Appraisal Of Internal Control System On Large Firm
(A Case Study Of Emenite Ltd)
The appraisal of the internal control system within a large firm encompasses a comprehensive evaluation of the mechanisms and processes in place to safeguard assets, ensure accuracy of financial reporting, and promote adherence to policies and regulations. This assessment involves scrutinizing the design and effectiveness of controls implemented across various departments and functions, including financial, operational, and compliance areas. Key components evaluated typically include control environment, risk assessment, control activities, information and communication, and monitoring activities. By conducting a thorough appraisal, firms can identify strengths, weaknesses, and areas for improvement in their internal control framework, thereby enhancing operational efficiency, minimizing risks, and fostering stakeholder confidence.
This project invested the appraisal of internal control system in large firms. The study was aimed at determining the strength and weakness of internal control system in public limited liability companies and how the existing control has helped the management in the realization of the organizational objective
In this project the research found out whether
1. There is regular cash survey to ensure that amount voted into imprest in judiciously used.
2. Majority of the employees are paid through banks and all authorized deductions are remitted to their appropriate authorities.
3. Stocktaking is usually carryout by a team consisting of store and accounting staff preparation of pay roll and payment of salaries are not usually done by some person.
Data for research was collected from both primary and secondary. Primary data was conducted mainly through the use of questionnaires supplemented by oral interview, which was conducted among the staff of the company. Data was analyzed using the chi-square and percentage method of analysis. A test was carried out which showed that system of internal control in the company is effective.
Title page
Dedication
Approval page
Acknowledgement
Abstract
CHAPTER ONE
1.0 Introduction
1.1 Background
1.2 Statement of the problem
1.3 purpose of the study
1.4 The scope of the study
1.5 Research question
1.6 Statement of Hypothesis
1.7 Significance of the study
1.8 Limitation of the study
CHAPTER TWO
2.0 REVIEW OF RELATED LITERATURE
2.1 Origin and purpose of internal control
2.2 Definition of internal control system
2.3 Internal check and control
2.4 Types of internal control
2.5 Element of internal control and internal auditing
2.6 Limitations of internal control
CHAPTER THREE
3.0 Research METHODOLOGY
3.1 Research design
3.2 Area of study
3.3 population of the study
3.4 Determination of sample size
3.5 Instrument for data collection
3.6 Method of data collection / Administration of research instrument.
3.7 The validity of the instrument used.
3.8 Method used for water data analysis
CHAPTER FOUR
4.0 PRESENTATION AND ANALYSIS OF DATA
4.1 Interpretation of data.
4.2 Finding
CHAPTER FIVE
5.0 SUMMARY CONCLUSION AND RECOMMENDATION.
5.1 Summary of findings
BIBLIOGRAPHY
QUESTIONNAIRES
1.0 BACKGROUND OF THE STUDY
1.1 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 persons 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.
1.THE CONTROL ENVIRONMENT
The control environment set the tone an organization by influencing the control consciousness of the people. It may be viewed as the foundation for the other components of internal control. Control environment factors include integrity and ethical values; commitment to competence board of directors or audit committee, managements philosophy and operating style organizational structure; assignment of authority and responsibility to human resource politices and practices.
2. RISK ASSESSMENT
The second component of internal control is risk assessment. Management should carefully identify and analyze the factors that affect the risk that the organizations objectives will not be achieved and then attempt to manage that risk. Managements risk assessment involves consideration of those factors that effects all of the organizations objective.
3. The accounting information and communication system information is needed at all levels of an organization to assist the management in meeting the organizations objective of major concern to the auditors is the accounting information system, and the way in which responsibilities for internal control over financial reporting are communicated throughout the organization. Accounting information system should include a chart of accounts and a manual of accounting policies and procedure as aids for communicating policies.
4. CONTROL ACTIVITIES
Control activities are policies and procedures that help to ensure that management’s directives are carried out. These policies and procedures promote actions and address the risks that face the organization. There are many different types of control activities performed in an organization.
5. MONITORING
Monitoring is a process that assesses the quality of internal control overtime. It is important to monitor internal control to determine whether any modifications are necessary. Monitoring can be achieved by performing ongoing activities or by separate evaluations ongoing monitoring activities include regularly performed supervisory and management activities such as: continuous monitoring of customers complains or reviewing the reasonableness of management reports.
In Nigeria, much emphasis is plaid on account ability and the keeping of accurate records of transportation by those who manage the affairs of all business enterprises.
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. How far has the existence of internal control audit has helped to minimize errors in the company?
