THE ROLE OF INTERNAL CONTROL SYSTEM IN AN RGANIZATION USING NATIONAL DIRECTORATE OF EMPLOYMENT, UYO AS A CASE STUDY
CHAPTER ONE
GENERAL INTRODUCTION
1.0 Introduction
The concept of internal control is indispensable in any organization whether in government or private sector. It is because of the size of organization these days that management can no longer oversee all aspect of its Operations, so to ensure effective supervision of an adherence to guidelines, management installs control system so as to perform according to set standards.
Internal control comprises the whole system of controls, financial and otherwise, established by the management in order to carry on business of the enterprise in an orderly and efficient manner, ensure adherence to management policies safeguard the assets and secure as far as possible, the completeness and accuracy of records Woolf (1982:71). The attainment of any organization dream depends on how effective and its management is in controlling the activities it undertaken.
Apple in his view in (1981:37) said “control is an element of management and correction of the performance of subordinates to make sure that the objectives of the enterprise and plans devised to attain them are accomplished efficiently and economically.” The basic purpose of maintaining internal control is to promote the efficiency of the functions in an organization primarily, its application means “No one person should perform the work of two more persons.” Duties should be properly separated to avoid collusion among employees.
If there is a proper application of internal control assets, assets will be completely safeguarded from waste, fraud, inefficient use, errors and irregularities will be detected and prevented as well as controlling large scale financial malpractices.
On the other hand a weak and inefficient internal control system would hardly lead to the achievement of an organization good. These would be collusion between personnel as a result of inadequate segregation of duties, the organization could face larger scale fraud either by fraudsters or by the employees intentional, forgeries, naked and bone faced stealing due to improper control of assets.
On most occasions, management of some organization tender reports on loss of assets such as plant and machinery, shortage of store etc, these are losses due to lack of physical control of assets. However, a poorly designed system of internal control could possibly lead to an organization becoming a victim of most of these acts.
The management of any government establishment, state or federal is usually interested in maintaining strong internal control over its operation as well as accounting and other financial functions. Accordingly, management will always establish a control device to provide for operational efficiency and adherence to prescribed policies.
It is against their background that the researcher has chosen to conduct a study on the role of internal control as an aid to management in attaining the set goals of the organization.
1.1 Historical Background of the Establishment under Review
The world wide economic depression of the early 80’s caused a rapid deterioration in Nigeria’s economy. Industrial output shrank to an all time low level, commercial activities were consequently reduced; leading to the loss of employment opportunities for millions of Nigerians. By the end of 1985 the unemployment situation in Nigeria had reached desperate and alarming proportions. The youths and the graduates were the hardest hit.
On 26th march 1986, the president appointed a committee to deliberate the strategies for dealing with mass unemployment, labour and productivity. The report of the committee was approved by the Federal Government in October 1986. Based on its recommendations, the National Directorate of Employment (NDE) was established in November 1986 with the objectives to design and implement programmes; to combat mass unemployment, articulate policies aimed at developing work programmes with labour intensive potentials, obtain and maintain a data bank on employment and vacancies in the country with view to acting as a clearing house to link job seekers with vacancies in collaboration with other government agencies.
The National Directorate of Employment presently has its headquarters at plot 1623 Saka Jojo Street, Victoria Island, Lagos and has state offices in all the states of the federation and the federal capital Territory, Abuja. The Director General of the Directorate is appointed by the president, Commander-In–Chief of Armed Forces on the recommendation of the minister. The state office is headed by a state co-ordinator. The Directorate is funded by the federal Government.
1.2 Statement of the Problem
Designing an internal control in any organization requires conceptual ability to transform the concepts into easy way to follow operatable instructions. Hence, there are major problems militating against the effective operation of internal control in many organizations, such as collusion among employees and inefficient use. Others are the existence of incompetent personnel where output do not commensurate with functional responsibilities, in the organization and besides inadequate documentation and recording of documents which culminates to poor verification of documents.
It is considered extremely expedient to show in the study of role of internal control system in an organization that internal checks and accounting system are the effective way to solve the above problems in an organization.
1.3 Purpose of the Study
The purpose of the study is to examine the internal control system adopted by National Directorate of Employment, Uyo to see the various types of control adopted by the organization to check abuses. The system to be examined will include administrative control, accounting control and internal audit.
1.4 Objective of the Study
In order to carry out this study successfully, the following objectives are set to be accomplished:
(i) The study will determine whether there is an effective internal control system at the National Directorate of Employment, Uyo.
(ii) It will find out whether the management of the establishment really knows the objectives of maintaining effective internal control system in the organization.
(iii) It will examine whether there is any deficiency facing the internal control system in the Directorate.
(iv) It will evaluate the benefits that are maintaining a good internal control system has impacted on the organization.
(v) It will find out whether the internal control system existing in the establishment possesses the necessary qualities of internal control.
(vi) Finally, the study will find out how internal control system has enhanced management effectiveness and efficiency in the organization.
1.5 Research questions/hypothesis
The following research questions were used to direct the conduct of the research.
(i) Will the management of the establishment be able to identify the existence of internal control in the organization?
(ii) Will the management of the establishment be able to mention the objectives of maintaining effective internal control in the organization?
(iii) Will the management of the establishment be able to identity problem (s) facing the internal control system of the organization?
(iv) Will the management be able to mention the benefits of maintaining the internal control impacted on the establishment?
(v) Will the management be able to explain the extent to which internal control system has enhanced management effectiveness and efficiency in the organization?
(vi) Will the management be able to identify whether the internal control system existing in the organization possess the necessary qualities of internal control?
1.6 Significance of the study
This study is conducted to render the following benefits:
(i) It would enable the management of the Directorate to improve and develop their internal control system.
(ii) Management could be assured of honest, devoted and dependable employees and also management’s supervisory functions could become less tedious.
(iii) It will also serve as a reference material to those who would be conducting research in the same subject matter.
(iv) Finally, the recommendation at the end of this study would help the establishment in solving most of their internal control problems.
Delimitation of the Problem/Scope of the Study
This research project is carried out within Uyo Township in National Directorate of Employment. Hence, the study is limited to information obtained from only the personnel of the Directorate and other secondary information obtained from text books and other previous research works.
1.8 Limitation of the study
This study was not without constraints.
The constraints were:
(i) Time Factor – This had been the greatest of all. There was only a limited time devoted for the study. The researcher combined the study with other academic programmes, and this made it difficult to give full time for the work.
(ii) Finance – Another constraint was fund available for the study. There was no sufficient fund to extend the study to other organization to have a balance view on the subject matter. The study was therefore limited to only National Directorate of Employment, Uyo.
(iii) Meeting with the Respondents – It was not easy to get responses from the respondents. Some staff gave appointments which were not kept, so the researcher had to repeat the Directorates several times.
1.9 Definition of Terms
Accounting:
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