THE IMPACT OF INTERNAL CONTROL SYSTEM IN A MANUFACTURING INDUSTRY WITH A SPECIAL REFERENCE TO COCO COLA AND ANAMMCO COMPANIES
A
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THE IMPACT OF INTERNAL CONTROL SYSTEM
IN A MANUFACTURING INDUSTRY WITH A SPECIAL REFERENCE TO COCO COLA AND ANAMMCO
COMPANIES
ABSTRACT
This
research work “The Impact of Internal Control System in manufacturing Industry
with reference to coca cola and ANAMCO Companies” aims at determining the
strength and weakness of internal control system and exposing the areas of
weakness in the operation of the system and how it effects the productivity and
hence profitability of the organization. To examine the extent the internal
control have gone in bringing about efficiency in the operation of
manufacturing industries. To recommend approaches to proper designing
installation and operation of an adequate internal control system which will
improve and ensure further survival of manufacturing firms. Source of data used
include both primary and secondary data. The data collected were analyzed using
the chi-square test method. The findings are lack of knowledge of internal
control system by the staff has affected its application in the running of the
business and the weakness in internal control system of business manufacturing
companies affect the projected profit of the companies. Some recommendations
are audit department should be created in each company and should be made
independent to be able to report deliberate errors, falsifications or improper
use of record or other forms of irregularities that comes to it attention.
TABLE OF
CONTENTS
Title page
Approval page
Dedication
Acknowledgement
Abstract
Table of Contents
List of table
List of figures
Chapter One: INTRODUCTION
1.1 Background of the study
1.2 Statement of the problem
1.3 Objective of the study
1.4 Research Questions
1.5 Hypothesis
1.6 Significance of the study
1.7 Scope and Limitation of the study
1.8 Definition of Terms
References
Chapter Two:
REVIEW OF RELATED LITERATURE
2.1 Definition of Internal Control
2.2 Elements of a good Internal Control
System
2.3 Area of Internal Control
2.4 Internal Control System in Electronic
Data Processing System
2.5 Limitations of Internal Control System
2.6 Internal Audit
2.7 Manufacturing Companies
2.8 The Impact of Internal Control on coca
cola and Anammco Companies
References
Chapter
Three: RESEARCH DESIGN AND METHODOLOGY
3.1 Research Design
3.2 Description of Respondents
3.3 Sources of Data
a) Primary Sources of Data
b) Secondary Sources of data
3.4 Population of Determination of Sample
Size
3.5 Methods of Investigation
Chapter
Four: PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA
4.1 Analysis of Data
4.2 Testing of Hypothesis
Chapter
Five: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 Summary of Findings
5.2 Conclusion
5.3 Recommendations
Bibliography
Appendices
Chapter One
INTRODUCTION
1.1 Background of the Study
The sizes,
capabilities, and complexities of modern companies even the smallest requires
internal control in the activities of the organization. As an organization
grows, the management needs more formal information system in order to maintain
control. The control can no longer be carried out by the man on top. Since the
organization is now complex, and subject to such influences without that one
person can possibly hope to exert the detailed and sophisticated control
needed. The management therefore, needs assurance that the accounting data it
receives are accurate and dependable. This assurance is provided in large part
by developing strong system of control that comes from within the functioning
of the organization itself. This strong system is the internal control system.
It is the system where each level of management acts as a siege so far as
possible. Adverse factors are dealt with on the spot by lower management before
they grow to worse.
The
institute of chartered accountants of Nigeria defined this internal control as
the whole system of control, financial, personal, operating and good
information management system and otherwise established by the management in
order to carry on the business of the enterprise to achieve their aim and set
objectives in an orderly and efficient manner, ensure adherence to management
policies, safeguard the assets the assets of the organization and secure as far
as possible the completeness and accuracy of record. This definition recognizes
that a system of internal control extends beyond to the functions of accounting
and financial departments infact, the concept of internal control is so vast
that it effects all the assets of business, all liabilities, the revenue and
expenditures, periodic operating reports, statistical analysis and
dissemination therefore, it also taught across standard costing training
programmes designed to aid the personnel in meeting their responsibilities,
internal audit and every aspect of the operation.
The main
purpose of internal controls can be deducted from the above definition are:
1) To ensure adherence to management
policies.
