Effective Internal Control System As A Means Of Detecting And Minimizing Fraud In A Manufacturing Company

Introduction

It is the primary responsibility in the management of business organization to prevent and detect errors, irregularities and frauds. The responsibility arises because of direction and other managers owe a contractual duty of care and must act in a stewardship capacity with regards to the property entrusted to them by the share holder or other owners.

They exercise this duty of care is a matter for them, be generally they discharge their duties by maintaining an effective internal control system.

In fact, internal control system mean "the whole system control financial and otherwise established by the management in order to carry in the business of a company in an orderly manner, safeguard its asset and secure as far as possible the accuracy and reliability of its record".

In other words, it is a complex series of continuous and interrelated activities design by the management to direct and monitor the affair of the organization.

1.1 Background of the Study

The main motive for internal control is to prevent and minimize fraud can be define as an international misrepresentation financial information by or more individual among the management, employees or third party it is a special cause of criminal description to obtain and undue advantage.

More over, the internal control system various one organization of another as regards the activities of individual. However, there is a frame work every internal control system and these are usually in the form of measure of performance against the objective, analysis and appraisal of the actual deviation and appropriate action including the re-appraisal of the objective.

1.2 Statement of the Problem

This study intends to ascertain the importance, impact and effects of internal control system as a mean of detecting and minimizing fraud in a manufacturing company often fair to take proper records of their accounts which has always caused such company into present or future failure.

The failure of business recognition within the manufacturing company has brought up the motivations of this project work, effective internal control system in the case study, Nigeria Bottling Company, Ilorin Plant, the question if how to appraise the effects and importance of effective internal control system.

Conclusively, with the problem discussed above, the researcher will proffer solutions to the problems during the course of the study.

1.3 Aims and Objective of the Study

This study aims at conducting a research in the operational activities of the company (Nigeria Bottling Company, Ilorin). Therefore offers were made to review and evaluate its internal control system and make suggestion for correction or improvement where there are loopholes in the existing system.

The immediate purpose of this study is to establish.

To identify internal control system that would detect and minimize fraud in order to facilitate attainment of organization objective.

That there is proper functioning of the organization.

That all receipt is duly accounted for

That the work dine by junior officers are checked by their supervisor, department heads to ensure conformity with established standard.

That purchases and sales of goods are properly carried out necessary books and record are kept.

1.4 Significance of the Study

The ultimate significance of this study is to enable the leaders managers handle the crime of counterfeiting handwriting documents materials in order to minimize fraud to its lowest possible so as effect primary aim of business organization which is profit making. Likewise to let the management see the need to main use of effective internal control system, in order to map out strategy to eradicate fraud entirely if possible.

An organization with ineffective internal control system adversely effect its progress therefore, it is in this context that the researcher wishes to analyze and emphasize the need for internal control system in an organization and suggest way by which effective control could be established in an organization.

1.5 Scope and Limitation of the Study

This research work covers some strategic area, such as effectiveness of internal control system of the manufacturing company with particular attention on staffing, knowledge, stall, discipline and supervision.

It is also covers the role of an auditor with respect of effectiveness of internal control system.

However, the problem encountered in the course of this study is the attitude of some respondents answered just few questions leaving majority of the question unanswered.

More so, the analysis of the study are based on responses of the respondents as well as the result of the interview conducted since there is no way testing the degree of reliance of their responses, do data collection. However, limited to the Nigeria Bottling Company, Ilorin Plant alone/due to materials and time constraints. The study may not be a good reflection of the system and it may result is not applicable to true situation in totality.

1.6 Organization and Plant of the Study

This shall comprise of five chapters. The first chapter will contain the Introduction, Background of the Study, Statement of the Study, Significance and Scope of the Study and the Definition of Terms, while

The Second Chapter consst of the Literature Review Internal Control and its Relevance, Internal checks, Internal Audit and Contribution of Scholars and Authors textbooks relevant to the research work and other sub-headings.

The third chapter shall consist of the Research Methodlogy, The History of the Research Study, Method of data Collection, data Analysis and technique and Source of data Collected.

The four contains the data Presentation and Analysis Data Presentation, data Analysis and Data Summary "while the last Chapter (5) Five state the Summary, Conclusion and recommendation, putting the following into consideration.

Bibliography, Questionnaire and Appendix of the project work.

1.7 Definition of Key Terms

Errors:

Errors are generally in auditing as unintentional mistake in the financial records. It make clients amount unreliable, misinterpretation of facts.

Frauds:

Frauds can be interpreted as an attempts to deceive by falsification. It is intention misrepresentation of financial information by one or more individual between management employee or third party.

Frauds can also refers to as stating stock value higher than obtainable, in a deceptive manner to be able to declare profit. Fraud can also be interpreted as international deceit.

Irregularities:

This refers to as intentional distortion of financial statement for whatever purpose or not accompanied by distortion of financial statement (such as payment disputes, imbalance figure e.t.c). irregularities give due for fraud.

1.8 Plan of Study

The structure of this research work is divided into five chapters:

Chapter One: Introduction containing general background of the study such as statement of the problems, its significant scope, objective and limitation of the study research.

Chapter Two: Literature Review shadding light of different authors (scholars), researchers, in related field and review journals, bullions and relevant literature.

