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NNAMANI EMMANUEL EKENE PG/MBA/08/47868

EFFECTIVE INTERNAL CONTROL IN ENHANCING FOUNDATION FOR SAFE AND SOUND OPERATION IN AN ORGANISATION (A CASE STUDY

OF COLLEGES OF EDUCATION IN ENUGU)

Accountancy

BEING A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF DEGREE OF MASTER OF

BUSINESS ADMINISTRATION IN ACCOUNTANCY

Webmaster

2010

UNIVERSITY OF NIGERIA

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EFFECTIVE INTERNAL CONTROL IN ENHANCING

FOUNDATION FOR SAFE AND SOUND OPERATION IN AN

ORGANISATION (A CASE STUDY OF COLLEGES OF

EDUCATION IN ENUGU)

BY


DEPARTMENT OF ACCOUNTANCY FACULTY OF BUSINESS ADMINISTRATION UNIVERSITY OF NIGERIA ENUGU CAMPUS

AUGUST, 2010

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TITLE PAGE

EFFECTIVE INTERNAL CONTROL IN ENHANCING

FOUNDATION FOR SAFE AND SOUND OPERATION IN AN

ORGANISATION

(A CASE STUDY OF COLLEGES OF EDUCATION IN ENUGU)

BY


BEING A RESEARCH PROJECT SUBMITTED IN

PARTIAL FULFILMENT OF THE REQUIREMENT FOR

THE AWARD OF DEGREE OF MASTER OF BUSINESS

ADMINISTRATION IN ACCOUNTANCY

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CERTIFICATION PAGE

I certify that this research project is an original research report

submitted by me which has not been written by anybody in part or in

full for any Diploma or Degree of this University or any other

University.

--------------------------------------------- NNAMANI EMMANUEL EKENE PG/MBA/08/47868 ACCOUNTANCY

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APPROVAL PAGE

MR. NNAMANI EMMANUEL EKENE, a post graduate student of

the department of Accountancy with registration number

PG/MBA/08/47868 has satisfactorily completed the requirement the

research work for the award of Master of Business Administration in

Accountancy.

------------------------------- ------------------------------------ Dr. C. M ODO DR. MRS. R. G OKAFOR Project Supervisor Head of Department of Accountancy, UNEC

----------------------------------- EXTERNAL SUPERVISOR

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DEDICATION

This research project is dedicated to my wife, Mrs. Appolonia

Nnamani, my parents, Mr. Livinus Nnamani and Mrs. Roseline

Nnamani and my siblings

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ACKNOWLEDGEMENT

The successful completion of this research project is a product of

many people’s contributions of whom the researcher wishes to

express his profound gratitude to.

May I express my sincere gratitude to my project supervisor, Dr. C.M

Odo, who gave his time and advice selflessly and Mrs. E.O

Onyeanu for her guidance throughout my program, her contribution

towards this research work is unquantifiable.

My special thanks to my Boss, Mazi Levi Ohazurume-Eze Okata,

Provost emeritus, Enugu State College of Education (Technical),

Enugu and the new Provost, Mr. Anthony Anih for their permission

and encouragements and to my subordinates, Miss Uche Agu and

Mrs Obiageli Onyia for their support.

My regard also goes to my wife Mrs Appolonia and my younger

ones Ngozi and Chiagolom for their understanding and patience.

The computer operator that did the typesetting, Miss Uche Agu is

not left out as well and host of others.

In all, I say TO GOD BE THE GLORY.

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ABSTRACT

Effective Internal controls are system consisting of specific

policies and procedures designed to provide management with

reasonable assurance that the goals and objectives important to the

entity will be met. The purpose of this research is to ascertain

whether internal control has actually helped to promote operational

efficiency and effectiveness; provide reliable financial information;

safeguard asset and records; encourage adherence to prescribed

policies; comply with regulatory agencies and many more.

Findings after analysis of data have shown that these Colleges has an

organizational structure in place in these colleges; Provosts of these

colleges have limited powers on expenditure approval; there are

segregation of duties as it relates to transaction authorization,

recording and custody; authority documents such as conditions of

service, scheme of service and financial regulations are available; and

there are internal audit department to ensure that these internal

control system are operational.

The survey method was used in gathering data while chi-square

statistical method was used for data analysis. Harvard style of

documentation was adopted in this research.

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TABLE OF CONTENTS

Title page… … … … … … … … … i

Certification page… … … … … … … … ii

Approval page… … … … … … … … … iii

Dedication… … … … … … … … … iv

Acknowledgement.. … … … … … … … v

Abstract… … … … … … … … … … vi

Table of contents… … … … … … … … vii

CHAPTER ONE: INTRODUCTION

1.1 Background of the study… … … … … … 1

1.2 Brief history of Colleges of Education in Enugu State… 4

1.3 Statement of the problems… … … … … … 4

1.4 Objectives of the study… … … … … … 4

1.5 The scope of the study… … … … … … 6

1.6 Research questions… … … … … … … 7

1.7 Statement of hypotheses… … … … … … 8

1.8 Significance of the study… … … … … … 9

1.9 Limitations of the study… … … … … … 10

Reference… … … … … … … … 12

CHAPTER TWO: LITERATURE REVIEW

2.1 Definition of internal control… … … … … 14

2.2 Purpose of internal control… … … … … … 16

2.3 Classification of internal control system… … … 18

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2.3.1 Administrative control… … … … … … 19

2.3.2 Accounting control… … … … … … … 19

2.4 Internal control objectives… … … … … … 20

2.4.1 Authorisation… … … … … … … … 20

2.4.2 Competence… … … … … … … … 21

2.4.3 Accountancy… … … … … … … … 21

2.4.4 Validity… … … … … … … … … 21

2.4.5 Physical safeguard and security… … … … … 21

2.4.6 Error handling… … … … … … … … 21

2.4.7 Segregation of duties… … … … … … … 22

2.5 Components of internal control… … … … … 22

2.5.1 Control environment… … … … … … … 22

2.5.2 Communication… … … … … … … … 23

2.6 Communication and internal control… … … … 25

2.6.1 Assessing and managing risk… … … … … 26

2.6.2 Control activities… … … … … … … 27

2.6.3 Detective control activities… … … … … … 28

2.6.4 Monitoring… … … … … … … … 29

2.7 Limitations of internal control.. … … … … 30

2.7.1 Application control… … … … … … … 31

2.7.2 General control… … … … … … … … 31

2.8 Internal control audit as a control mechanism… … 33

Reference… … … … … … … … 35

CHAPTER THREE: RESEARCH METHODOLOGY

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3.1 Sources of data… … … … … … … … 36

