THE IMPACT OF INTERNAL CONTROL IN MANUFACTURING ORGANIZATION

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

Internal control is an indispensable element in the life of any organization, organization cannot meet it’s objectives very well without having an internal control. The need to install internal control becomes imperative due to the increase in size and complexity of the activity of the modern organization. The installation of internal control has a lot of impact on manufacturing organization.

Control on the other hand has been identified as one of the essentials of management functions. It is difficult if not impossible to talk about management without control. Control according to Robert. C. apple is an activity that involves checking to see that plans have carried out and derivation attended to control therefore is one element of management to serious organization has it own idea of control over finances, control over expenditure tangible assets and the internal control originated from control.

The statement number one of the institute of chartered internal control as one consisting of one only internal check nd internal audit but the whole system of controls, financial or otherwide established by management in order to carry on the business in an orderly manners.

internal control can simply be defined as all measures used by management to regulate and control the affairs of the business without an internal control an organization is likely to be effective and too costly to operate due to constant occurrence of fraud. Regardless of the size, type and occurrence of structure of any organization manger and accountants should know the rudiment of it’s accounting system and internal controls. This will help the managers and other staff to operate the organization effectively and efficiently.

1.2     STATEMENT OF PROBLEMS

*        Doesinternal 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?

1.3     OBJECTIVE OF THE STUDY

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

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

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

1.4     SIGNIFICANCE OF THE STUDY

1.       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.

2.       This will help the workers of the company to know their shortcomings and that of internal control system and hence put corrections in place.

3.       The researcher after the study will have a broad knowledge of the role of internal control system in management.

4        The investors will equally gain from this study because they are sure that investment in the organization is well secured against fraud.

5        Finally, this study will also serve as reference literature to future researchers.

1.5     RESEARCH QUESTIONS

1.       What constitute the internal control system of organization?

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

3        Does reliability to accounting information depends in internal control.

4        Does internal control assists the external auditor in auditing the organization?

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

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

1.6     RESEARCH HYPOTHESIS

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

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

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

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

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

5        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 impact of internal control system on manufacturing organization is limited only to the internal control system of Nigeria bottling company Plc Onitsha, Anambra state. Due to many limitation, the researcher encountered while striving to make a through research. 

1.8     DEFINITION 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 it’s 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.