THE ROLE OF FINANCIAL ACCOUNTABILITY IN A PRIVATE LIMITED COMPANY
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ABSTRACT
The mismanagement of every organization results from the inability of the financial accountability controllers to administer the financial resources in order to achieve its profit maximization. Business collapsed, is characterized by negligence to adhere to effective control system, which primarily comes from internal control. An organization encounters problems, which often times result to financial impropriety, which has made many firm to collapse. Some of these problems lie largely outside the control of the organization. These are the problem to be solved by the financial accountability controllers in the interest of effective control system of the organization While other problems arise from the organization’s limitation in his financial resources. An analysis of factors that contributed to this fact would be highlighted and useful recommendation towards resolving these problems would be made. This researcher is optimistic in view of the fact that if these recommendations are adhered to, they will go a long way in achieving the objectives of this research work.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The term “Financial Accountability” according to Hornby (2000:3) is the ability to give explanation of stewardship of money or any other economic resources and assets. Financial Accountability is geared towards ensuring that there is control over fraudulent practices such as defalcation, embezzlements or inflation of contract. The subject of the study of “Financial Accountability” has been a controversial issue even among the early philosopher. Plato condemned the use of money in trade, according to him, for the attendant “social ills” and “unethical reason”. In addition to the above, the peculiar nature of Nigeria economy has made any topic in accountability, financial or otherwise, worth discussing. Nigeria has had her fair share of financial impropriety both in public and private sector, no quite unconnected with her political set ups, the history of the evolution of her financial institutions and level of the country’s development. The research has therefore been reduced to the firm (micro) level and Emenite Nigeria Limited, Enugu has been carefully selected to be used in drawing a line of parallel between the level of accounting in the public and private sectors. Control is adjunct of accountability. The extent of financial accountability therefore should be reflected to the extent of the working mechanisms within the particular organization. The fact that both public and private sectors make use of control measures is undisputable. The extent to which they employ this and how it has improve their finances is called to question. The effective means, by which they employ internal control to safeguard assets, collect debt or pay creditors, etc. is the issue at stake. In the word of a management experts internal control comprises the plan of organization to co-ordinate methods and measures adopted within a business to safeguard its assets, check accuracy and reliability of its accounting data, promote operational efficiency and encourage adherence to prescribed managerial policies. Apparently, the general concept “internal control” here is that it should be effective enough to cause probity in all the organization activities with a resultant discipline financial atmosphere in the organization. Responsibility accounting system as noted by Eze (2014:24) identify various decision centres and trace financial data to the individual managers who are primarily responsible for the data in question. Here manager supervise subordinates and to improve performance, top manager sub-divide operating process and also design an organization structure. Obviously, another general concept of responsibility accounting here is that it should be instituted in the organization to ensure that individual managers are held responsible for the financial data that is assigned in their possession.
1.2 Statement of Problem
Every policy formulated in boardrooms would have been a success, if they were being carried out there too. Unfortunately, adherence to planned policies by employees is the problem of many management of some companies. Harold Koontz, noted that management is the art of getting thing done through and with people in formally organized group. The owner of every business expects a reasonable return on their investment of who executes the policies. The problem of policy execution is further compounded by the evolution of large organization. Personal supervision of the employees by an individual seems an attempt at impossibility with large spans of control. There are therefore the needs for an internal control system. Internal control is such an indispensable tool in the hand of management if it wishes to obtain adequate and useful information, protect company assets, but despite the established necessity for installing an internal control system, many managers do not have it, and they of course wallow in the flimsy excuse of its expensive nature. This is the first problem. The other thing to think about is the effectiveness of control procedures if the internal control is at all established. The effectiveness of control procedures is a function of the fact that segregate duties are not being circumvented by the collusion of the employees, negligence and mistake or even personal factors. These factors are problem to the firm and eventually would undermine the effectiveness and efficiency of the internal control system, if not taken care of.
The above mentioned problems give rise to the following basic questions:
a. How adequately are employees adhering to internal control measures?
b. What standard should management adopt as test to observe control measures?
c. Should internal auditing be an adequate means of checking internal control?
d. Should the effectiveness of control be relied on for adequate financial accountability?
