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THE ROLE OF FINANCIAL ACCOUNTABILITY IN A PRIVATE LIMITED COMPANY

CHAPTER ONE

INTRODUCTION

1.1     Background of the Study

The term “Financial Accountability” according to Hornby (2000:3) is the ability to give explanation of stewardship of money or any other economic resources and assets. Financial Accountability is geared towards ensuring that there is control over fraudulent practices such as defalcation, embezzlements or inflation of contract. The subject of the study of “Financial Accountability” has been a controversial issue even among the early philosopher. Plato condemned the use of money in trade, according to him, for the attendant “social ills” and “unethical reason”. In addition to the above, the peculiar nature of Nigeria economy has made any topic in accountability, financial or otherwise, worth discussing. Nigeria has had her fair share of financial impropriety both in public and private sector, no quite unconnected with her political set ups, the history of the evolution of her financial institutions and level of the country’s development. The research has therefore been reduced to the firm (micro) level and Emenite Nigeria Limited, Enugu has been carefully selected to be used in drawing a line of parallel between the level of accounting in the public and private sectors. Control is adjunct of accountability. The extent of financial accountability therefore should be reflected to the extent of the working mechanisms within the particular organization. The fact that both public and private sectors make use of control measures is undisputable.

The extent to which they employ this and how it has improve their finances is called to question. The effective means, by which they employ internal control to safeguard assets, collect debt or pay creditors, etc. is the issue at stake. In the word of a management experts internal control comprises the plan of organization to co-ordinate methods and measures adopted within a business to safeguard its assets, check accuracy and reliability of its accounting data, promote operational efficiency and encourage adherence to prescribed managerial policies. Apparently, the general concept “internal control” here is that it should be effective enough to cause probity in all the organization activities with a resultant discipline financial atmosphere in the organization. Responsibility  accounting system as noted by Eze (2014:24) identify various decision centres and trace financial data to the individual managers who are primarily responsible for the data in question. Here manager supervise subordinates and to improve performance, top manager sub-divide operating process and also design an organization structure. Obviously, another general concept of responsibility accounting here is that it should be instituted in the organization to ensure that individual managers are held responsible for the financial data that is assigned in their possession.

1.2 Statement of the Problem

Every policy formulated in boardrooms would have been a success, if they were being carried out there too. Unfortunately, adherence to planned policies by employees is the problem of many management of some companies. Harold Koontz, noted that management is the art of getting thing done through and with people in formally organized group. The owner of every business expects a reasonable return on their investment of who executes the policies. The problem of policy execution is further compounded by the evolution of large organization. Personal supervision of the employees by an individual seems an attempt at impossibility with large spans of control. There are therefore the needs for an internal control system. Internal control is such an indispensable tool in the hand of management if it wishes to obtain adequate and useful information, protect company assets, but despite the established necessity for installing an internal control system, many managers do not have it, and they of course wallow in the flimsy excuse of its expensive nature. This is the first problem. The other thing to think about is the effectiveness of control procedures if the internal control is at all established. The effectiveness of control procedures is a function of the fact that segregate duties are not being circumvented by the collusion of the employees, negligence and mistake or even personal factors. These factors are problem to the firm and eventually would undermine the effectiveness and efficiency of the internal control system, if not taken care of. The above mentioned problems give rise to the following basic questions: a. How adequately are employees adhering to internal control measures? b. What standard should management adopt as test to observe control measures? c. Should internal auditing be an adequate means of checking internal control? d. Should the effectiveness of control be relied on for adequate financial accountability?

1.3 Objective of the Study

The purpose of this study is to have a close look at the cost of internal control existing in Emenite Nigeria Limited, Enugu State. If there is any, then to know how efficient this has assisted in attaining financial accountability. Specifically, the Objective of the Study include:

i. To find out if there is any role of financial accountability in a private limited company.

ii. To ascertain if there have been irregularities that have passed unnoticed in the establishment.

iii. To examine if there is adequate segregation of duties at various levels of management.

iv. To determine whether adequate punishment is meted out to those found to over – step control measures to prevent further occurrence of such defects in the future.

1.4 Research Question

In carrying out this research more effectively, the researcher therefore designed the following questions:

i. To what extend is the relationship between the roles of financial accountability in a private limited company.

ii. How adequately are employees adhering to internal control measure?

iii. What standard should management adopt as a test to observe control measure?

iv. Should internal auditing be an adequate means of checking internal control?

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