1.0 Introduction
1.1 Background of the Study
There has been increasing attention in the system of internal control in the recent past. This has been as a result of the increasing size and the complex nature of most modern business units which has necessitated the adoption of different system of internal control. The development of these systems leads to efficient performance of these businesses and subsequently the output of the management process.
Systems such as internal control, accounting control, electronic data processing system are adopted by the management for the purpose of achieving their goals and objectives, safeguarding their assets and the efficient performance of the business which is aided by completeness and accuracy records.
The history of internal control systems could be traced back to the time human being began to form organization to achieve goals which they could not have achieve themselves as single individuals. The question of management and co-ordination of efforts became necessary immediately when more individuals came together to achieve a common goal.
Over the years, these organizations have grown in size and expanded vastly in operations. As a result of these, various kinds of irregularities ranging from international errors, frauds and either major international manipulation and falsification records or even to the extent where individuals connive to undermine the system of internal control in operating.
Daily reports illustrations in the media clearly indicated how some chief executives and top management personal of some organizations have embezzled and misappropriated the fund of such organizations as a result of weakness in the system of internal control in such organization.
According to Anderson (1977:143) it should exist for clear that “internal control does not exist for the sake of the auditor alone, but for the sake of the organization as a whole and its management”. So even small organizations that may not require statutory publication of their financial accounting statements and audit report still need the existence and effective operation of a good system of internal control are important tools by which an organization can achieve its objectives of ensuring as far as possible the orderly and efficient conduct of the organization activities.
The system of internal control plays a vital role as a tool for efficient performance of an organization and it has also proved its worth in organizations where they are well established.
According to Mohammed (1982:20) “where an internal control is employed in an organization, it does not make irregularities impossible by any means but makes it more difficult and the chance of detection more great”. Assets are better safeguarded accountability in existence, an organization can perform better, owing to the accurate records of financial transactions, and auditors could also base their audit work and subsequent audit reports on the system of internal control existence. But were internal control systems are absent or ineffective, fraud is suspected.
Due to increase in acquisition of financial assets, physical assets and increased sophistication in financial recording, the need arises for increased watch and adherence to management plans and policies in the various business. These call for routine study and innovations on the system of internal control in existence in most organizations to guard against weakness and loopholes.
1.2 Statement of Problems
There is a popular adage that says “knowing the problem is half cure” some of the problems of internal control are:
- Many banks do not maintain adequate internal control system.
- Internal control system doesn't help management to safeguard the assets of the organization.
- Internal control system does not facilitate management decision making.
- Internal control does not help management to achieve its organization goal.
1.3 Purpose of the Study
The purpose out-lined below:
- To find out if there is adequate internal control system in the firm.
- To find out if internal control system help management to safeguard the assets of the organization.
- To find out of internal control system facilitate management decision making.
- To find out if it produces reliable and accurate organizational information for the management and all those who need it.
1.4 Research Question/Hypothesis
Based on the information in the statement of the problem the research questions are:
- Does the firm maintain adequate internal control system?
- Does the internal control system help management to safeguard the assets of the organization?
- Does it help management to achieve its organization goals?
The hypothesis will however be tested for significance with the data to be generated during the study, the following hypotheses are formulated for the study.
Hypothesis 1
Ho: Internal control system does not help management to achieve its organizational objective.
Hi: Internal control system helps management to achieve its organizational objectives
Hypothesis 2
Ho: Internal control system does not aid management to define the duties of staff.
Hi: Internal control system helps management to define the duties of staff.
1.5 Scope of the Study
This research on the problems and prospects of internal control system is designed to cover all the principles and procedures of an organization as lay down by experts in the field of accounting. The internal control system being the whole system of control is a vast topic that control is exhaustively dealt with in one research work.
The study is restricted to Guaranty Trust Bank plc Owerri branch. It is however, believed that the result from this bank will be used to generate data on the effect of neglect or otherwise of internal control system in Guarantee Trust Bank plc Owerri branch.
It is however, believed that the result from this bank will be used to generate data on the effect of neglect or otherwise of internal control system in Guaranty Trust Bank plc Owerri branch.
1.6 Limitation of the Study
The researcher encountered a problem when he went to the bank to obtain data on a recent internal control report of the bank as required by the work. When I got there, I met with the security man who introduced me to the credit control officer; who later explain my mission to the accountant, he notified me that such information is not made known to the public, he made it clear to me that it is strictly for internal use only not for external use.
Another problem is the time period given to do this work is not sufficient for such research work, and insufficient fund is another factor militating against this research work because it will limit most of the areas the researcher are supposed to have covered.
1.7 Significance of the Study
The significance of the study cuts across many interest groups. It will generally reveal how any business management can use sound internal control system to achieve its set goals. It will also help business organizations to understand more about the benefits and impacts of internal control system.
It will help the government to set adequate and proper internal control in its public organization because, it produces reliable information. Again, the study is significant because it will serve as reference source to future researchers on the problems of internal control system in any organization it will add to body of knowledge already in existence in the academic world.
1.8 Definition of Terms
Decision:
This is the process of choosing one course of acting in the face of many alternatives.
Efficiency:
This denotes the state of minimizing cost but maximizing quality without additional resources.
Operating Procedure:
This refers to the approved means of carrying out businesses of the organization.
Tool:
This is used to describe any instrument with which a specific objective is achieved.
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