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THE EFFECTIVENESS OF INTERNAL CONTROL SYSTEM IN AN ORGANIZATION (A Case Study of Dangote Group of Companies)
The study investigated the effectiveness of internal control system in an organization (A Case Study of Dangote Group of Companies). The study employed primary data collected from the employees of Dangote Group of companies in LagosState.
The primary data used for the study were collected through questionnaire administered to the respondents.
The study employed use of Chi-Squared in analyzing the data collected in testing the hypothesis on the importance and contribution of internal control department to the organization and on how it safeguard the resources of the organization.
TABLE OF CONTENTS
Title Page i
Table of Contents vi
CHAPTER ONE: INTRODUCTION
1.1 Background of the Study 1
1.2 Statement of Problem 2
1.3 Objectives of the Study 3
1.4 Research Questions 3
1.5 Research Hypotheses 4
1.6 Significance of the Study 4
1.7 Research Methodology 5
1.8 Scope and Limitation of Study 6
1.9 Organisation of the Study 6
1.10 Definitions of Terms 7
CHAPTER TWO: LITERATURE REVIEW
2.0 Introduction 10
2.1 Meaning and Definitions 11
2.2 Components of an Internal Control System? 13
2.3 Elements of Control Procedures 15
2.4 Design of Internal Controls 21
2.5 Internal Controls in the Various Areas of A Business 25
2.6 Inherent Limitations of Internal Control 52
2.7 Stages of Internal Control Audit 53
2.8 Important of Internal Controls 56
CHAPTER THREE: RESEARCH DESIGN AND METHODOLOGY
3.0 Introduction 58
3.1 Research Design 58
3.2 Source of Data Collection 58
3.3 Population of Study 59
3.4 Sample Size 60
3.5 Sample Distribution 60
3.6 Instrument of Date Collection. 60
3.7 Method of Data Presentation 61
3.8 Method of Data Analysis 61
3.9 Validity Test and Reliability of Instrument 62
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.0 Introduction 63
4.1 Administration and Retrieval of Questionnaires 64
4.2 Data Presentation 64
4.3 Hypotheses Testing 76
CHAPTER FIVE: SUMMARY OF FINDING, RECOMMENDATIONS AND CONCLUSION
5.1 Summary of Finding 81
5.2 Recommendations 82
5.3 Conclusion 83
5.4 Suggestion for Further Studies 83
1.1 BACKGROUND OF THE STUDY
Internal control system came into use as a necessity in any organization especially large organizations to harmonise and secure both the physical assets as well as the financial fund for effective and efficient management of any organization to achieve the set objectives and goals. And for sound organization an internal control system department is necessary and the overall purpose of internal control is to help a department achieve its mission and accomplishment through:
i. Promoting orderly, economic efficient and effective operation
ii. Produce quality products services consistent with the department mission.
iii. Safeguard resources against loss due to waste, abuse, mismanagement, errors and fraud.
iv. Promotes adherence to statutes regulation.
v. Develop and maintain reliable financial and management data, and accurately report that data in a timely manner.
An internal control system is the process that an administrator uses to provide reasonable assurance that the unit's goals and objectives will be achieved. Rick Hayes(2005) It is the management of business risks and is a dynamic process that changes as personnel and circumstances change. The system includes organizationaldesign, written policies and procedures, actual operating practices, physical barriers to protect assets and all personnel. The system should be designed to discourage occurrences of errors or irregularities and to identify, within a reasonable time frame, errors or irregularities that may occur. The internal control system encompasses a variety of internal controls such as background checks of prospective employees for sensitive positions to locking the door when the office is closed for the evening. The internal control system provides for safeguarding of assets, proper recording of transactions, and the efficient and effective accomplishment of the unit's and organization goals and objectives.
1.2 STATEMENT OF PROBLEM
The management of various organization has failed to recognize the effect of internal control in an organization in the overall maintenance of organizations goals and objectives. This has led to inefficiency and lack of proper co-ordination on the part of management.
