Internal Control As A Tool For Efficient Management
(A Case Study Of P & Co Feed Limited)
Internal control serves as a crucial tool for efficient management by providing systematic measures and procedures designed to safeguard assets, ensure accuracy and reliability of financial reporting, and promote adherence to organizational policies and regulations. By implementing robust internal control mechanisms, management can mitigate risks, prevent fraud, and optimize operational performance. Effective internal controls also facilitate decision-making processes by providing reliable information, enhancing transparency, and fostering accountability throughout the organization. Furthermore, they contribute to the achievement of strategic objectives by promoting efficiency, effectiveness, and compliance with laws and regulations, thereby enhancing overall organizational performance and sustainability.
This project was carried out wit the sole aim of investigating the internal control system as a toll for efficient management using Peco feeds as a case of study.
The project is divided into many chapters, chapter one is introduction, and chapter tow is review of the related literature. Chapter three is research methodology, chapter four presentation and analysis of data and also the organization structure of Peco feeds Limited while chapter s the recommendation and conclusion
The study toll used is oral interview, use of questionnaire, reading and journals and personal observation
The study covers the following area of the system records, physical facilities, personnel, procedures, organizational structure and control. Some findings were made at the adequacy and effectiveness of control system and some necessary recommendation made.
Title page
Approval page
Dedication
Acknowledgement
Abstract
Table of content
CHAPTER ONE:
1.1 Introduction
1.2 Statement of the problem
1.3 Objective of study
1.4 Significance of study
1.5 Statement of the hypothesis
1.6 Scope of the study
1.7 Scope of the study
1.8 Definitions of terms
CHAPTER TWO:
2.1 Review of the related literature
2.2 Introductions
2.3 Division of internal control
2.4 Fundamental practical applications
2.5 Behavior consideration
2.6 Non – profit controls
2.6 Internal check
2.7 Internal audits
2.8 The development and need for internal audit
2.9 The responsibilities of internal audit
2.10 Requirement for effective audit
CHAPTER THREE
3.1 Research design and methodology
3.2 Pupation and sample size
3.4 Instrument of data collection
3.5 Sample used
3.6 Response rate
CHAPTER FOUR
4.1 Data analysis and interpretation
4.2 Data presentation and analysis
4.3 Test of hypothesis
CHAPTER FIVE
SUMMARY, FINDINGS, CONCLUSION AND RECOMMENDATION
5.1 Summary of the findings
5.2 Conclusion
5.3 Recommendation
BIBLIOGRAPHY
APPENDIX / QUESTIONNAIRE
INTRODUCTION
The study of this internal control system of an organization is like the study of an anatomy of man. In word of Peter Druker” Good organizational structure dose not buy itself produce good performance just like a good constitution dose not guarantee great presidents or good laws a moral society. But a poor organizational structure makes good performance impossible, no matter how good the individual managers”.
Promised on this dictum, it is therefore obvious that the organizational structures of an establishment will greatly determine to what extent the organization is to be managed. In some organizations, jobs are not properly defined, duties are not efficiently assigned to the right persons and functions are sometimes duplicated with the result that in fighting within the organization results in sub-optimization. By this I mean that each staff and sub-manager try to impress the management and often times to the detriment of the overall goal of the organization.
A good internal control system ensures that functions/duties are properly defined and that duties are properly are properly assigned to qualified staff and that there is an inbuilt control in the system to ensure feedback, detection and correction of errors in good time.
It is the overall good of any organization to ensure its continued existence and growth hence establishments set up certain units/departments in their organization to ensure that its good is achieved to a reasonable degree.
The internal audit is one such unit established by the management to ensure compliance to policy instructions and to correct for correction deviation from the management set guideline .it objectively examines, evaluates and reports on the adequacy of the internal control, thereby ensuring efficient and effective application of limited resources.
Internal check is also another internal control tool employed by the management to ensure that the objective of the organization is attained.
The entire system of check internal audit and internal check, which is geared towards the attainment of the organizations goal, is called internal control.
Internal control has different definitions but most widely accepted is that of the statement of accounting standard (SAS) which defined internal control as “not only internal check and internal audit, but the whole system of controls, financial and otherwise establi9shed by management in order to carry on business of the company in an orderly manner, safeguard its assets and secure as far as possible the accuracy and reliability of its records”. The internal control system should be an open one and should be cheap, conveniently manipulated by management to ensure completeness and accuracy of records and also prevent or uncover errors and fraud. It should be based on the overall view of the organization and should provide information for all uses of the system.