3.2 Primary data… … … … … .. … … 36

3.3 Secondary data… … … … … … … … 37

3.4 Population… … … … … … … … 37

3.5 Sample size and sampling technique… … … … 38

3.6 Methodology… … … … … … … … 40

3.7 Data collection procedure… … … … … … 40

3.8 Tools for Analysis… … … … … … … 41

3.9 Validity of responses/reliability of data… … … … 41

Reference… … … … … … … … 43

CHAPTER FOUR: PRESENTATION AND ANALYSIS OF DATA

4.1 Analysis of research questions… … … … … 46

4.2 Testing of research hypotheses… … … … … 60

CHAPTER FIVE: FINDINGS, RECOMMENDATIONS AND

CONCLUSION

5.1 Summary of findings… … … … … … … 68

5.2 Conclusion… … … … … … … … 71

5.3 Recommendations… … … … … … … 72

Bibliography… … … … … … … … 75-77

Appendix: Questionnaire… … … … … … 78-85

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CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Effective Internal Control in enhancing foundation for safe and sound

operation in every business organization. For Colleges of Education,

high level of losses would be experienced in cash and inventory the

organization does not take steps to protect its assets. The best form

of protection for these assets is good internal control system. A

properly designed and consistently enforced system of operational

and financial control helps Governing council and management

safeguard its resources, reliable financial reports and comply with

relevant laws and regulations. It also reduces the possibility of a

significant error and irregularities and assists in their timely detection

when they occur.

According to CIMA, internal control is defined as the whole system of

control, financial and otherwise, established by management in order

to carry on the business of the organization in an orderly and

efficient manner, ensure adherence to management policies safe

guard its assets and secure as for as possible, the completeness and

accuracy of records in order words management want not only to

safeguard assets and have reliable records, but also to maintain an

efficient operation that follows its policies. Generally, an internal

control can be said to the methods and produces used to safeguard

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assets and other resources that are used as directed by

management.

Internal controls are necessary in very organization be it profit

oriented or not and irrespective of good and services produced by the

firm. From the banking sector to Education sector, to the oil and gas

different internal controls are put in place to safeguard the assets,

inventories and operational efficiency of staff and machines of the

organization. An effective system of internal control can give

managers the means to provide accountability for the programs, as

well as the means to obtain reasonable assurance that the programs

they direct meet established goal objectives. However, all the people

in an organization not just the managers, have a part in and a

responsibility for internal control. Internal control impacts executive

managers who establish an organization strategic plan, as well as

support staff.

For the purpose of this work, the research shall consider the impact

of effective internal in different Colleges of Education in Enugu State,

most of these Colleges made to see to it that a well planned and

effective internal control system is put in place so as to avoid

excessive loss of assets.

In designing the control systems, care should be taken to see to it

that it will provide managers reasonable assurance that’s.

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- Recorded transaction assurance that’s

- Financial reporting reliable

- Risk management system are effective

- The company complies with law and regulations. Internal

policies and procedures associated with manufacturing

concerns

- Machine and equipment are efficient and effective control

system can help management measure performance,

make decision evaluate processes and limit risk good

internal controls can be also help managers achieve the

organization objectives and avoid surprises. It will also

facilitate the defection of mistake caused by personal

destruction carelessness, fatigue errors in judgment or

unclear instruments in addition to fraud and deliberate

non-compliance with policies.

Effective and well-planned and designed internal control system is

still subject to executing most control system and even well turned

personnel with the best of intensions can be distributed carefully or

confused.

Internal control must be consistently applied and well understood by

all the staff of the companies it board and management policies are

to be implemented.

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Typically, an internal system would do the following:-

- Limit authorities

- Safeguard access to and use of records and company

assets.

- Separate and rotate duties

- Ensure both regular and unscheduled reviews.

1.2 BRIEF HISTORY OF COLLEGES OF EDUCATION

IN ENUGU STATE

It is very expedient at this point to give a brief information what so of

the colleges of education in Enugu State.

Enugu is one of the ancient cities in Nigeria, a civil service town now

being turned into a big commercial city. Enugu is known for their love

for education, hosting large number of educational institutions

ranging from universities to polytechnics and colleges of education

plus many monotechnics. Enugu host many colleges of education

both federal, state and private owned colleges. Under study here are:

Federal College of Education, Eha-Amufu: It was at the first instance

established by the defunct Anambra State Government in 1981 but

was taken over by Federal Government in 1993. Enugu State College

of Education (Technical), Enugu was established in 2006 by the

Enugu State Government as a state owned College of Education.

Institute of Ecumenical College of Education is private owned College

of Education in Enugu State. It is owned by Catholic Church.

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1.3 Statement of Problems

Effective internal control in an organization helps to set a foundation

for sound operations when compliance to policies and procedures are

not negotiable.

The sub-Problems are Summed up as to follows:-

(1) Limitations in scope of internal control make it ineffective.

(2) Internal control system consists of specific policies and

procedures designed to provide management with

reasonable assurance on achievement of goals.

(3) Internal control contributes to effective management in an

organization

(4) Internal audit is a vehicle for internal control effectiveness

(5) Internal control in Colleges of Education helps to safeguard

fund and assets.

(6) The record keeping processes in Colleges of Education are

signs of effective controls.

1.4 Objective of the Study

The main purpose of this work is to establish the impact of effective

control system in an organization with reference to Colleges of

Education in Enugu State as a government establishment. The main

objective of internal control is to assure members of the board of

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directors and management that the assets finance and inventories of

the organization are safe and the system is effective in design and

operation.

Generally, the overall objective of this research work includes the

following:-

(i) To evaluate the functions of internal control system in place

in Colleges of Education.

(ii) To ascertain how effective internal control system can

enhance management efficiency.

(iii) Find out peculiar problems association with Colleges of

Education in Enugu State.

(iv) To certain the role of internal control system in the

accountability process in Colleges of Education.

(v) To find out problems that makes internal control ineffective

and seeks ways to finding solution to them.

1.5 The Scope of the Study

The scope of this study is focused on the effectiveness of internal

control system in Colleges of Education in Enugu State. This study

shall also consider how these colleges maintain this system over

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time. Three colleges would be considered for the purpose of this

study.

