Effect of Internal Control System on Management of Organisational Resources of Manufacturing Firms in Nigeria

Abstract

The globalizations of economies, technological advancements, complexity of business and allegations of fraudulent financial reporting have sharpened the ever-increasing attention to internal control in organizations.

These developments have thus led to a continuous reflection of internal control and its importance in the development of firms.

It is therefore against this background that this study’s main objective is to examine the effect of internal control system on management of organisational resources of manufacturing firms in Nigeria.

However, the specific objectives are to: ascertain the level of significance of internal control system on quick recovery of stolen cash in manufacturing firms in Nigeria;

ascertain the efficiency of internal control system on credit control of manufacturing firms in Nigeria; analyze the effect of internal control system on the safety of non-current assets in manufacturing firms in Nigeria;

examine the relationship between effective internal control system and efficient management of working capital in manufacturing firms in Nigeria;

and ascertain the effect internal control system has on manufacturing firms efficiency ratio in Nigeria. The descriptive survey design was adopted.

Introduction

1.1 Background of Study

As a concept, internal control is distinguished by its scope and its high level of the services offered. In the modern business world, the term internal control is being used to refer to two basic concepts: the internal control system and the internal control itself.

The internal control system refers to an organized amalgamation of functions and procedures, within a complete system of controls established by the management and whose purpose is the successful function of the business (Cheung and Qiang, 2007).

The internal control system is all the methods and procedures followed by the management in order to ensure, to a great extent, as much successful cooperation as possible with the director of the company,

the insurance of the capital, the prevention and the detection of fraud, as well as the early preparation of all the useful financial information.

According to (Papadatou, 2005) the internal control system resembles the human nervous system which is spread throughout the business carrying orders and reactions to and from the management and it is directly linked to the organizational structure and the general  rules of the business.

According to American Institute of Certified Public Accountant (AICPA) (1963) a system of internal control extends beyond those matters which relate directly to the functions of accounting and the financial statements.

In addition, internal control is a systematic procedure which will lead to evaluate the degree of correlation between those established criteria and the real results of the business.

References

Aguolu, O. (2009). Designing an Effective Internal Audit Group. Association of Accountancy Bodies in West Africa, 1(4), 60-76.

Ahmad, N., Othman, R. & Jusoff, K. (2009). The Effectiveness of Internal Audit in Malaysian Public Sector. Journal of Modern Accounting and Auditing, 5(9), 784-790.

Aikins, S. K. (2011). An examination of Government Internal Audits’ Role in Improving Financial Performance. Public Finance and Management, 11(4), 306-337.

Alam, H.M et al. (2011). Impact of working capital management on profitability and market valuation of pakistani firms. European Journal of Economics, Finance and Administrative Sciences, 32(5)48- 54

Aldridge, R. & Colbert, J. (1994). Management’s Report on Internal Control, and the Accountant’s Response. Managerial Auditing Journal, 9(7), 21-28.

Al-Twaijry, A. A.M., Brierley, J. A. & Gwilliam, D. R. (2003). The Development of Internal Audit in Saudi Arabia: An Institutional Theory perspective. Critical Perspective on Accounting, 14, 507-531.