STATEMENT OF PROBLEMS
In very human endeavor, problems and difficulties will arise. Manufacturing is not an exception to this rule
The common problems encountered include:
1. Inadequate capital and poor administration
2. Poor accountability
3. General increase in all aspects of operational costs
4. Unsteady policy by government resulting in uncertainties
5. Internal control breakdowns
6. Stringent loan conditions by banks
The above general problems are easily identified and are associated with under development of the society. There is also the psychological angle, the problem of dissatisfaction of workers and the attending strike action which often result to loss of many hours and disruption of the entire system
RESEARCH OBJECTIVE
This study will be aimed at accomplishing the following objectives:
1. To examine the nature and scope of internal control systems in a manufacturing establishment using Peco feeds as a case study
2. To ascertain whether the internal control systems in use are appropriate and will lead to efficient management
3. To identify the principal problems associated with workers dissatisfaction and recognize the implications of such problems for control methods
4. To seek purpose oriented solutions and make recommendations that will go a long way in solving the identified problems
SIGNIFICANCE OF STUDY
This research work has been undertaken in such a way that students, researchers and interested persons would be educated in the following areas:
1. The various internal control systems
2. The causes of breakdown in internal control systems
3. The effects of an efficient or inefficient internal control systems on the management of an organization
4. Corrective measure to ratify an inefficient control system
STATEMENT OF HYPOTHESIS
For the purposes of the study, the researcher wishes to states the following hypothesis:
1. That the internal control system in operation in Peco feeds limited is adequate in the area of promotion and encouragement of effective operational efficiency and adherence to management plans and policies
2. That the internal control, internal check and internal audit in Peco Feeds Limited has been of immense help to the management both in the areas of safeguarding the assets of the organization and the prevention of questionable claims and payments
RESEARCH QUESTIONS
In other that the research provides the results, the following research problems, which revolve around the basic elements of an effective and efficient internal control, system would be utilized in testing the research hypothesis
1. To what extent does the organizational structure and responsibility sharing arrangement in Peco Feeds Ltd reflect the existence of an effective an efficient control system?
2. How efficient is the internal control system in Peco Feeds Ltd with regards to the safeguard of its fixed and other assets as well as in the prevention of questionable claims and payments?
3. How efficient is the accounting system in use in Peco feeds Ltd with regard to responsiveness to the organizational objectives as well as in the area of accuracy and reliability of the financial records prepared under the system?
4. To what extent has the existence of an internal audit unit in Peco Feeds Ltd helped in the promotion of operational efficiency and encouragement of adherence to management policies?
LIMITATIONS OF TERMS
In very human undertaking, there has to be a limitation. The limitation could be internal or external; internal to the extent of the researchers ability and external to the extent of things outside the control of the researcher.
In this undertaking finance and time has been the most constraining factor. Some others include the usual Nigerian attitude to label every imaginable piece of information as confidential or to secret.
DEFINITIONS OF TERMS
1. Internal control – this is defined as “not only internal check and internal audit, but the whole system of controls, financial and otherwise, established by management in order to carry on the business of the company in an orderly manner, safeguard the assets and secure as far as possible the accuracy and reliability of its records.
2. Internal check- this is defined as “the allocation of authority and work in such a manner as to afford checks on the routine transactions of day to day work by means of the work of one person being checked or controlled independently by another “.
3. Internal audit: this is defined as “an independent appraisal activity within an organization for review of accounting, financial and other operations as a basis for service to management.
It is a management controls which functions by measuring and evaluating the efficiency and effectiveness of other control.
4. System: this is define is an organized or a complex whole. It is a set of a complex related or a an arrange of essential principles or facts arranged in a rational dependence or collection forming a coherent whole.
Internal Control As A Tool For Efficient Management:
Internal control is a crucial tool for efficient management within an organization. It refers to the systems, processes, policies, and procedures put in place to ensure the accuracy of financial reporting, safeguard assets, and promote operational efficiency. Here’s how internal control functions as a tool for efficient management:
- Risk Management: Internal control helps identify and manage risks that could impact an organization’s objectives. By implementing controls that mitigate risks, management can make informed decisions that contribute to the achievement of goals.
- Operational Efficiency: Effective internal control streamlines processes and workflows. It ensures that tasks are performed consistently and in accordance with established standards, reducing errors, redundancies, and delays. This, in turn, leads to increased operational efficiency and productivity.
- Accuracy of Financial Reporting: Internal control ensures the accuracy, completeness, and reliability of financial information. This is critical for making informed decisions, meeting regulatory requirements, and maintaining the trust of stakeholders.
- Fraud Prevention: Internal controls act as a deterrent to fraudulent activities. They help detect and prevent unauthorized transactions, inappropriate use of resources, and other fraudulent behaviors that could harm the organization.
- Compliance with Regulations: Internal controls ensure that an organization adheres to relevant laws and regulations governing its operations. This minimizes the risk of legal penalties and reputational damage due to non-compliance.
- Asset Protection: Internal control safeguards an organization’s assets, including physical assets like equipment and property, as well as intangible assets like intellectual property and sensitive information. This protection is essential for the organization’s long-term sustainability.
- Effective Decision-Making: When management can rely on accurate and timely information, they can make well-informed decisions that contribute to the organization’s success. Internal control provides the necessary assurance that the information used for decision-making is trustworthy.
- Transparency and Accountability: Internal control promotes transparency by documenting processes, transactions, and responsibilities. This transparency enhances accountability among employees and management, as everyone understands their roles and the expected outcomes.
- Continuous Improvement: Internal control systems are subject to periodic evaluation and improvement. Through this process, management can identify weaknesses, adapt to changes, and refine their operations over time, leading to ongoing enhancements in efficiency.
- Stakeholder Confidence: Effective internal control builds confidence among stakeholders, including investors, customers, lenders, and regulators. When stakeholders have faith in an organization’s internal controls, they are more likely to engage with the organization in a positive manner.
In conclusion, internal control is a vital tool for efficient management. By establishing a strong internal control framework, organizations can enhance their operations, minimize risks, ensure compliance, and make well-informed decisions that contribute to their overall success and sustainability.