They are:-

(i) Enugu State College of Education (Technical), Enugu

(ii) Federal College of Education, Eha-Amufu

(iii) Institute of Ecumenical Education, Thinkers Corner

1.6 Research questions

According to Ikeagwu (1998), research questions refer to the

fundamental questions researcher develops in his specific problem

area. On this, this study has some questions that go thus:

i. Do colleges of education have a structured organigram

showing clearly the flow of authorities and responsibilities?

ii. Are there limitations to the powers of the Provost on

granting approvals on expenditures?

iii. Is there segregation of duties as it relates to transaction

authorization, recording and custody?

iv. Are there any authority documents such as conditions of

service, scheme of service and financial regulations?

v. Has there been any review in these authority documents in

the recent times?

vi. Is there a well established, well staffed internal audit

department in existence?

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vii. Is the internal audit department given that independence

status it deserves?

viii. Does the internal audit department give its report regularly

on the weaknesses of the internal control system?

ix. Is the accounting control system review carried out

regularly?

x. Does the College maintain a budget tracking mechanism?

xi. Has the College been ever involved in any financial fraud or

loss of asset due to weakness of internal control system?

xii. Has the internal control system anything to contribute in the

proper working of management of the college?

1.7 Statement of Hypothesis

For the purpose of this study, the under listed hypothesis would be

used to evaluate the effectiveness of the internal control in the

selected companies.

a)

H0. - Internal control system does not contributes to the

proper

working of management

b)

H0 - Internal control does not helps to maintain and safeguard

College funds, working and property.

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c)

H0 - Internal audit department does not strengthen the

internal

control system.

d)

H0. - Limitations of powers of approval of provost do not make

the

internal control system work.

1.8 Significant of the Study

Management can be aided by the utilization of internal control system

maintain the traditional policy role, while ensuring compliance with

policies and procedures.

An effective internal control system can sever in particular.

- To help reduce overhead cost

- Identify ways to improve efficiency

- Minimize exposures to possible losses and safeguard

assets.

- Ensure the protection of inventory.

For the above objectives to be accomplished the internal control

system must perform certain function which, must be in line with

requirement of regulations. Therefore, an effective internal control

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system will make a positive contribution to the objective of any

organization.

This study is very significant in many aspects and it is intended to

create awareness in the management of Colleges of Education, of the

immense benefits of this study. It is hoped that this study will help

administrators see the role of controls as that which in terms of

ensuring that the operations of the business are well controlled and

machines and personnel used are efficient, resources are utilized

economically and the information provided to management is

reliable.

To the accountants and auditors who are expected to be of excellent

communications, it will be of benefit to know the onerous

responsibilities placed on them as the watch dogs of the organization.

Others that would benefits from the study are future researches and

fellow student it will improve to a great extent trial and practical

knowledge about the nature.

1.9 Limitations of the Study

Although the role of internal control in every organization is about the

same this study is restricted in only the Colleges of Education in

Enugu State.

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Due to the fact that the researcher was tightly scheduled in Enugu as

at the time when this research was carried out, it was a little bit

difficult for him to do a thorough study that will cover all the Colleges

of Education in the state as this would even be near impossible due

to lack of time and money. The researcher encountered some

difficulty in reaching most top officials as much as he would have

been necessary.

Lack of money in the sense that these Colleges of Education are

situated in different parts of Enugu State, and even the materials

needed for in-depth study required money for it to be acquired. Also

the fact that the study was being conducted from Enugu made it

even more expensive.

Thirdly, and most importantly management of the organization

visited regarded some information as being secret and exclusively

and such, the researcher was deprived of these information, due to

these, hampered the analysis as he would have wanted to.

But then, to avoid the above limitation from being an impediment to

the validity of the conclusion and recommendations in the study, the

researcher choose three Colleges of Education to avoid the

cumbersomeness associated with a study on all the colleges of

education in Enugu State and these colleges chosen were easily

assemble and the staffs there were very co-operative.

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REFERENCES

Ayuba Abimiku B. (1977): The National Accountant Effective Internal

Control System. ANAN Publication Page 51.

Okoaikwo I. E. (2003): Advanced Auditing and Investigation Innosco

Press Nig. Ltd. Page 224.

Okoye Victor. O. (1994): Practice of Auditing for Tertiary Institutions

Baset Printing Limited Page. 232 – 232.

Onodugu V.A. (2004): Note on Research Methodology. A Lecturer

Monograph University of Nigeria, Enugu Campus.

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CHAPTER TWO

Literature Review

Internal control has been the subject of much debate and the focus

of more attention that at any previous time for example several

organization have issued comprehensive document which represent

more up-to-date thinking about internal control, while there are both

similarities and difference among these document, they are

consistent in contending that internal control has taken on new and

expanded meaning. Traditionally, internal control applied to only

accounting activities, Haves (1999), today however internal control is

a dynamic concept that affects virtually every aspect of an

organization activities or operations.

In the premises of its evolution, the human society has developed

various control system for effectively regulating its function. In

describing an organisaiton considered to be a system of consciously

co-coordinated personal activities or forces of a system of structural

inter personal relations thus involving people, it also needs similar

controls for its efficient management. The success of any

organization is dependent on its ability to respond in a coordinated

and controlled manner to opportunities and that Nwude, (2003) as

the name suggests internal control system are system put in place by

management of the organization.

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At the stage this study shall present in a very logical manner the

different position of some writers or what internal control really is all

about, its components and other related matters.

2.1 Definition of Internal Control

In the recent years, Many group and organization have published

guidelines and standards on internal control and defined it in various

ways. Each of this definition has captured the basic concepts of

internal control using different words. The definitions are similar in

recognizing internal control extensive, and its dependence on people

in the organization.

Haves, (1999) defined internal control system as the integration of

the activities plans, attitude policies and effort of people in an

organization working together to provide reasonable assurance that

the organization will achieve its objectives and mission.

The definition also established that:-

- Internal control impacts every aspect of an organization

all of its people, processes and physical structure.

- It is a basic element

- It is dependent up on people and the surrounding

environment work together.

- It incorporates good management

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- It provide a level of comfort to an organization

- It does not guarantee success

- It helps an organistion achieve its objectives and mission.

Belverd (1991) defined internal control system as the policies and

procedures management used a to protect a firms assets and to

ensure the accuracy and reliability of the accounting records it also

includes control that deals with operating efficiency and adherence to

management policy. The revised edition of the internal control guide

for managers (2004), Defined internal control as composing the plan

of organization and all co-ordinated method and measures adopted

within an oragnisation to safeguard its assets check the accuracy and

reliability of its accounting data, promote operational efficiency and

encourage adherence to prescribed managerial policies and

applicable laws internal control can be detective, Corrective or

preventive in nature. Detective control is designed to detect errors in

irregularities that have been detected. Preventive controls are

designed to keep errors and regularities that have been detected.