2) To safeguard the assets of the
organization.
3) To secure as far as possible the
completeness and accuracy of records.
4) To evaluate the level of performance
in all divisions of the company
Infact,
internal controls aid in the efficient operation of a business. The increased
size of business units have encouraged the adoption of different methods which
will both increase the efficient of the business and act as a safeguard against
fraud and error which adversely affect profitability. The basic divisions of
the elements of internal control are:
Plan of Organization
Plan should
cover the activities of both management and staff at all levels stating clearly
their duties responsibilities and their power to authorize various activities
of the business.
Authorization, Recording and Custody
Procedures:
Where these
are concerned, the financial and accounting controls should be as such as to
facilitates efficient working, at the same time obviate any chance of fraud or
error arising.
Management Supervision and Review:
Management
should constantly review and give consideration to the financial position and
financial procedures within the organization. This may include the use of an
internal audit department, but not necessarily so. Budgeting control whereby
variances are revealed and investigated special reviews of department systems
may also take time apart from normal internal audit procedures.
However
every company designs its own internal control according to the needs of the
establishment or the area in question needs to be in relationship with the cost
benefit. All departments needs to be scrutinized properly before an adequate
and strong system which will provide all the necessary informations that can be
understood and concise form can be designed. The success and continued
existence of all manufacturing companies and all business enterprises lies on
the internal controls that exist there. In other words, the internal control
system is the key to profitability of all manufacturing companies.
1.2 Statement of the Problem
Although
internal control is highly effective in increasing the reliability of
accounting data and in protecting against fraud and errors and promoting the
efficiency and growth of the organization no system of internal control is
fully proved. Today, there are news of bankruptcy and folding up of many
manufacturing companies due to some problems like:
i) Lack of raw material for production
of enough goods for quantity demanded of the people;
ii) Different companies have not been manufacturing
or producing the expected or projected number of units.
iii) Most companies have not been adhering
to the system of internal control. It is being neglected and poorly operated.
iv) Internal control in most companies is
not operational rather it held in principles;
v) Lot of money is lost through non
adherences to internal control system thereby denying its expected profit.
1.3 Objectives of the Study
The
objectives of this study include among other things:
i) To examine the extent to which
management have designed, installed and operated the internal control;
ii) To expose the areas of weakness in
operation of the system and how it effects the productivity and hence
profitability. Profitability here is related to the level of internal control
system;
iii) To examine the extent the internal
controls have gone in bringing about efficiency in the operation of
manufacturing industries;
iv) To recommend approaches to proper
designing, installation and operation of an adequate internal control, system
which will improve and ensure further survival of manufacturing firms.
1.4 Research Questions
1) To what extent has internal control
system, improved the activities of the manufacturing industry?
2) Can in adherent to the system of
internal control affect the profitability of the manufacturing companies?
3) Has internal control system reduces
the chances of fraud and errors in the manufacturing companies?
1.5 Hypothesis
Hypothesis I
Ho: Manufacturing companies have failed to
maintain strict and efficient internal control over their cash.
H1: Manufacturing companies have maintained
strict and efficient internal control over their cash.
Hypothesis
II
Ho2: Lack of knowledge of internal control system
by the staff has negatively affected its application in running of the
business.
H1: Knowledge of internal control system by the
staff has positively affected its application in running of the business.
Hypothesis
III
Ho: The weakness in internal control system of
manufacturing companies affects the projected profit of the companies.
H1: The weakness in internal control system of
manufacturing companies does not affect eh projected profit of the company.
1.6 Significance of the Study
This work
will undoubtfully be of a great help to management of various manufacturing
companies and other business enterprises. The importance of it brings the dream
of designing and internal control system and throws more light on the need for
adequate system of control which helps in bringing efficiency in operation and
achievement of objective which leads to increased profitability of the company
it shows that areas of weakness of internal control and suggests appropriate
measures of correcting those weaknesses. It also moves on the state the
negative effect of poor internal control operation which most at times lead to
leakage in the projected profits. This will help waken most companies in order
to tighten their loose ends, maximize profit, survive and succeed. Others who
will benefit from this work are other researchers on this topic, it will help
them for further researcher. The researcher found this work invaluable to his
academic advancement because it has exposed him to so many things which ordinary
he would not have come across.
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