EFFICIENT INTERNAL CONTROL AND IT’S EFFICIENT ON PROFITABILITY OF AN ORGANIZATION
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- BACKGROUND OF THE STUDY
The question of distressed private and public firms, misapproriation of funds, fraud (both employee fraud and fraudulent finance reporting) and embezelent e.t.c in the private and public enterprises in the country are prevalent and one at high alorming rate.
In fact, are would be justified to believe that, there was something terribly wrong be internal control system in the various organization. It is obvious and statement and even output of result desired or expected by the public from the organization are being prepared by professional accountants, but by and large the financial statement are approved or certified by the internal control management of the organization.
According to carmi Michael (1996) the importance of the understanding the internal control structure has been recognized in the program for preparing, verifying and disturbing to various level of management these curent reports and analyses that enable executives and function that are used be a large organization.
The importance of establishing and maintaining effective internal control system is also illustrate by the passege of the ‘foreign practices Act of 1997’’ in united state of America the act was introduced because in the mid-1970s, hundred of american corporation acknowledged having made payment (bribes and kickback) to official in foreign countries to obtain business. In essence, frauds and bribes had destroyed the internal control system of organisation (Whittington pany, 2003)
Cormichad, 1996, says that intwernal control system of any organization cannot be over-emphasized; it is key to determine the success and failure of any bisuness organization and is indeed the background of an accounting system in any organization professional standards, least since 1947 ans was expressed in the second standard of field work, as revised in 1988, as follows.
“As sufficient undastanding of internal control structure is to be obtained, to plan the audit and to determine the nature, timing and extent to test to be perforned”.
Internal control system is defined by millichamp, (2002) as the whole system of controls, financial and otherwise, established by the management in order to carry on the business of the enterprises in an orderly an efficient manner, ensure adherence to management policies safeguard the assets and secure as far as possible the completeness of accuracy of the records.
The definition of internal control is comprehensive in that it addresses the achievement of objectives in the areas of operations financial reporting and complaince with laws and selling, purchasing, accounting and prodcution.
1.2 The main objectives of this resarch work is to examine the management, set goals in relation internal control system of the organization other objectives of the resarch include
- To examine how the business is carried an in orderly and efficient manner.
- To examine how its assets are safeguared it is very important for all assets to be secured and maintained.
- To examine the accuracuy of records and determine whether or not they are relaible.
- To recommended on the corrective measure to be taken in order to enchance effocient and internal control in organization
- STATEMENT OF THE PROBLEM
Efficeitn and efficient internal control system is needed in all forms or kinds of organization because when an internal control is efficient, it bring about the profit or gain desired by the management and especially by the owners also know as the shame holders. His the management responsibility of ang organization to ensure that the internal control and other control measures established by it are properly adhered to as minimize their wealth and survival of the organization, but the prevailing situation now is that business atmosphere in the country.
All theses situation can be traced to internal control system of any organization and it consist of people called the board of directors, management and even the directors of any operating department in the organization. There for, the question is why is business or companies folding up or winding up. How efficiently the internal control system of organization in the business world in this country.
Viewing from the efficient internal control system and it’s effect on the profitability of organization.
- JUSTIFICATION OF THE STUDY
Based on inefficiency and inffectiveness of internal control system on an organization’s profitability, this reasarch work justified the purpose of knowing the importance if internal control of the operation of an organization like quality of the product produced, this effective the profit level which in turn reduce the individual dividends attributable to the owners.
Internal control also include the program for preparing, verifying and distributing to various level of management, current reported and analysis that enable executive to maintain control over the variety of activities of function used by the organozation. The use of budgeting techniques production standard, laboratory inspection, time and motion studies and training of employers are devices which are part of internal control but are removed from accounting and financial activities. When all these are put in place, and are dvely followed, it makes the organization remain ficus otherwise many fauth or discrepancies arises which effects the production of the company as well as the profitability level. This justified the need for and well defined control policies that the company needs to follow to achieve its objective and reach tis goals.
- RESEARCH METHODOLOGY
This is describing the various processes that has been in collecting and analyzing the data which produces the necessary information to solve the research problem. It also shows how the analysis was been carried out and relevant tools employed in testing the hypothesis it specifies the research instrument that was employed in collecting sample form the population.
Research design – Nworgu ( 1990) define research design spelt out the framework or plan for a study that is used as guide for analyzing data . The narrative description and quantitative survey method were used for the presentation of data gathered for this research project.
Johnson 9 1977) ascertain that this methods are important aim of using descriptive method particularly is b because of its simplicity, it advantage over other methods and the nature of research to be carried out.
- SIGNIFICANCE OF THE STUDY
The research work is meant importance of effective and efficient private and public organization . The success of private organization that is to broaden knowledge about the internal control system to both the main focus is its relevance to the low profitable they are :
Furthermore, it also benefit the external uses of the financial statement of t he organization , as a basis for assessing it, as a potential investor.
The research study will aid researcher. In the same field of study ( accountants and Business management) in carrying out further research work on the internal control system of any organization.
The research work had covered all the important aspects of internal control system of any organization.
- The research work had covered all the important aspects of internal control measures established by the organization in order to enhance profitability direct question toward find out the efficiency of the internal control and its effect on profitability of an organization.
It also covered five (5) years report of internal control system ( that is 2002-2006) of the Nigerian Bottling company ( coca- cola) ilorin branch.
- PLAN OF THE STUDY
This research study was designed to make use of primary and secondary data. The primary data was collected through the use of questionnaires and personal interview with staff of cocal- coal bottling company ilorin.
The secondary data was gathered from sources like accounting records, and other material made available by the company.
DEFINITION OF TERMS
- Efficient: To do something well and thoroughly with no money or energy. That is , orderly and efficient conduct of business.
- Internet control system: Is as s et of processes, function , activities , sub- system and people who are grouped together or consciously segregated to ensure the effective achievement of objectives and goals.
- Organization structure : It defines individual manager’s responsibility for decision making and for establishing company policy and set the limit of such authority understood to all levels of the organization contribute to a strong control environment.
- Control frame work: In a given organization it may be complex or relatively simple but as a generalization, large organization tends to have more complex and sophisticated control frame work small organization are often able to operte effectively with control base largely on personal contract between employees.
- Polices and procedures: complete and well documented polices and procedures to described the scope of the functions its activities and inter relationship with other department policies establish the organizations direction, while procedures indicate now policies are to be implemented and
- Profitability: that make or likely to make money in business organization or transaction.
- Effective: Producing the result that is worried or intended as an out come in a business organization.
- Internal control : Essentially comprises control environment and c ontrol procedure adopted by the directors and senior management of an organization to assist in attempting to achieve the orderly and efficient conduct of business.
- Monitoring; It is the process that assess the quality of internal control overtime.
- Risk assessment : It’s the identification, analysis and management of risks relevant to the preparation of conformity with GAAP (General Accepted accounting practice)
- Control activities: This is the policies and procedures ensuring that \ necessary actions are taken to address the risk involved I achieving he entity’s objectives.
- Control environment : It sis the tone of an organization which reflects the overall attitude and actionsof the board of directors, management and owners influencing the control consciousness of its people.
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