Preventive controls are designed to keep errors and irregularities

from occurring.

More widely accepted definition of internal control is the one given by

the consultative committee of accounting bodies which noted that as

the whole system of control, financial and otherwise, established by

the management in order to carry on the business of the organization

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in are orderly and efficient manner, ensure adherence the

management policies, safeguard its assets and secure as far as

possible the completeness and accuracy of records. Adams (2002)

sees internal control as all control operating in very area of corporate

activity.

From the above it is obvious that internal control can be looked at

from different perspectives, however they all convey the same

manning and give details about its components and central idea.

2.2 Purpose of Internal Control

As stated in the above definition, internal control is a means for

achieving the organization objective and mission. Its ultimate

purpose, more specifically the international organization of supreme

audit institutions established four main purpose of internal control.

(1) To promote orderly, economical, efficient and effective

operation and to produce quality producers and services

consistent with the organization mission.

(2) To ensure adherence of laws, regulations contracts and

management directive.

(3) To develop and maintain reliable financial and management

data and to accurately present data in a timely report.

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According to Aguolu (2002), internal control is intended to not only to

maintain an adequate method of processing accounting data but also

safeguarded the company against possible financial loss due to fraud

and errors.

There is also the over riding need on the part of management to run

the fussiness in an orderly manner. It also established steps that

should be taken to ensure that internal control achieves its purpose.

(i) All income or revenue due to the company are received and

accurately recorded as the books.

(ii) All expenditure incurred by the company are correctly

recorded and payment by the properly authorized.

(iii) All assets are correctly recorded and adequate provisions

made for known and anticipated losses.

(a) The system of controls differs from one establishment to the

other. The system to be adopted by an organization will depend on

the peculiar circumstances of the organization and the requirement of

management.

There are however some general principals and recognizable features

that are essential for a good system of internal control. Some of

these feature relate to basic control while other to the disciples over

basic controls.

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If an organization addresses each of the four purposes listed above in

developing if internal control system the organization above in

developing its internal control system, the organization would most

likely achieve its objectives mission. Failure to adequately address

and one of these purposes may put the organization at risk. The

question then is how does an organization address this four purpose?

2.3 Classification of Internal Control System

In Aguolu (2002) internal control system can be classified based on

three heading namely:

- Method of keeping books and records

- Inbuilt control techniques

- Management techniques

But in general, internal control system can be suited comprised a

control environment (over all attitude awareness and actions of the

management regarding internal control and their importance in the

organization) and control procedures, the policies and produces in

addition to the control environment which are established to provide

management with evidence that specific objectives of the

organization are achieved. The later can be classifies are

administration control and accounting controls. The former is largely

concerned with the achievement of objectives of the organization and

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the implement of objectives of the organization and the

implementation of the policies lay down by the management.

2.3.1 Administrative Controls

These relate to the plan of the organization and methods that are

concerned with operational efficiency and adherence to managerial

policies and applicable laws. Kodjo (2004) see administrative control

as the plan of the organization particularly as it affect superior

subordinate relations hips and the flow and timing of information, the

methods and procedures that are concerned with general efficiency

of operations and adherence to management policies and plans this

administrative control relate only tangentially to the financial records

and are more concerned with issue such as absenteeism, latendings

training programmes time and motion studies.

2.3.2 Accounting Controls

Accounting control is also known as financial control have to do

primarily with the plan of the business organization the methods and

procedures that have a effect on the reliability of the financial records

and the safeguard of these assets that relate to financial matters, the

system of authorization and approach of transaction and the custody

of assets that relate to the transaction, Kodjo (2004).

Accounting control aim to achieved accountability in financial matters

and in doing so cover the transaction establishing responsibility for

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maintains financial records including those assets. To ensure control

specific procedures are applied to cash and cheques, stock including

work in progress, sales and debtors purchase and creditors,

investment, fixed assets, capital expenditures debt and equity capital

etc.

In general, accounting control pertain to procedures, which ensure

that financial records are accurate and reliable.

2.4 Internal Control Objectives

Internal control objective are the desired goals or conditions for a

specific even cycle which if achieved, minimize the potential that

waste, loss unauthorised use or misappropriate will occur. They are

the condition that we want the system to satisfy for a control

objective to the effective compliance with it must be measurable and

objective.

Internal audit execute the firms system of internal control by

accessing the ability of individual process control to achieve

predefined control objectives.

Adams (2002) listed and explained the control objective as

authorization, completeness, accuracy, validity, physical safeguard

and security error handing and safeguard of duties.

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2.4.1 Authorisation

This objective is to ensure that all transaction are approved by

responsible personnel in accordance with their specific or general

authority before transaction is recorded.

2.4.2 Competence

This object is to ensure that no valid transaction have omitted from

the accounting records.

2.4.3 Accountancy

The objective is to ensure that all valid transactions are accurate

consistent with the originating transaction data, and information is

recorded in a timely manner.

2.4.4 Validity

The objective is to ensure that all recorded transactions fairly

represent the economic event that actually occurred are lawful in

failure and have been exacted in accordance with management

general authorization.

2.4.5 Physical Safeguard and Security

The objective is to ensure that excess to the physical assets and

information system are controlled and properly restricted to

authorized personnel.

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2.4.6 Error Handling

The objective is to ensure that an error detected at any stage of

processing receives prompt corrective action and is reported to the

appropriate level of management.

2.4.7 Segregation of Duties

The objective is to ensure that duties assigned to individual in a

manner that ensure that no one individual can control both the

recording function and the procedures relative to processing and

transaction.

A well designed process with appropriate internal control should most

it not all these control objectives.

2.5 Components of Internal Control System

Haves (1999) described the five basic components of internal control

as:-

(i) Control environment

(ii) Communication

(iii) Assessment and management of risk

(iv) Control activities

(v) Monitoring

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Each of these components is an integral part of the management

process and plays a specific role department internal control

procedures.

2.5.1 Control Environment

Control environment is the attitude towards internal control system

and control consciousness established and maintained by the

management and employees of the organization. It is a product of

management philosophy style and supportive attitude as well as the

competence, ethical values integrity and morale of the organization

people. The organization structure and accountability relationships

are the key factors in the control environment. The control

environment sits the tone of organization, influencing the

consciousness of the people; it is foundations of all internal control

providing discipline and structure.

2.5.2 Communication

Communication is the exchange of useful information between and

among people and organization to support decision and co-ordinate

activities. Within an organization information should be

communicated to management and other employees who need it in a

form and within a time frame that helps them to carry out their

responsibilities.