1.3 Objective of the Study
The purpose of this study is to have a close look at the cost of internal control existing in Emenite Nigeria Limited, Enugu State. If there is any, then to know how efficient this has assisted in attaining financial accountability. Specifically, the Objective of the Study include:
i. To find out if there is any role of financial accountability in a private limited company.
ii. To ascertain if there have been irregularities that have passed unnoticed in the establishment.
iii. To examine if there is adequate segregation of duties at various levels of management.
iv. To determine whether adequate punishment is meted out to those found to over – step control measures to prevent further occurrence of such defects in the future.
1.4 Research Question
In carrying out this research more effectively, the researcher therefore designed the following questions:
i. To what extend is the relationship between the roles of financial accountability in a private limited company.
ii. How adequately are employees adhering to internal control measure?
iii. What standard should management adopt as a test to observe control measure?
iv. Should internal auditing be an adequate means of checking internal control.
1.5 Research Hypothesis
Generally based on the research objective and research question the following research hypotheses are formulated to guide the study.
1. H0: There is no significant relationship between the role of financial accountability and private limited company.
H1: There is significant relationship between the role of financial accountability and private limited company.
2. H0: There is no inadequately segregation of duties at various levels of management
H1: There is adequate segregation of duties at various levels of management
3. Ho: There is no irregularities that have passed unnoticed in the establishment
H1: There have been irregularities that have passed unnoticed in the establishment
4. H0: There is no punishment meted out to those found to over-step control measures to prevent further occurrence of such defect in the future.
H1: Adequate punishment is meted out to those found to over-step control measures to prevent further occurrence of such defect in the future.
1.6 Significance of the Study
Although the research work is not exhaustive one because of the none availability of some important information and limited time, all part of this work is very important in one way or the other to Emenite Nigeria Limited, Enugu State in particular More so, this study will be useful for those who may be interested in carrying out further investigation on “The Role of Financial Accountability in private Limited Company” with special reference to Emenite Nigeria Limited, Enugu State. However, the Emenite Nigeria Limited, Enugu State will benefit greatly by ensuring “Financial Accountability” in there company and they can achieve this by adopting and implementing the different ways suggested by the study of Internal Control System
1.7 Scope of the Study
The scope of this project is board on the role of financial accountability in a private limited company with emphasis on Emenite Nigeria Limited, Enugu. The study cover the period of 2014 to 2015
1.8 Limitations of the Study
The researcher was saddled with limitation which constituted an impasse to make and compile the research work. The following problems to the research work include:
a. The widespread increase on transportation in the country have prevented the researcher from making frequent visit to the company as many times as are necessary.
b. The competitive nature of the Innoson Nigeria Limited have almost make every issue a secret such that information may be better thrown to the winds than be given out to untrusted students who claim to be working for internal Control system of a company to which they do no belong.
c. Respondents show lackadaisical attitude when they discover there is no financial reward which might accrue to them in the exercise, some keep the questionnaires for so long while other never bother to return them.
d. Another frustration is due to the “come today”, come tomorrow syndrome which people in authority have enjoyed issuing as a cheap excuse for being momentarily busy.
1.9 Definition of Terms
Financial: According to the website 4th American Heritage dictionary define financial as relating to or involving of finance, finances or financiers.
Accountability: Webster 1913 Edition defines accountability as the state of being accountable; Liability to be called on to render an account and the obligation to bear the consequences for failure to perform as expected.
Financial Accountability: Financial accountability according to Hornby (2000:3) connotes the ability to give explanation of stewardship of money or any other economic resources and assets.
Private limited Company: According to Ojemba and Pst Okoh (2015:), private limited company is a company established by two to fifty people who buy share in the organization. Its share are not allowed to be subscribe publicly.
Internal Control: The comprises the plan of organization all of the co-ordinate method adopted within a business to safeguard its assets, check accuracy and reliability of its accountability of its accounting data, promote operational efficiency and encourage adherence to prescribed managerial policies.
Responsibility Accounting: This involves the creation of responsibility center. Colin (2011). This may be defined as creating environment that encourage the detection and prevention of fraud in government, public, commercial and even private establishment. Benjamin (2005).
Internal Auditing: According to the Institute of Internal Auditors (IIA) is an independent, objective assurance, and consulting activity designed to add value and improve an organization’s operations.
Auditing: This is the process of examination of records and statements and expresses an opinion regarding the fairness and accuracy.
Budget: This is a plan expressed in monetary terms in the face of competing need.
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