INTERNAL CONTROL SYSTEM IN A COMPUTERIZED ACCOUNTING ENVIRONMENT

Cover page 

Table 4.7:To examine the effect of computerized accounting system on the effective performance of internal control unit in first bank Plc 26

Table 4.8: To evaluate the extent of application of computerized accounting system in first bank Nigeria Plc 28

Table 4.9: To determine the influence of internal control system in a computerized accounting environment 29

Table 4.10: identify the factors militating against internal control system in a computerized accounting system. 30

Internal controls system comprised of set of rules, policies, and procedures an organization implements to provide direction, increase efficiency and strengthen adherence to policies. These are important for achieving the business objective. The development and application of information technology (IT) makes it possible for companies to support operations with information technology systems in order to improve operating performance. The approval, recording and processing of transactions, as well as the generation of reports can be automated, to ensure operational effectiveness and efficiency, financial information reliability, and legal compliance.  Internal control system helps to safeguard business assets from stealing and wastage by ensuring the compliance with business policies and the law of the land (Nduka, 2015).

Companies have to adjust the techniques and methods of internal controls in accordance with computerization, in order to exercise effective controls. The internal control techniques used in an information technology environment are quite different from those used in a manual environment. Transactions are automatically triggered or executed in an information technology environment, and the internal controls are supported with information technology. Therefore, the internal control techniques in a manual environment cannot be migrated to an information technology environment (Alambo, 2016)  

Internal control system differs from one business organization to another depending on the nature and size of the business. To achieve the objective of a business, proper execution of business activities in the light of prevailing laws and socio-economic condition of the country is called an internal control system or structure. The internal control system is introduced to avoid errors and frauds and for systematic control of business activities. The plan of organization and all of the coordinate methods and measures adopted within a business safeguard its assets, check the accuracy and reliability of its accounting data, promote operational efficiency and encourage adherence to preserved managerial policies (Ekechi, 2014).

With computers becoming extensively used in business today, it is obvious that accounts which were earlier maintained in a manual form will be gradually replaced with computerized accounts. The speed with which accounts can be maintained is several fold higher. Basic difficulties faced like balancing of trial balance, correct posting into the general ledger and subsidiary ledger is a thing of the past. The only concerns that has increased today are concerns for controls, security and integrity of the computer system as more and more information is stored not in the hard print but as soft copies inside the computer. Issues like unauthorized access to the data either through the local area network or through the internet by hacking into the company server are becoming potential threat to the computer usage. It is against the background that the study intends to examine internal control system in a computerized accounting environment with particular reference to First Bank Nigeria Plc.

The accountancy profession now faces a challenge to recover trust and respect. The reputation of the profession has been damaged by high-profile scandals such as Enron, WorldCom and Parmalat. Those scandals have created some suspicion of accountants among the public on the competence of auditors and the accountancy profession as a whole. Internal controls have been a very important topic in recent years. Many people have postulated that one major critical success factor of any competitive business is its effective internal controls. The world is now a global village as predicted due to the Information and Computer technology (ICT). Sophisticated ICT has become integral part in modern accounting information systems and management information systems. This has affected the traditional procedures auditors employ to perform their procedures. Normally, though, they only possess ordinary skills to work with Computers. Their competence and professionalism to take up engagements in the face of the sophistication in ICT use that is fast complicating the internal control environments are called to question. Auditing procedures in identifying risks, fraud and errors by making inquiries of and testing internal controls within the entity have changed as a result and therefore the competence and skills of the auditor must change to suit the circumstance to minimize audit risks that would add to the worsened reputation of the profession.

Information and Computer technology (ICT) has become integral part to any modern accounting information systems. ICT, however, is a high risk discipline due to high level of vulnerabilities and threats.  A key emphasis of auditing procedures is identifying risks, fraud and errors by making inquiries of and testing Internal controls within the entity in order to place some reliance on internal reports and associated management assertions. Auditors’ responsibility in identifying fraud has now been acknowledged by regulatory standards and the law. It has become critical that auditors are fully aware of the impact of ICT issues on the audit of a client’s financial statements in how ICT is used by a client to gather process and report financial information. It is against this problems that the study posits to examine internal control system in a computerized accounting environment with particular reference to First Bank Nigeria Plc.

The main objective of the study is to examine internal control system in a computerized accounting environment with particular reference to First Bank Nigeria Plc. The specific objectives of the study include to;

Based on the objectives above the researcher asked the following questions;

To achieve the above objectives, the following hypotheses will be tested. 

The significance of any study entails the immediate beneficiaries and the benefits as well as how they will benefit from it. Thus far this research work would be valid to the following set of people.

Shareholders/Investors- It would assist existing shareholders and potential investors to make appropriate judgments as regards their investments and profitability.

Future researchers- They will be able to apply this research to carry out further studies in the same area or related areas. The study is expected to be of very great importance to the researchers simply because after the completion of this research study the researchers will be able to use this research study as a reference to what they will do in future not forgetting that it will be used as a source of literature review to their studies.

The research would be beneficial to the government in the sense that it is going to help us expose some of the experiences Nigeria has acquired in the course of internal control management.  This study is also meant to be beneficial to the policy makers, business investors, bankers, financial managers and the general public.

This study will cover the internal control system in a computerized accounting environment with particular reference to First Bank Nigeria Plc. The study will cover a period of 2014 to 2018.

Internal control: The internal control has been the ability of the management of an organization to organize direct and control all the activities of workers and other members of staff.

Accounting control: These comprises the plan of organization and the procedures, measures and records that are concerned with the safeguarding of assets and the reliability of financial records and consequently are designed to provide reasonable assurance that transactions are executed in accordance with management general or specific authorization.

Administrative control: administrative control is not limited to the plan of the organization and the procedures and records that are concerned with the decision processes leading to management authorization of transactions.  

Profit After-Tax: Profit after-tax is the earnings of a business after all income taxeshave been deducted

Return on Equity: Return on equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders' equity. Because shareholders' equity is equal to a company’s assets minus its debt, ROE could be thought of as the return on net assets.

Return on Assets (ROA): Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets.

Computerized Accounting Environment: Business owners and managers can use computerized accounting systems to create a more secure environment for their financial information.