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Parties such as customers, suppliers and regulators, Pertinent

information must be identified, captured and communication in a

form and time frame that enables people to carry out their

responsibilities information system produces reports containing

operational, financial and compliance related information that make it

possible to run and control the organization. They deal not only with

internally generated data but also information about external events

activities and conditions necessary for informed decision making and

external reporting.

Effective communication must occur in a brother sense, flowing

down, across and up the organizational structure. All personnel must

receive a clear message from top management that control

responsibilities and they should be taken seriously. They must

understand their own role in the internal control system as well as

how individual activities relate to the work of others. They must have

a means of communication significant information upstream.

It is established that information should level in all direction to ensure

that members of the organization are informed and co-ordinate. A

good system of communication is essential for an organization to

maintain an effective system of internal control and ultimately its

mission. A good communication system consists f methods and

records established to identify, capture and exchange useful

information.

36

Timely information is provided hen the user needs its timelessness

and require that the data will be correct and simple provided at a

time when it is beneficial sufficiently detailed information provides

enough detail to help the user active his or her objectives.

Information should not be too detail that it becomes unmanageable.

Information should also be tailored to the user, different levels of

personnel require different types and account information to do their

job. For example, managers may rely on broad or summary

information to monitor performances, identify opportunities or make

organizational decision. Other employees however may rely on

detailed information to perform specific tasks, such as recording

transactions or processing data.

2.6 Communication and Internal Control

Management should ensure that good communication channels exist

to carry information to people who need it throughout the

organization. These channels should be well utilized by staff of the

organization to communicate relevant information to the right people

in a timely manner.

According to Alan (2000) management must ensure that clear

internal communication channels that:

. Inform employees of their duties and responsibilities.

. Report sensitive matters

37

. Enable employees to provide suggestions for

improvement carryout their responsibilities.

Convey to management message that internal control responsibilities

are important and should be taken seriously.

People outside the organization, like customers, suppliers, and

regulations also need reliable and timely information relevant to their

specific needs.

However, communication is not an isolated internal control

component, communication issues effect every aspect of an

organization’s operations and he help support it system if internal

control. Therefore the extent to which good communication network

is established and used by managers and employees can be used by

management accurate guidance about internal control issue. The

feedback from the communication network can be management

evaluates how ell the cannas components of the system are corking

and which need improvement.

2.6.1 Assessing and Managing Risk

Nwude, (2002) describes risk as events that thrust the

accomplishment of objective. This impairs an organization ability to

accomplish its mission. He defines risk assessment as the process of

identifying, evaluating and determining how to manage these events.

38

Nwude, (2003) again defines risks assessment as the analysis or

estimation of the probability of loss occurring and the potential

impact if the loss does occur. At every level within an organization

there are both internal and external risk that could prevent the

accomplishment of established objectives, ideally, management

should seek to prevent these risk from occurring, in such cases

management should decide whether to accept the risk, reduce the

risk to acceptable level or avoid the risk. To have a reasonable

assurance that the organization will achieve its objectives

management should ensure that each risk is assessed and handled

properly.

2.6.2 Control Activities

Haves (1999) describe control activities as the policies and

procedures that help ensure that management directives are carried

out. They help ensure the necessary action are taken to address any

risk that threaten achievements of the organization objective for,

Edward (1975). Control activities can also be described as tools both

manual and intermitted that help prevent or reduce the risks that can

impede accomplishment of organization objectives and mission.

Management should establish control activities to effectively and

efficiently accomplish the organization objectives.

Management should also closely monitor and evaluate control

activities to ensure that they are functioning properly and that their

39

effectiveness is not being comprise by as such things as managerial

over ride, collusions and careless judgment. According to Haves

(1999) there is many control activities through which management

can use to counter the risk that threaten an organization namely

directive, preventive, detective and corrective control activities.

Directive control Activities: These are designed to guide an

organization towards it designed out come. Most directives control

activities that take the form of laws regulations guidelines policies

and written procedures.

Preventive control activities: Designed to detect the occurrence of

undesirable event. The development of these control involves

predicting potential problems before they occur and implementing

ways to avoid them.

2.6.3 Detective Control Activities

Those controls designed to identify undesirable events that do occur,

and alert management about what has happened. This management

to take correction promptly.

Corrective control activities. They are processes that keep the focus

an undesirable conditions until they are corrected they many also

help in setting up producers to prevent re-occurrence of the

undesirable conditions.

40

There is no control activity that provides all the answers to risk

management problems, in some situations, a combination of control

activities should be used and in others. One control activity can

subsist for another. A good description would be given of some of the

more commonly used control activities. However, this is by no means

an exhaustive listing of all the alternative available they are:-

- Documentation

- Approval and athorisation

- Verification

- Supervision

- Separation of duties

- Safeguard of assets

- Reporting

2.6.4 Monitoring

According Ndibe (1986), Monitoring is the review of an organisation’s

activities and transaction to assets that quality of performer controls

are effective management should focus monitoring efforts on internal

control system and achievement of organization objectives

monitoring can be also be seen as a process that access the qualify

of the systems performances over time. This can be accomplished

through on going monitoring activities, separate evaluation or a

combination of both on going monitoring activities include their

duties. The scope and frequency of separate evaluations will defend

41

primarily on procedures. Internal control deficiencies should be

reported upstream with serious matters reported to executive, all

employees need to understand the organization mission and

objective responsibilities has some tolerance level Every one with an

organization has some responsibilities for monitoring. The position a

person holds in the organization helps to determine the focus and

extent of these responsibilities. Therefore the monitoring performed

by staff person, supervises, mid level managers and executive

managers will not have the same focus.

2.7 Limitation of Internal Control

While internal control go to a long way in ensuring efficient

functioning of an organization. They are not panacea for all ailment

of an organization. They suffer from their own limitation. Aguolu

(2003) described the limitation as follows:-

√ Segregation of duties avoided by fundament collusion

especially by those in authorities.

√ Authorisation control abused by the persons in authority.

√ Competence and integrity of personnel underline by

pressures from inside or outside the organization.

√ Human errors of judgment of interpretation due to

misunderstanding, carelessness, fatigue or distraction

under mining the effective cooperation of internal

controls.

42

Controls in Computer Environment

In any discussion on control system, recognition must be given to the

facts that computer has revolutionaries the ways in which

organization process fata.

Computer System

√ Hold data in electronic form which is often more complex to

access than paper records

√ Process data with much less manual interpenetration than

manual systems. This tend to but the segregation of duties

implemented to the traditional ways such as management

authorization evidenced by signing paper records.

√ Frequently much more complex than manual systems.

