THE IMPACT OF A GOOD INTERNAL CONTROL SYSTEM ON FINANCIAL MANGEMENT OF ORGANIZATION (A CASE STUDY OF NIGERIA BOTTLING COMPANY)
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THE IMPACT OF A GOOD INTERNAL CONTROL
SYSTEM ON FINANCIAL MANGEMENT OF ORGANIZATION (A CASE STUDY OF NIGERIA BOTTLING
COMPANY)
ABSTRACT
An internal
control system is the process that can be use to provide reasonable assurance
that the units goals and objectives will be achieved. It is also the management
of business risks and is a dynamic process that changes as personnel and
circumstance change. The impact of a good internal control system on the
financial management of organization can not be over emphasized. This is
because internal control is the had rock of any organization that wants
continuity in the existence of the organization. Owing to the above reason,
awareness on the need for internal control system in organization become the
vital inducing factor for this project work. However aroused of students and
potential readers interest on significance of internal control system become
the secondary objective of this work. This will go a lung way in safeguarding
and managing efficiently the finance or fund for running the organization for
profit maximization by management. Don’t for this research work ;will be
obtained through administrating questionnaire through oral interview to senior
staff which critical analysis follows. Regrettably however, the quest for
introduction will he hindered by time and money factors. Lecture will be going
on the class resource are scarce to travel enable the resource to write
extensively on the topic. In conclusion therefore researcher will suggest that
the impact of a good internal control system when applied. Will help a business
in profit planning decision making safeguarding of asset and for costing.
CHAPTER ONE:
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Internal
control can be defined as the whole system of internal control, financial and
otherwise established by management in order to carry on the business of the
enterprise in an orderly and efficient manner, ensure adherence to management
policies, safeguarded the assets and secure as far as possible the completeness
and the accuracy of records. Dr. Aveh (2010). The individual components of an
internal control system are known as controls or internal controls. Internal
control includes all policies and procedures adopted by the directors and
management of an entity to assist in their objective to achieve as far as
possible the orderly and efficient conduct of the business including adherence
to management internal policies, safeguard of assets. Prevention and detection
of fraud and error, the accuracy and completeness of accounting record and
timely preparation of reliable financial statement.
An internal
control is of great importance to every organization because of its impact on
the management of its resources especially finances. It is evident that where
there are no9 rules controlling how a thing is to be done, that very thing is
done anyhow and the best of it is not attained, this is exactly what effective
internal control system is all about. For the purpose of our studies, financial
management will mean the application of an organization’s financial resource
(money) on activities meant for its usage. It is the proper use, the effective
and efficient use of financial resources or simply put the expedient use of
financial resources. Internal audit is an internal function which means that it
is conducted by the employer of an organization specially designed for this
purpose and therefore means it is an organizations management responsibility to
establish the department or not to do so. The object of internal auditing is to
assists all member of management in the effective discharge of their
responsibilities, by furnishing them with analysis, appraisal, recommendation
and appropriate comment in the activities reviewed.
To attain
its overall objective, internal audit involves such activities as:
i. Reviewing the soundness, adequacy
and application of accounting, financial and other operating controls and
recommending effective control reasonable cost.
ii. Appraising the quality performance
in carrying out assigned responsibilities.
iii. As creating the effectiveness of
established policies and plans and recommending operating improvements.
Where an
internal audit department operates, the statutory auditor plays particular
attention to its activities as these will have a direct hearing on the scope
and depth regained by the external auditors.
This system
of internal check is to prevent and also ensure an adequate accounting system
which will provide the information necessary for preparing true and fair
financial statement. Since it is the sole duty of the management of an
organization to detect fraud errors and other irregularities and correct them
before they come to the notice of the external auditors, the internal audit
procedures adopted by an organization is of consequence. As a result of this
procedure to be adopted by an internal audit department must have these in and
also be set up by experts in theory and practice.
1.2 STATEMENT OF PROBLEM
It has been
stated earlier that the duty of detecting frauds and Irregularities lies with
the management. This could only be done through an effective and efficient
internal control system in an organization.
Some of these problems include:
i. The inability to establish a functional
internal control system within the organization.
ii. The inability of the management to safeguard
the assets of the organizations.
iii.The
inability of the authorizing officers to give approval for all vouchers before
payments.
iv.Inadequate
supervision of duties within the organization.
v. The inability of management to appreciate,
understand and clearly respond to the role of internal control system.
vi.Inadequate
of good internal control system in contributing to the development of the
company.
1.3 OBJECTIVE OF THE STUDY
i. To find out if there is any
internal control system in Nigeria bottling company.
ii. To determine if there are laid down
procedures by management to safeguard the assets of the organization.
iii. To find out if there are proper
authorization for the documents before payments.
iv. To determine if there is adequate supervision
of duties within the organization.
v. To find out if management appreciate,
understand and clearly respond to the role of internal control system.
vi. To find out if good internal control
system contribute to the development of the company.
1.4 RESEARCH QUESTION
i. Is there internal control measures
put on ground with this organization?
ii. Are there laid down procedures
within the organization to physically safeguard the assets of the organization?
iii. Is there proper authorization of
documents before payment?
iv. Is there proper supervision of duties
within the organization?
v. Are the management appreciate,
understand and clearly respond to the role of internal control system?
vi. Is there good internal control system
in contributing to the development of the company?
1.5 SIGNIFICANCE OF THE STUDY
No internal
control system newer elaborate ,could be completely water tight .But a good internal control system operated in a company is an
indispensable aid to efficient management ,in that it Assures
management of the re liability of
decisions taken by them and that these
decisions are in line with goals to be attained .
The
significance of this study is to bring to the notice of management the impact
of a good internal control system in the financial management 0f organizations
.That is to say that it will help the organization to know now to manage it
scarce fund.
It will help
to discover the existence of internal control system in an organization; and to
know it there is weaknesses in the system, and suggest measures to correcting
them.
Again, it
will equally help to reveal the problems that are caused by a bad internal
control system.
This piece
of work will also be useful to students, scholars, lectures and other third
parties as it shall open new area of further research work.
It will also
advance challenge to on- coming researchers. Non –management owners of a
business will be adequately protected because all material fraud which either
to, are undetected by auditors in case of this project work will be brought
will be notice of management, so corrective action may be taken.
1.6 SCOPE
OF THE STUDY
The focus of
this is on the impact a good internal control system has on financial
management of organization with particular reference to Nigerian Bottling
Company PLC, Enugu.
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