Chapter Three: Historical Backgrounf of the Study, Methodology of data, data Analysis and Techniques, Source of data Analysis.

Chapter Four: data Presentation and Analysis, data Presentation, data Analysis and Summary.

Chapter Five: Contain of Summary, Conclusion and some Recommendation will be made.

5.0 Summary, Conclusion and Recommendation

5.1 Summary

The early part of this project deals with the introduction of the project topic. The role and essence of internal control system as an instrument of audit was discussed. Likewise the purpose of the study in the management of a business organization to be effectively and efficiently run so that the objective of the organization can be accomplished was also mentioned.

Chapter two of the project contained Literature reviewed of the study the internal control and its relevance internal check and internal audit were discussed. Also the type of fraud that may exist in an organization and its causes were mentioned. The fraud can affect the development of an organization and the possible factor that may encourage fraud in an organization, the basic control and how to minimize fraud were discussed.

In chapter three, we were able to state all avenues available to us. In collecting our data which include the company"s journals reports of direction management staff guide, conduction of oral interview as well as the job assessment of the staff. They gave us the opportunity to be able to know area where the system needs some amendments.

Even through in our finding, it show that there had not been any major fraud reported in record years the system shown that some errors were been reported.

There are specific areas controls are always been much such as cash sales store production and wages and salaries because of their importance and sensitive nature.

That is all cash and other items, which can easily be converted to cash, are always under the watchful eye of the internal check system.

During the course of studying, the internal control system of Nigeria Bottling Company, Ilorin Plant. The areas mentioned above are area where control is effectively manned both at the plant and the depot as one can see in chapter four, which deals with area of control in plant.

Therefore, it is not surprising that the plant not experienced any major cash in new cash fraud in recent years as revealed in our study and as a contain in internal control system, which can be fraud reasonable auditing test books, and so laid down by the auditing committee of the institute of chattered accountant of England.

5.2 Conclusion

The writer of this project has examined and assess the effectiveness of internal control measure being operating at the Nigeria Bottling Company, Ilorin Plant in Kwara state. At this juncture, it is pertinent to say that internal control does not exis at separately alone itself in the company everybody in the company is part of the internal control system through unknown to them.

Conclusively, it is an established tack that there is no absolute standard of internal control system, the circumstances and the need of the business alike. The only thing that can be said by way of generalization is that an adequate system of internal control is the one that is economical in term of cost effectiveness and efficiency in terms of reducing errors, fraud and irregularities to the nearest minimum and in the same vein able to reveal any error, fraud or irregularities that may arise in an organization.

5.3 Recommendation

A good and sound system of internal control system should be flexible to cater for the change in business condition. Having assessed the internal control system in the plant, we are of opinion that a constant review of the system in the plant is necessary so as to update the system to be able to cope with the current economic and social life of the business world. This will go a long way to further enhance discipline of the plant employee as well as increasing the effectiveness and efficiency of the plant and the company as a whole.

It is also obvious that the plant need new employees who are season professionals that are more qualified and well experienced. That is the plant need new management staff that will be able to blend and scope with the new business trend. This will improve profit, efficiency and the performance of the company generally.

Finally, we recommend that management should also ensure that receiving issue and entering the store items in the stock book should not be concentrated in the hand of one person. There should be division of duty in the department, to avoid misappropriation; the company must ensure that the cashier who prepares pay-in-slip should not be the one to receiving cashiers.

Title Page

Certification

Dedication

Acknowledgement

Table of Content

Chapter One

1.0 Introduction

1.1 Background of the Study

1.2 Statement of the Study

1.3 Aims and Objective of the Study

1.4 Significance of The Study

1.5 Scope And Limitation of the Study

1.6 Organization and Plan of the Study

1.7 Definition of the Key Terms

1.8 Plan of The Study

1.9 Historical Background of the Study of Nigeria Bottling Company

Chapter Two

2.0 Literature Review

2.1 Internal Control and Its Relevance

2.2 Internal Check

2.3 Internal Audit

2.4 Forms of Fraud and Its Cause

2.5 Effect of Fraud on Organization

2.6 Factors That May Encourage Fraud

2.7 Basis Control and Prevention of Frauds

Chapter Three

3.0 Research Methodology

3.1 Data Analysis and Techniques

3.2 Sources of Data Analysis

Chapter Four:

4.0 Data Presentation and Analysis

4.1 Introduction

4.2 Data Presentation

4.3 Data Analysis

4.4 Data Summary

Chapter Five

5.0 Summary, Conclusion and Recommendation

5.1 Summary

5.2 Conclusion

5.3 Recommendation

References

Appendix

• Internal Audit Effectiveness And Public Sector Financial Reporting Quality Of Selected Federal Government Health Institutions
• Effectiveness And Efficiency Of Internal Audit As Tool For Management Control
• Comparative Analysis Of The Effectiveness Of Internal Control System In A Computerized Accounting System
• Impact Of Internal Control System On The Effective Management In Government Ministries
• Internal Audit As A Tool For Ensuring Effective Management Of An Organization
• Impact Of Effective Internal Control On The Revenue Generation Of Local Government Councils
• Role Of Information Technology In Development Of An Effective Internal Control System

• Accounting Project Topics and Materials