2. do all staff see the company’s goal as a joint responsibility?
3. are all empolyee’s motivated by the process of strong internal control?
4. are all transportations from beginning to the end been carried out by the same set of individual?
5. Whether the internal control has successes in protecting the company against errors and irregulatives and ensure the reliability of accounting data?
1.3 PURPOSE OF THE STUDY
The purpose of the study is the aim of the researcher to undertake the study. It examines the overview of internal control in making sure that objectives of the organization are achieved by strictly adhering to the management policies without deviation.
1. 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. 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.
RESEARCH QUESTIONS
1. Does internal control system exist in large firms
2. How effective is the internal control system in large firm
3. Does internal control system help in minimizing fraud and loss of property in your firm?
4. How far does staff respond to their responsibilities
5. Does the internal audit exist in your company
6. Does the Audit section achieve the goal for which it has been set?
7. Does the staff see the company’s goal as a joint responsibility
8. Does the large firm take adequate steps to safeguard their assets?
9. For large firms to safeguard their assets, what step do they take?
10. How far does the step taken by companies help in safeguarding their assets?
1.6 STATEMENT OF HYPOTHESIS
NULL HYPOTHESIS
The hypothesis is the core of the study and therefore acts as a beacon light in the course of the research. It is therefore a suggested answer to the problem of the research under investigation.
For the purpose of this research, null hypothesis will be used which is deviated by HO HO: I: I internal control system in public limited companies are not effective 1:2 internal control system in public limited company are effective.
1.7 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.
1.8 LIMITATIONS TO THE STUDY
This study is limited to the availability or time, finance and the semesters work load.
Appraisal Of Internal Control System On Large Firm:
An internal control system in a large firm is a crucial component of its governance structure. It encompasses the policies, procedures, processes, and mechanisms designed to ensure that the organization’s objectives are achieved efficiently and effectively, financial reporting is accurate, assets are safeguarded, and compliance with laws and regulations is maintained. Here are key aspects of an internal control system in a large firm:
- Control Environment: The tone at the top sets the foundation for the internal control system. Senior management’s commitment to ethics, integrity, and compliance sets the culture that guides employees’ behavior. Large firms often have robust governance structures and clear lines of authority and responsibility.
- Risk Assessment: Large firms conduct a thorough risk assessment to identify and evaluate potential risks to their operations. This includes financial, operational, strategic, and compliance risks. Risk assessment helps prioritize where internal controls are most needed.
- Control Activities: Control activities are specific policies and procedures put in place to mitigate identified risks. In a large firm, these can include segregation of duties (ensuring no single individual has too much control over a process), authorization processes, document trails, and technology-based controls.
- Information and Communication: Effective communication is crucial. Information flows throughout the organization, including financial and non-financial information. Large firms often have elaborate reporting systems to ensure relevant information reaches the right people.
- Monitoring: Ongoing monitoring is essential to ensure that controls are functioning as intended. This can involve periodic internal audits, external audits, management reviews, and the use of technology-based monitoring tools.
- Compliance: Large firms must adhere to various laws and regulations. An internal control system ensures that the company is in compliance with these rules. Compliance controls often involve specific reporting and documentation requirements.
- Technology: Large firms often rely on sophisticated technology for their operations and internal controls. This can include enterprise resource planning (ERP) systems, data analytics, and cybersecurity controls to protect sensitive information.
- Documentation and Record-Keeping: Maintaining detailed records of financial transactions, control activities, and compliance efforts is essential. Large firms generate a vast amount of data, and proper documentation helps ensure transparency and accountability.
- Training and Education: Employees must be trained on internal controls and compliance requirements. Large firms invest in training programs to ensure that employees understand their roles and responsibilities in maintaining the control environment.
- Whistleblower and Reporting Mechanisms: Large firms often establish mechanisms for employees to report concerns or potential violations confidentially, such as anonymous hotlines or reporting channels. This encourages early detection of issues.
- Crisis and Contingency Planning: Preparing for potential crises, such as financial downturns or cybersecurity breaches, is essential. An internal control system should include contingency plans to mitigate the impact of such events.
- Continuous Improvement: Large firms regularly assess and enhance their internal control system to adapt to changing risks and business environments. This may involve benchmarking against industry best practices and implementing improvements as necessary.
In summary, an effective internal control system in a large firm is a multifaceted framework that encompasses governance, risk management, compliance, and operational efficiency. It helps the organization achieve its objectives while safeguarding assets and ensuring compliance with laws and regulations. Continuous monitoring and improvement are essential to keep the system effective in an ever-evolving business landscape.