√ Process data consistently and error are mannered in

accordance with their programs.

√ Have large concentration of data making the organization

functioning highly susceptible to failure of its computer system.

√ Often subject to different legal constraints than manual system.

The concepts described in 2.5.4 above as well as the control activities

computerized processes however, several additional control activities

are unique to a computer environment they exist to address the

characteristics that distinguish computerized information system

mainframe, micro-computer and end user environment computer

43

control activities are typically categorized as either general and

application controls.

2.7.1 Application Control

ICAN (2005) defines application control as those controls both

manual and computerized which ensure that data are processed

completely, accurately and in a timely manner Application controls,

as the name suggests are specific to the application and include.

In put control such as data validation and hatching run to control to

check the total at key stages in processing.

Control over out put: Application control relate to specific tasks,

performed by the computer system, that purpose is to provides

reasonable assurance that data entered into the system is properly

recorded processed and reported.

2.7.2 General Control

These include the system development standard operated by the

organization. The control, which apply to the operation of the

computer installation and over system software. All of these usually

affect the number of applications. General controls are those that

related to all activities in the computer environment, including access

44

security over both hardware and electronic files. They often include

controls over the development modification and maintenance of

computer programmes, and maintenance of computer programmes,

and the use of and charges to data maintained on files.

General and Application control over computer system are

interrelated. If the general control is inadequate the application

control is unlikely to function property and could be overridden the

application control assumes that the general control will function

properly and provided immediate feedback and errors, mismatches

incorrect format of data access (by unauthorized persons). Therefore,

general control supports the functioning of application control and

both are needed to ensure complete and accurate information

processing.

2.8 Internal Control Audit as a Control Mechanism

Internal audit is a very effective tool in the various internal control

system and identifying internal audit as the review of the transaction

of a business which may be in many respect similar to saluting of the

business who are responsible to the management and hence may

only report to the management. Give the above definition; it is

therefore in the interest of management to set up an effective

internal audit system. While doing so the key principles of functioning

of an internal auditor viz independence, accountability, materiality

evidence and objectivity has to be kept in view.

45

Internal audit qualified as part of the system of internal control for

the following reasons:-

√ It is established by management

√ it is designed to enforce financial and other controls.

√ It helps ensure orderliness in the business

√ It is carried out by internally assigned staff\

√ It helps to safeguard the assets

√ it helps to ensure the accuracy and reliability of the records.

Internal control is more than a necessary evil required by condition.

It provides assurance that the firms goals and objectives are

accomplished and that assets are protected. Internal control helps

manager’s management effectively and efficiently. It also ensure that

activities and transaction and handled in a consistent manner from

day to day.

Opportunities for fraud, waste and above/accuse significance in a

week internal control environment. All levels of management are

responsible for the creations and maintenance of successful control

environment.

In the words of ICAN (2005) a successful internal control

environment requires management’s commitment and support.

46

Reference

Adums, R.A (2002), Understanding Managmenet Accounting”,

Printnny, South Africa.

Aguolu, O. (2002). “Fundamentals of Auditing, Mendian Association

Onitsha.

Alam, H. (2000). “The Role of Internal Control System in Government

Establishment, Tiandia, USA.

Belverd sr. N.E. (1991), Financial Accounting, Mittilin Publishers

Beston U.S.A.

HAVES, A. G. (1999) “Standards for Internal Control System” New

York.

Kodjo S.N. Decision Accounting for Managers, Oklek Publishers,

Enugu.

Ndibe et al (1086), Auditing and Investigation, future tech.

publishers, Awka.

Nwude, C. E. (2002). Basic Principles of Financial Management,

Second Course, Enugu.

47

CHAPTER THREE

Research Methodology

3.1 Sources of Data

The data used for the analysis and conclusion of this study were

collected from primary sources. The effect of this is to guarantee that

the approach adopted in the analysis and hence the conclusion is

scientific and also to fill the gap that would be created by the

obsolete nature of some of he secondary data. Also in order to arrive

at a result with grater validity, data were also obtained form

secondary resources.

3.2 Primary Sources

The primary sources of data the questionnaire which will be designed

and distributed. At the initial stage of this study, it was intended that

about 150 questionnaires would be distributed with an anticipated

80% responses.

Furthermore, interviews were conducted with staffs of the screen

companies under study who are responsible in one way or the other

for internal controls with a view to ascertaining their opinion on the

existence establishment and effectiveness of internal control in their

organization.

48

3.3 Secondary Sources

The secondary sources of data include those obtained form both

published and unpublished material and some contemporary write

ups on internal control posted on the internet. Those include

journals, textbooks, financial reports of companies and newspapers.

Data was also gotten from the official website of the charted

accountants of India and student accountant of the ACCA. The

published materials that were selected was systematically done so as

to reflect the opinions and possibly the experience of others who

have either under taken previous studies in related areas or are

knowledgeable in those areas. The specific topics that were selected

and which were used in the review of the literature are:

Purpose of internal control

Objective of internal control

Component of internal control

Limitations of internal control

Control in computerized environment and

Internal Audit

3.4 Population

The population to this research is not far fetched because the

researcher only made use of Accountants and other Bursary staff,

Internal Auditors and other internal audit staff as well as staff of the

ICT department of these Colleges of Education.

49

Table 3.

Population distribution table

Category Population Percentage

Accountants 43 27.2

Other bursary staff 80 50.7

Internal auditors 12 7.6

Other Internal audit staff 15 9.5

ICT staff 8 5.1

Total 158 100

These numbers were got from what statistics departments of the

Colleges provided to the researcher.

3.5 Sample size and Sampling Technique

The study focused on the responses received from the questionnaires

that were distributed. These respondents include Staff of the three

colleges of education under study. The sample was chosen not on

the grounds of any special attributes such as age, place work, sex

and level of qualification. The only factor that qualified them for

selection was that they were staff of the companies selected for

study and are on one way or the other subject to internal control

system in place in these companies.

50

In order to ensure that the sample size is a true representation of the

population, the researcher used a stratified formular meant for a

finite population known as yaro yamene (1964) formular, thus:

N = N

1+N(e)2

Where n = sample size

N = finite population

1 = constant

e =error estimate or precision

For this study, the researcher has chosen a precision of 10% which is

equal to 0.1. Therefore substituting for values,

n = 158

1+158(0.1)2 = 61 (sample size)

Table 3.2

Sample size distribution table

Category Sample size Percentage

Accountants 17 27.2

Other bursary staff 30 50.7

Internal auditors 5 7.6

Other Internal audit staff 6 9.5

ICT staff 3 5.1

Total 61 100

SOURCE: FIELD SURVEY, 2010

51

3.6 Methodology

Data for this particular research were made easy by the use of

preliminary investigation on trying to make best choice of

researchable topic that will be of importance to the profession. Field

survey and observation were also sources of data in its primary state.

