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ROLES OF INTERNAL CONTROL IN AN ORGANIZATION

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF STUDY

International audit firms together with their government to serve as a yardstick by which they must operate failure to do so can lead this firm to changes of negative and serious financial penalties. However, most business concerned have developed a means of checking the rate of fraud, illegal acts, misappropriation of assets etc. which had led to many companies folding up abruptly or endeared bankrupt. One of the best preventives against crimes being committed or stated in business is through the establishment of internal control which must be under the supervision of an auditor or the directors, who should have as one of their objective, the regarding of assets, and the proper knowledge of and recording of liabilities. Internal control, contrary to frequent misconceptions, is not operations procedures but a check on operating procedure.

They are not part of the audit function, but the establishment of rules, and regulation proofs or balances. Rules and regulation are those guides and procedures establishment for the purpose of preventing a person from handling an entire transaction without having another person proven and checking him, guiding against one person exercising complete charge over an entire department and someone else approval it is necessary to point out that there are some controls acting on the business from the outside. These are called external control. An example of this is the auditor who is expected to be government regulation decrees etc.
Internal control system is defined as the whole system of control financial and otherwise, established by management in other to carry on the business of enterprise in an orderly and efficient manner ensure adherence to management policies safeguard the assets and secure, as far as possible the completeness and accuracy of the records. The individual component of the internal control system is known as control. This definition is further broken down to ensure a better understanding of the above.

1.2 STATEMENT OF PROBLEMS

* Does internal control give rise to organization efficiency and good management?

* Is it possible to have a good accounting system without an internal control system?

* Can the organization achieve its objectives without internal control?

1.4 OBJECTIVE OF THE STUDY

1.       To find out what makes up the internal control system of a an organization

2.       To examine critically the roles of internal control in the management of the company understudy.

3. To access the strength and weakness of internal control system in the organization.

4. To make necessary recommendation on how to correct lapses in internal control which may be discovered at the course of the research.

5. To increase the knowledge of the research on the internal control system of an organization.

1.5 SIGNIFICANCE OF THE STUDY

The study will equip the direction of the company with all the necessary principles, design implementations and the operations of a good internal control system. This will help the workers of the company to know their shortcomings and that of internal control system and hence put corrections in place. The researcher after the study will have a broad knowledge of the role and roles of internal control system in management. The investors will equally gain from this study because they are sure that investment in the organization is well secured against fraud. Finally, this study will also serve as reference literature to future researchers.

1.6 RESEARCH QUESTIONS

What constitute the internal control system of organization?

How effective is the internal control system of the organization and to what extent is the organization staff complying to it?

Does reliability to accounting information depends in internal control?

Does internal control assist the external auditor in auditing the organization?

Does installation of internal control serve as a check on the activities of the staff of the organization?

Does installation of internal control prevent the occurrence of fraud in the organization?

1.7 RESEARCH HYPOTHESIS

According to Willy Nnamani (2007) to effectively find a solution or a useful result to the problem, the following hypothesis were formulated

The low installation of internal control serves as a check on the activities of the staff of the organization

Due to the issue or consistent failure of many organization constitute the internal control system in some organization

The low installation of effective internal control system serves as a loophole in preventing occurrence of fraud in the organization

How does internal control system assists the external auditors in auditing the organization

The declining force of internal control system in some organization has made the staff not complying to it

1.7     SCOPE OF THE STUDY

The study roles of internal control system on organization is limited only to the internal control system of the study area Due to many limitation, the researcher encountered while striving to make a thorough research

18 DEFINITIONS OF TERMS

INTERNAL CONTROL: It is all measure used by management to regulate and control the affairs of the business

FINANCE: It is an issue of distribution of and purchase of liability and equity claims for the purpose of generating revenue producing assets

ASSETS: Anything owned by a person, company etc, that have money value and that may be sold to pay debts

CHARTERED ACCOUNTANT: He is a member of professional body recognized by any act or degree of federal republic of Nigeria

INTERNAL CHECK: It is an aspect of internal control system and it is an arrangement in which a person work is complementary to the work of another person.

INTERNAL AUDIT: It is the type of audit conducted by an employee of a business into any aspect of its affairs and in compliance with the accounting system and objective of the business.

FRAUD: It is the misappropriation of the asset internal falsification of the books of accounts other records of the business organization.

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