFECTIVENESS: This is the degree which an
organization is successful in acquiring and utilizing scarce and valued human
and material resources.
EXCEPTION PRINCIPLE: This rule
state that the more manages of organization concentrate control efforts on
exception the more efficient will be the result of their control mechanisms.
INTERNAL AUDIT: This is an independent appraisal
function within an organization for the view of the system of control and the quality of performance as a services
ot the organization, internal audit involves the following: proper
organization, accounting, authorization of fund, supervision” etc.
INTERNAL CHECK: These policies cover the
defects of framed or errors and of interior quality work.
ACCOUNTING: This is the process of recording,
analyzing classifying, summarizing and interpreting of business or financial
transactions in prmit sound judgement form users.
MANUFACTURING:
This is all process involing form the purchase of raw materials to the production
of semi or completed finished goods ready for consumption
FINANCIAL CONTROL: This is the process which
describes; that financial resources are obtained economically and utilized
efficiently and effectively in the attainment of the organizational described
goals.
PERIODUATY: It has been said that business
units are assured to be going concern, as a matter of facts, the accounting
concept made it necessary that business life or activities are divided into
accounting periods so that changes in the position of business activities can be
measured over the relevant periods.
FINANCIAL INDICATIONS: By this we
mean the financial, performance of the organization as revealed by he key
ratios, this may include, such accounting and balance sheet ratios, like current
ratio, acidity ratios, debtor ratios, stock turnovers ratios, high gearing
ratios.
HYPOTHESES
Ho: Weak internal control as a measure of
prevention of errors of life
breweries
Onitsha, ahs
result in how profitability of the organization.
Hi: Weak internal control as a measure of
prevention of errors of life
breweries
Onitsha, ahs
result in how profitability of the organization.
H1:
Who is responsible for sharing of duties and responsibility.
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