INTERNAL CONTROL AS A TOOL FOR
EFFICIENT MANAGEMENT
CHAPTER ONE
INTRODUCTION
The
study of this internal control system of an organization is like the study of
an anatomy of man. In word of Peter Druker” Good organizational structure dose
not buy itself produce good performance just like a good constitution dose not
guarantee great presidents or good laws a moral society. But a poor
organizational structure makes good performance impossible, no matter how good
the individual managers”.
Promised on this dictum, it is therefore obvious that the
organizational structures of an establishment will greatly determine to what
extent the organization is to be managed. In some organizations, jobs are not
properly defined, duties are not efficiently assigned to the right persons and
functions are sometimes duplicated with the result that in fighting within the
organization results in sub-optimization. By this I mean that each staff and
sub-manager try to impress the management and often times to the detriment of
the overall goal of the organization.
A
good internal control system ensures that functions/duties are properly defined
and that duties are properly are properly assigned to qualified staff and that
there is an inbuilt control in the system to ensure feedback, detection and
correction of errors in good time.
It is the overall good of any organization to ensure its
continued existence and growth hence establishments set up certain
units/departments in their organization to ensure that its good is achieved to
a reasonable degree.
The internal audit is one such unit established by the
management to ensure compliance to policy instructions and to correct for
correction deviation from the management set guideline .it objectively
examines, evaluates and reports on the adequacy of the internal control,
thereby ensuring efficient and effective application of limited resources.
Internal check is also another internal control tool employed
by the management to ensure that the objective of the organization is attained.
The entire system of check internal audit and internal check,
which is geared towards the attainment of the organizations goal, is called
internal control.
Internal
control has different definitions but most widely accepted is that of the
statement of accounting standard (SAS) which defined internal control as “not
only internal check and internal audit, but the whole system of controls,
financial and otherwise establi9shed by management in order to carry on
business of the company in an orderly manner, safeguard its assets and secure
as far as possible the accuracy and reliability of its records”. The internal
control system should be an open one and should be cheap, conveniently
manipulated by management to ensure completeness and accuracy of records and
also prevent or uncover errors and fraud. It should be based on the overall
view of the organization and should provide information for all uses of the
system.
STATEMENT
OF PROBLEMS
In very human endeavor, problems and difficulties will arise.
Manufacturing is not an exception to this rule
The
common problems encountered include:
1.
Inadequate capital and poor
administration
2.
Poor accountability
3.
General increase in all aspects of
operational costs
4.
Unsteady policy by government
resulting in uncertainties
5.
Internal control breakdowns
6.
Stringent loan conditions by banks
The
above general problems are easily identified and are associated with under
development of the society. There is also the psychological angle, the problem
of dissatisfaction of workers and the attending strike action which often
result to loss of many hours and disruption of the entire system
RESEARCH
OBJECTIVE
This
study will be aimed at accomplishing the following objectives:
1.
To examine the nature and scope of
internal control systems in a manufacturing establishment using Peco feeds as a
case study
2.
To ascertain whether the internal
control systems in use are appropriate and will lead to efficient management
3.
To identify the principal problems
associated with workers dissatisfaction and recognize the implications of such
problems for control methods
4.
To seek purpose oriented solutions
and make recommendations that will go a long way in solving the identified
problems
SIGNIFICANCE
OF STUDY
This
research work has been undertaken in such a way that students, researchers and
interested persons would be educated in the following areas:
1.
The various internal control
systems
2.
The causes of breakdown in internal
control systems
3.
The effects of an efficient or
inefficient internal control systems on the management of an organization
4.
Corrective measure to ratify an
inefficient control system
STATEMENT
OF HYPOTHESIS
For
the purposes of the study, the researcher wishes to states the following
hypothesis:
1.
That the internal control system in
operation in Peco feeds limited is adequate in the area of promotion and
encouragement of effective operational efficiency and adherence to management
plans and policies
2.
That the internal control, internal
check and internal audit in Peco Feeds Limited has been of immense help to the
management both in the areas of safeguarding the assets of the organization and
the prevention of questionable claims and payments
RESEARCH
QUESTIONS
In
other that the research provides the results, the following research problems,
which revolve around the basic elements of an effective and efficient internal
control, system would be utilized in testing the research hypothesis
1.
To what extent does the
organizational structure and responsibility sharing arrangement in Peco Feeds
Ltd reflect the existence of an effective an efficient control system?
2.
How efficient is the internal
control system in Peco Feeds Ltd with regards to the safeguard of its fixed and
other assets as well as in the prevention of questionable claims and payments?
3.
How efficient is the accounting
system in use in Peco feeds Ltd with regard to responsiveness to the
organizational objectives as well as in the area of accuracy and reliability of
the financial records prepared under the system?
4.
To what extent has the existence of
an internal audit unit in Peco Feeds Ltd helped in the promotion of operational
efficiency and encouragement of adherence to management policies?
LIMITATIONS
OF TERMS
In very human undertaking, there has to be a limitation. The
limitation could be internal or external; internal to the extent of the
researchers ability and external to the extent of things outside the control of
the researcher.
In
this undertaking finance and time has been the most constraining factor. Some
others include the usual Nigerian attitude to label every imaginable piece of
information as confidential or to secret.
DEFINITIONS
OF TERMS
1.
Internal control – this is defined as “not only internal check
and internal audit, but the whole system of controls, financial and otherwise,
established by management in order to carry on the business of the company in
an orderly manner, safeguard the assets and secure as far as possible the
accuracy and reliability of its records.
2.
Internal check- this is defined as
“the allocation of authority and work in such a manner as to afford checks on
the routine transactions of day to day work by means of the work of one person
being checked or controlled independently by another “.
3.
Internal audit: this is defined as
“an independent appraisal activity within an organization for review of accounting,
financial and other operations as a basis for service to management.
It
is a management controls which functions by measuring and evaluating the
efficiency and effectiveness of other control.
4.
System: this is define is an
organized or a complex whole. It is a set of a complex related or a an arrange
of essential principles or facts arranged in a rational dependence or
collection forming a coherent whole.