INTERNAL CONTROL PROCESS AS AN EFFECTIVE TOOL FOR MANAGEMENT.
Need help with a related project topic or New topic? Send Us Your Topic
DOWNLOAD THE COMPLETE PROJECT MATERIAL
INTERNAL CONTROL PROCESS AS AN EFFECTIVE TOOL FOR MANAGEMENT.
Chapter one
INTRODUCTION
1.1 Background of the Study.
As an organization’s management strives for operational excellence, it is necessary to continually assess and evaluate its internal control system in order to determine how well it is performing, the extent to which it aids in the detection of frauds, wastes, abuse, and mismanagement, and how it can be improved and updated to meet changing conditions.
Internal control is a process that is influenced by an organization’s structure, work, and authority flows and is intended to help the organisation achieve specified goals and objectives.
It is the method by which all organisations’ resources are directed, managed, and measured. It is critical in preventing and detecting fraud, as well as protecting the organization’s physical and intangible resources.
Internal control objectives at the organisational level include financial reporting reliability, timely feedback on operational or strategic goal achievement, and compliance with laws and regulations.
Internal control at the transaction level refers to the steps required to achieve a given goal (how to ensure that the organization’s payment to third parties is for valid services supplied).
Internal controls are a critical component of an organization’s financial and commercial practices.
It includes all steps used by management to attain the organization’s goals.
The mere presence of an internal control system is insufficient; rather, its effectiveness and efficiency should be prioritised.
Internal control refers to the entire system of controls used by an organization’s management to:
1. Check the accuracy and completeness of the financial records.
2. Conduct business in an orderly fashion.
3. Protect assets and information from unauthorised access and usage.
4. Produce dependable and timely financial and management information.
5. Ensure compliance with policies.
1.2 Statement of Problems
Most public-sector organisations confront a high rate of fraud, mistakes, inconsistencies, waste, and inaccurate financial statement recording. These issues include document or invoice changes, willful misuse of accounting policies, over-invoicing, real theft of cash balances, and mathematical or clerical errors.
Financial statement manipulations are used to meet corporate expectations or to get indirect personal ground, such as diverting organisation resources for personal use.
Alterations to bills, double payment of invoices, payment to ghost workers, and other practices all have a negative impact on an organization’s growth.
In some cases, employees utilise their organization’s name for personal business, lowering the organization’s revenue.
As a result, a good internal control system will decrease, and likely eliminate, the risks associated with undiscovered mistakes, irregularities, and fraud.
1.3 Purpose of Study
Internal control systems are extremely beneficial since they have a significant impact on an organization’s success. This research will guarantee that all control mechanisms are successful and the organization’s objectives are met, which include:
– Effective and efficient operations.
– Reliable financial records.
– Compliance with the law and regulations,
– Accurate and comprehensive financial statements, among others.
1.4 Research Questions.
This is an inquiry into the research problem that is used to determine the study objectives. They are derived from the concepts linked with the research problem, which define the problem’s specific words.
1. Does the management have a solid foundation for defining realistic and achievable goals?
2. Are assets like cash, supplies, inventory, and equipment counted and compared on a regular basis to control records?
3. Does management respond to infractions of policies, procedures, or codes of conduct?
4. Are identity plates and numbers affixed to office furniture, equipment, or other moveable assets?
5. Does management give training and counselling to assist employees maintain and develop their job skills?
6. Does management examine the organisational structure on a regular basis and make modifications as needed to reflect changing conditions?
7. Do senior leaders and managers foster teamwork, promote the organization’s goal, and encourage employee feedback, as indicated by actions taken to communicate this to all employees and the availability of opportunities for management to receive feedback?
8. Is the compensation system suitable for acquiring, motivating, and retaining individuals, and are incentives and rewards offered to encourage personnel to perform to their full potential?
1.5 Hypothesis Statement: H0: There is no substantial association between effective internal controls and organisational management.
H1: There is a considerable association between effective internal controls and organisational management.
1.6 Significance of the Study
An internal control system will help an organisation monitor its actions to guarantee that management’s orders are followed.
Control activities occur throughout an organization’s operations at all levels and functions. These include approval, authorization, verification, and reconciliation, asset security, and segregation of roles. The effectiveness of an internal control system is evaluated by examining if proper control activities have been created.
1.7 Scope of Study
This study focuses on internal control systems, which are an excellent management tool. However, it only applies to the organization’s other operations and activities.
1.8 Definition of Terms
Internal Control System: This refers to the entire system of financial and other controls established by an organization’s management to ensure policy adherence, asset and information safeguarding, completeness and accuracy of financial records, and that the business is run in an orderly manner.
Management is the process of directing actions towards the attainment of agreed goals.
It is the function of directing, coordinating, motivating, managing, and uniting people efforts and activities in order to achieve organisational goals and objectives.
Errors are accidental misstatements in an organization’s financial accounts.
Fraud is defined as the intentional misrepresentation of financial statements by one or more employees, third parties, or management of an organisation. It involves the use of criminal deception to gain an illegal advantage.
Irregularities are purposeful distributions in an organization’s financial statements.
Audit: According to the International Audit and Assurance Standard Board (IAASB), a sub-committee of the International Federation of Accountants (IFAC), an audit is an independent examination of an express opinion on the financial statements of a business enterprise by an auditor in accordance with his terms of appointment and in compliance with relevant statutory and professional requirements.
Internal auditing is an impartial appraisal activity that reviews an organization’s operations. It is a managerial control that measures and assesses the effectiveness of control within an organisation.
Need help with a related project topic or New topic? Send Us Your Topic