AN APPRAISAL OF INTERNAL CONTROL SYSTEM IN THE PRIVATE SECTOR

Description

CHAPTER ONE

1.1    BACKGROUND OF THE STUDY

Internal control has attained greatest significance in large-scale business organizations. It is of great assistance to both the management and auditors of such organization because it enables them to carry on the business in an orderly and efficient manner. It safeguard its assets and secure the accuracy and reliability of records.

The primary aim of an organization that is profit oriented is to operate the business in the most efficient way. That is to maximize profit at a minimum cost. This can be made possible by establishing strong internal control which acts as regulator of an organization. The internal control can be compared to a person’s nervous system. It embraces the entire organization internal control as the nervous system has five component that help it to coordinate the activities of the organization. They are:

1.  The control environment

2.  Risk assessment

3.  The (accounting) information and communication system

4.  Control activities and

5.  Monitoring.

In this chapter our discussion dealt with the following. Statement of the problem, objective of the study hypothesis, research questions, significance of the study scope of the study.

1.2    STATEMENT OF THE PROBLEM

The statement of research problem serves to explain in detail the information in the title of the study. This research seeks to find out the extent to which the system of internal control has helped to prevent both employee fraud and fraudulent reporting, assuming control over manufacturing and other process through the following questions.

1.  Management interview

2.  Lack of clarity of job deception and segregation of functions in a private sector.

3.  Lack of qualified personnel in the system.

4.  Master employers or servants relationship

5.  Inadequate detection of errors in the large system.

1.3    OBJECTIVE OF THE STUDY

This is to investigate how for internal control have achieved its objective in a manufacturing company.

Internal control are techniques employed by managers to ensure that specific control objective are contionevely met.

Control can be implemented to protect anything of value to a company’s economic performance or continued sustain ability.

The objective of internal control system of private company are:-

1.     Property of transaction: An important objective of internal control is to ensure that all monetary transactions conducted by the organization are in line with the company’s operational activities. Control in this area are focused around accounts payable and account receivable, ensuring that money is not being last, stolen or posted to erroneous accounts.

2.     Compliance: Complain with government regulation can require significant. Investment of time and money. Implementing internal controls to maintain compliance with applicable laws can help you avoid costly legal consequence as well as greatly reduced the cost associated with compliance related to activities.

3.     Efficiency: Efficiency is very important to the achievement of competitive advantage and maximization of profitability.

4.     Safety and security:- Safty plays a large part in any system of internal controls, rules and procedures play a vital role in maintaining a safe atmosphere for your employees and customers and limitations of the study.

1.4 HYPOTHESIS SIGNIFICANCE OF THE STUDY

For the purpose of this research work, the following assumptions were made.

1.   H0: There is no existence of internal control system

in Emenite Ltd.

H1: There is no existence of internal control system in Emenite Ltd.

2.   H0: Internal control is not effective in the forms

segregation of function.

H1: H0: Internal control is not effective in the forms

segregation of function.

3.    H0: The impact of such effectiveness is not felt in

the vouching payment activities of the firm.

H1: The impact of such effectiveness is not felt in

the vouching payment activities of the firm.

1.5 RESEARCH QUESTION

1.  Does internal control system exist in private sector.

2.  How effective is the internal control system in private Sector

3.  Does the internal control system help on monomosory fraud and loss of property in your private sector?

4.  Does the internal audit exist in private sector?

5.  What step do they take to safe guard asset of the private sector.

1.6 SIGNIFICANCE OF THE STUDY

This refers to the usefulness of the research to the public limited companies. The individuals, the government and society. The ultimate aim of every research is to provide knowledge and information that will about a better understanding of the topic under review. It is aimed at providing an understanding of the effectiveness of internal control system as obtainable in the private and public limited companies in Enugu State.

The researcher will be able to know the extent to which internal control system has held the management in the realization of their firm’s objectives. It will enable the management to appraise the internal control system in operation with a view to correcting any lapse, which may be evidence during the investigation process.

1.7    SCOPE OF THE STUDY

The scope of the study is the appraisal of internal control in large firms. The firms are made up of several departments and sections which the researchers found in “EMENITE LIMITED ENUGU BRANCH”.

For a better approval, one has to visit several departments to assess their system of control. How ever this is not feasible judging from the set backs that the researcher encounters through

1.8 LIMITATIONS TO THE STUDY

This study is limited to the availability or time, finance and the semesters work load and transportation. The major factor of the limitation is time and the researcher found. It difficult to cope with time factors and the financial aspect of it. The semester load added to the limitation, for the researcher to move for ward so that he could be able to cope with all these limitations.

Transportation, this is another major problem of the researcher, he found it difficult to transport from his destination to the venue regardless of time factor. Nevertheless, the researcher was able to collect all basic necessary facts to ensure objectively in the result of the project.