Interview has been used strongly in this research work because the

researcher believes that a bird at hand worth million in the bush.

Questionnaires were as well distributed to the staff mention in my

sample size make up. These questionnaires covers all the research

questions and other questions to enable me carry out reasonable

analysis of these questions. Also, the researcher made generous use

of library facilities within enugu metropolis such as IMT library, UNEC

library, ESCET library, CBN library and National library.

3.7 Data Collection Procedure

The data collection procedure involved interview and the distribution

of questionnaires. These questionnaires were physically handed out

and collected on the spot unless circumstances necessitated

otherwise. This will definitely produce a better result as staffs were

directly to complete the questionnaires after they were provided with

a good explanation as to the general motive of the research.

52

At the end, it is anticipated that some of the questionnaires were

improperly and partially completed. As a result, some of the

questionnaires were being abandoned.

3.8 Tools for Analysis

The following analytical tools will be used in analyzing the primary

data collected during the course of this study. They are:

Descriptive

Percentage

Bar charts

Chi- square

The above mentioned analytical and testing tools were used in

determining and stating the characteristics of the sample elements on

which the basis for generalization are to be made in the population.

The descriptive tables were used to represent the responses from the

questionnaires on which basis the analysis will be based. The

percentages were used to record the bar chart and were also used to

represent the distribution and return of the questionnaires while the

chi-square is used to test the hypotheses.

3.9 Validity of Responses/Reliability of Data

In order to ensure the validity of the responses that will be given by

the respondents, the researchers will impose some internal checks on

the questionnaires that were issued. Questionnaires completed

53

wrongly would definitely lack consistency and would consequently be

rejected.

The limitations of this study stated in chapter one notwithstanding. It

is the strong belief of the researchers that the search for the

collection of data for this research work will be reliable.

54

References

Ikeagwu, E.K. (1998), “Groundwork of Research Methods and

Procedure, Institute of Development Studies, Enugu.

Onodugu, V.A. (2004), Notes on Research Methodology’ A Lecturer

Monograph.

Ubesie, M. C (2003), Research and Scientific Writing, Jodek Press,

Enugu

Uzoagulu, A.E. (1998), Practical Guide to writing Research Project

Reports in Tertiary Institutions, John Jacobs classic publishers

ltd, Enugu.

55

CHAPTER FOUR

Presentation and Analysis of Data

In this chapter, the data collected for this study are presented,

analysed and discussed based on the responses received from the

questionnaires, which were completed and returned. All the primary

data collected from all the sources will therefore be analysed in this

chapter.

To facilitate this analysis, tabular formals have been adopted. The

responses are summarized and displaced in the ensuring paragraphs.

The total of 100 (one hundred) questionnaires were distributed to the

staff of the three (3) Colleges of Education under study. Only sixty-

one (61) were returned and the distribution is as follows:

Federal College of Education, Eha-Amufu had 25, Enugu State

College of Education (Technical), Enugu had 23 and Institute of

Ecumenical Education, Thinkers Corner, Enugu had 13. The

questionnaires received from the respondents were fully attended to,

as the question contained in them were fully answered. The

frequency distribution of the Colleges of Education and the number of

questions received from them are as below:

56

Table 4.1

Colleges of Education No of Questionnaires

Received

Percentage

Eha-Amufu 25 41%

Technical, enugu 23 37.7%

Thinker Corner 13 21.3%

Total

61 100

TABLE 4.2

Number Percentage %

Questionnaire 61 61%

Questionnaire Not

returned

39 39%

TOTAL 100 100


4.1 ANALYSIS OF RESEARCH QUESTIONS

57

RESEARCH QUESTION 1

DO COLLEGES OF EDUCATION HAVE A STRUCTURE

ORGANIGRAM SHOWING CLEARLY THE FLOW OF

AUTHORITIES AND RESPONSIBILITIES?

This question was to ascertain weather these colleges of education

under study have well mapped out organizational structure to show

without ambiguity flow of authority and responsibility.

Table 4.3

Responses Number of

respondents

Percentage

%

Agree strongly 22 36.1

Agree 27 44.3

Disagree 12 19.6

Total 61 100


Table 4.3 shows that 36.1% of the respondents strongly agree that

their Colleges of Education are well structured with well spelled out

responsibilities and the flow of authorities, 44.3% agree that such

structure is put in place while 19.6% disagree to the fact that there

are well structured organigram in these Colleges of Education.

58

RESEARCH QUESTION 2:

ARE THERE LIMITATIONS TO THE POWERS OF THE

PROVOST ON GRANTING APPROVALS ON EXPENDITURES?

This question is to enable the researcher know whether the chief

executive of these colleges (Provost) has any limitations to his

powers of approval to expenditure of funds. The following

responses were received as tabulated below

Table 4.4

Responses Number of

respondents

Percentage

%


Agree 11 18.0

Disagree 6 9.9

Total 61 100


From table 4.3 above, it is obvious that many respondents

attested to the fact that provost of these colleges actually has his

powers of approval on expenditures limited. As shown above, 72.1

percent of respondents agree strongly that Provost of these

colleges has limitation on their powers of approval on

expenditures, 18 percent agree to such fact while 9.9 percent do

not agree that Provost has limitation on any approval.

59

RESEARCH QUESTION 3

IS THERE SEGREGATION OF DUTIES AS IT RELATES TO

TRANSACTION AUTHORIZATION, RECORDING AND

CUSTODY?

This research question was to ascertain actually whether the

principle of segregation of duties as a tool for internal control

system is being observed. A total of 100 questionnaires were

distributed to 61 sample size, however, only 52 respondents

attended to the question. Their responses were tabulated below.

Table 4.5

Responses Number of

respondents

Percentage

%

Always 15 28.8

Sometime 20 38.5

Not at all 10 19.2

No idea 7 13.5

Total 52 100


Table 4.5 above shows that majority of respondents actually

understand that there is segregation of duties but with different

degrees. As shown above, 28.8 percent of respondents points out

60

that there is segregation of duties always, 38.5 percent of

respondents agree that it does happen sometimes, 19.2 percent of

respondents said that there is no segregation of duties at all while

13.5 percent of these respondents had no idea of whether there is

segregation of duties or not in these Colleges under study.

