THE IMPACT OF INTERNAL CONTROL SYSTEM ON THE FINANCIAL MANAGEMENT OF AN ORGANIZATION(A CASE STUDY OF THE NIGERIA BOTTLING COMPANY PLC, ENUGU)

1.0 INTRODUCTION


1.1 BACKGROUND OF THE STUDY


Every organization  both  profit  or  non-profit  organization  has  its


objectives  and goals in mind to achieve. For the non-profit making


organization,  their goal  is  to  satisfy  the  social  need  of  the  citizens


and  in  the effort  to achieve  these purposes supervision more often


than not play a vital role.


 The  size  and  scope  of these  organizations have  sometimes


made  it  hard  for  the  executors  to  exercise  personal  and  first  hand


supervision  of  operation.  It  is  in this  light  that  internal  control


established  by  management  is  initiated.  For  an  organization  to


carryout  its  business  there  must  be  some  factors  put  in  place  for


the  smooth  running of  the  organization  like  materials, machines,


money etc.


 These need to be well co-ordinated in order for the success of


the organization to be achieved. These factors are used by a group


of persons known as management. Neither can management exists


without  an  organization  both are inseparable.  The system  of



internal  control  provides  assurance  to  management  of  the


dependability of the accounting data used in the decision making of


the organization 


 It  has  been  discovered  that  due  to  lack  of  internal  control


several  banks  have  been  discovered  to  have  defrauded  its


customers  mostly foreign investors,  Having  discovered  this,  banks


now  take  extra  precaution  before  clearing  a  cheque  because  of


rampant  incidence  of  fraud  and  forgeries  which  have  placed  bank.


Loss on  average  of N1m  each  working  day  of  the  year  in  Nigeria.


Due to this challenges, CBN issued a directive to banks to increase


its capital base to N25 billion.


 Management use internal control as a tool to check it staff due


to  the  fact  that managers  are  not  able  to  monitor  the  activities  of


the organization.  It therefore  adopts the  internal  control  in  such  a


way  that  the  system  checks itself and  any  irregularity  within  the


system is been detected and corrected.


 To  ensure  that  the  system  checks  itself, management could


use  devices  such  as segregations,  supervision  of  work  and


acknowledgement  of  performance.  The  effective  arrangement and

 

implementation  of  this  control  system  would  ensure  proper


management.


1.2 STATEMENT OF PROBLEM


We  might  not  really  understand  the  impact  of  internal  control


system  in  an  organization  until  probably  we  run  an  organization


void of internal control system.


The  absence  of  adequate  internal  control  measures  exposes  the


financial management of an organization to certain threats such as:


- Incorrect  financial statement  and  /loss  of  the


companys’assets.


- Stealing  and  mis-management  of  organizational  vital


documents  which  may  be  done by an  employee  to  take  undue


advantage.


- Incorrect and unreliable financial records which may lead to


loss of organizational integrity.


- Non  implementation  of  accounting  policies in consistent


with  the  applicable  legislation  appropriate  in  presentation  of


financial statement.


1.3 OBJECTIVE OF THE STUDY


The  overall  purpose  of  this  research  work  is  to  evaluate  and


determine  the  impart  of  internal  measures  in  an  organizational


financial management.


 A  well  defined  organizational  structure  helps management  to


run  the  business  in  an  orderly  manner.  This  enhance  operational


and efficiency, which is the important features of internal control.


Specifically, this  research  work  stands to  achieve  the following


objective.


1. To  determine  the  impact  of  internal  control to  proper  use  of


organizations funds and assets.


2. To ascertain  whether  perpetration of  fraud  and  losses  of


Revenue in an organization are as a result of weakness in internal


control system.


3. To ensure whether a true reflection of organizational activities


are  presented  in  financial  statement  where  there  is  an  active


observation of internal control measures.





 
                                                                                       
 

4. To determine  the  relationship  between  internal  control


measures and proper keeping of accounting records.


 


1.4 RESEARCH QUESTION  


The  following research  questions will  be used  to  form  the  research


hypothesis and they are:


1. To what extent does the internal control measures impacts on


appropriation of organizational assets and funds.


2. To what  extent  does perpetration  of  fraud  and  losses  of


Revenue  in  an  organization are  as  a  result  of  weakness  in  the


internal control system


3. To what extent does internal control enhance a true reflection


of organization activities as presented in the financial statement


4. To  what  extent  does  a  relationship  exists  between  internal


control and proper keeping of accounting records


1.5 STATEMENT OF HYPOTHESIS


This  research  is  undertaken  on  the  basis  of  the  following


hypothesis.




 


                              HYPOTHESIS ONE (1)


  Ho: internal  control measure  does not  ensure  proper  use  of


organizations funds and assets.


Hi: Internal control measure ensures  proper  use  of  organization


funds and  assets.


                              HYPOTHESIS TWO (2)


Ho: Fraud perpetration and losses of revenue in an organization are


not as a result of weakness in the internal control system.


Hi: Fraud perpetration and losses of Revenue in an organization are


as a result of weakness in the internal control system.


                            HYPOTHESIS THREE (3)


Ho: internal  control  does  not  ensure,  a  true  reflection of  an


organizational activities as presented in financial statement 


 Hi: Internal control  ensures a  true  reflection  of an organizational


activities as presented in financial statement.