1. It led to inefficiency and lack of proper coordination .
2. It led to loss of fund both in assets and in manpower.
3. It also hinder corporate objectives of the company.
It is awell known fact that the enterprise or management level of an enterprise are entrusted with the management of both material and human resources of their establishment, if the management and others in charge are not brought under some controlthe ultimate consequence of this is that much of the resources will be indiscriminately mismanaged. Some will even, collide with other customers or clients to embezzle their organization’s funds to the detriment of the business or even to the shareholders. This is why it is very necessary for an internal control system to be establishedin any organization to see to the proper and efficient management of company assets and resources.
1.3 OBJECTIVESOF THE STUDY
The main purpose of this study will among others include:
1. To determine the mode of internal control system and
2. To ascertain the operation and effect of internal control in the operation of an organization.
3. To provide a basic understanding of internal control system and its procedures.
4. To ascertain how the functions ofinternal control can contribute to the overall performance of an organization.
5. To prescribe the qualification of those to be engaged in the internal control system of an organization.
1.4 RESEARCH QUESTIONS
Based on the purpose of the study, the following questions are raised to provide a guide and solution to the research problems.
1. How effective is the operation of internal control department in any organization.
2. What are the basic objectives of internal control department and its procedure.
3. How doe the functions of internal control department contribute to the overall performance of an organization.
1.5 RESEARCHS HYPOTHESES
In carrying out this research work, these conceptual statements are made to serve as a guide on which the work will be anchored or based
(a)Ho: The internal control department has no performance effect on the management of the organization.
Hi: The internal control department has performance effect on the management of the organization.
(b) Ho: The internal control department played does not played any important role in the safeguarding the resources of the organization.
Hi: The internal control department played an important role in the safeguarding the resources of the organization.
1.6 SIGNIFICANCE OF THE STUDY
It is of the view, when this work or research is concluded the study will be aid to or relevant to any organization that values performance to evaluate and contribute to the effectiveness of the internal control system. It will also help to highlight the impact of internal control in an organization, and this can be seen in the following ways.
Internal control department could be seen as the watch dog to the management of an organization on the ground that it will contribute to the successful and timely implementation of the management policies as well as safeguarding assets and ensuring financial accountability of the employer in an organization.
- An effective internal control system enhance effective and adherence to the laid down rules.
- It helps in achievement of financial accountability of all the staff of an organization.
- The activities of internal control department encompasses all segments of the organization, hence, any negative internal control department and the management will have a devastating effect on the generality of the organization
1.10 RESEARCH METHODLOGY
This is good to carried out the sample size and it’s characteristic the construction of the research instrument. The data gathering procedure, the data collection involving both primary and secondary sources. The primary source which is going to be the direct information from the company (organization) this is the administering of questionnaire and personal interview.
Secondary sources information gotten from already existing materials that are related to this topic study. That is from textbooks, journals and internets.
1.11 SCOPE AND LIMITATION OF STUDY
In view of the financial implication and time constraints as well as in accessible and restriction in getting the necessary data and information needed for this study, the study is thus limited scope of available data and information of the case study which are hope in future research on this topic could dwell on.
1.12 ORGANISATION OF THE STUDY
Chapter one of the study gifts the introduction of the study, the background of study, stating the problem, the hypothesis and the significance of the study.
CHAPTER TWO: LITERATURE REVIEW
This give the secondary data concerning the study, various material were collected from various authors concerning the subject matter i.e the internal control system and how its operatives.
CHAPTER THREE: RESEARCH METHODOLOGY
This give the research design population of study, method of data collection and method of data analysis.
CHAPTER FOUR: PRESENTATION OF DATA ANALYSIS
This give the analysis of presentation of data, and testing the hypothesis.
This explain the summary of findings recommendation and conclusions.
1.10 DEFINITIONS OF TERMS
The researcher finds it working to define some important terms in the research work for a better understanding of their meaning and the context in which they are used in the work.
Internal control: This is a whole system of controls, financial and other establishments by the management of an organization in order to carry on the business of the enterprise in an orderly and efficient manner, ensure adherence to management policies, safeguard the assets and service as far as possible the complete and accurate records in addition to the occurrence and internal advice.
Effectiveness: Successive achieving the result intended, that is producing the desire result, aim and objective regularly and frequently.
System: A particular way of doing things, organized or connected part that work together.
Shareholders: These are the owners of the organization i.e. those who contributed their resources to start up the enterprises.
Management: Those who see to the day-to-day running of the business to attain its set objectives and goals.
Assets: the organizational resources in tangible form.
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