RESEARCH QUESTION 4

ARE THERE ANY AUTHORITY DOCUMENTS SUCH AS

CONDITIONS OF SERVICE, SCHEME OF SERVICE AND

FINANCIAL REGULATIONS?

This question wants to ascertain the availability of authority

document which will guide the activities of employee in taking

certain actions especially financial actions. The responses obtained

were tabulated below.

Table 4.6

Responses Number of

respondents

Percentage %

All the documents is available 4 6.5

Only conditions of service and

financial regulation are available

32 52.5

Only financial regulations is

available

25 41.0

Total 61 100

61


Table 4.6 above shows that only few respondents were aware of

the existence of these authority documents such as: conditions of

service, scheme of service and financial regulations. This is shown

as only 6.5 percent of respondents agree that all these authority

documents are available for use, 52.5 percent says that only

conditions of service and financial regulations are available while

41 percent of respondents agree that only the financial regulations

is available.

RESEARCH QUESTION 5

HAS THERE BEEN ANY REVIEW IN THESE AUTHORITY

DOCUMENTS IN THE RECENT TIMES?

The essence of this research question is to ascertain the

modernity of these authority documents in furtherance of the fight

against corruption in the country. The responses obtained were

tabulated below.

Table 4.7

Responses Number of

respondents

Percentage

%

Yes 19 35.9

No 29 54.7

62

No idea 5 9.4

Total 53 100


Table 4.7 above shows that only 53 respondents out of 61 sample

size attended to this question. Responses indicates that 35.9

percent agree that these authority documents have been reviewed

in the recent years, 54.7 percent disagree to the fact that they

have been reviewed while 9.4 percent had no idea of whether

they have been reviewed or not.

RESEARCH QUESTION 6

IS THERE A WELL ESTABLISHED, WELL STAFFED

INTERNAL AUDIT DEPARTMENT IN EXISTENCE?

This research question was asked to enable the researcher

ascertain whether internal audit department is actually in

existence to strengthen the internal control system. The responses

were tabulated below.

Table 4.8

Responses Number of

respondents

Percentage

%

Yes 23 37.7

Yes but not well staffed 30 49.2

63

No 8 13.1

Total 61 100


Table 4.8 shows that 37.7 percent of respondents agree that there

is a well established and well staffed internal audit department,

49.2 percent agree that actually there is internal audit department

but disagree to the fact that it is well staffed while 13.1 percent of

respondents agree that there is internal audit department in their

College.

RESEARCH QUESTION 7

IS THE INTERNAL AUDIT DEPARTMENT GIVEN THAT

INDEPENDENCE STATUS IT DESERVES?

In this research question, respondents were asked to attest to the

fact that internal audit department is truly independent in their

functions. The responses are as tabulated below.

Table 4.9

Responses Number of

respondents

Percentage

%

Yes 26 42.6

No 29 47.5

No idea 6 9.9

TOTAL 61 100


64

On a bar chart, the responses will appear as follows.

FIGURE 4.1 STRUCTURE

Table 4.9 and figure 4.1 shows that 26 respondents representing

42.6 percent agree that internal audit department is independent,

29 respondents representing47.5 percent said no while 6

respondents representing 9.9 percent had no idea.

RESEARCH QUESTION 8

DOES THE INTERNAL AUDIT DEPARTMENT GIVE ITS

REPORT REGULARLY ON THE WEAKNESSES OF THE

INTERNAL CONTROL SYSTEM?


ascertain how often the internal audit department render its report

YES

NO

70

60

50

40

30

20

10

yes

NO

Invalid

No No idea

nn 0 0

65

of weakness in the internal control system to the Provost of these

Colleges. These are their responses as tabulated below.

Table 4.10

Responses Number of

respondents

Percentage

%

Quarterly 9 14.7

Semi-annually 14 23.0

Annually 30 49.2

As requested 8 13.1

TOTAL 61 100


As can be depicted in table 4.10, 9 respondents representing 14.7

percent agree that audit report is submitted quarterly, 14

respondents representing 30 percent agree that it is submitted

semi-annually, 30 respondents representing 49.2 percent agree

that it is submitted annually while 8 respondents representing 13.1

percent agree that it is submitted on request.

RESEARCH QUESTION 9

IS THE ACCOUNTING CONTROL SYSTEM REVIEW CARRIED

OUT REGULARLY?

66


ascertain to a reasonable extent whether accounting control

system is being reviewed and how often. The responses are

tabulated below.

Table 4.11

Responses Number of

respondents

Percentage

%

Yearly 26 42.6

Half-yearly 29 47.5

quarterly 6 9.9

TOTAL 61 100


From table 4.11 above, it is observed that 26 respondents

representing 42.6 percent agree that accounting control review is

carried out yearly, 29 respondents representing 47.5 percent said

it is done half-yearly while 6 respondents representing 9.9 percent

said that is done quarterly.

RESEARCH QUESTION 10

DOES THE COLLEGE MAINTAIN A BUDGET TRACKING

MECHANISM?

67

This research question was to know if these Colleges maintain a

budget tracking mechanism where by vote book is maintained for

every expenditure heads and sub- heads. The responses were

tabulated below.

Table 4.12

Responses Number of

respondents

Percentage %

Yes 34 55.8

No 17 27.9

No idea 10 16.3

TOTAL 61 100


From table 4.12, it can be observed that 34 respondents

representing 55.8 percent agree to the fact that there is budget

tracking mechanism, 17 respondents representing 27.9 percent

disagree to that while 10 respondents representing 16 .3 percent

had no idea whether there is budget tracking mechanism or not.


68

HAS THE COLLEGE BEEN EVER INVOLVED IN ANY

FINANCIAL FRAUD OR LOSS OF ASSET DUE TO WEAKNESS

OF INTERNAL CONTROL SYSTEM?

This research question was to ascertain whether these Colleges

had been involved in any financial fraud as a result of weakness in

the internal control system. Responses obtained were tabulated

below.

Table 4.13

Responses Number of

respondents

Percentage

%

Yes 10 16.4

No 41 67.2

No idea 10 16.4

TOTAL 61 100


From table 4.13 above, it can be observed that 10 respondents

representing 16.4 percent agree that their Colleges had been

involved in financial fraud as a result of weak internal control

system, 41 respondents representing 67.2 percent disagree to that

fact while another 10 respondents representing 16.4 percent had

no idea whether their College had been involved in any financial

fraud or not.

69


HAS THE INTERNAL CONTROL SYSTEM ANYTHING TO

CONTRIBUTE IN THE PROPER WORKING OF

MANAGEMENT OF THE COLLEGE?

This research question was administered to enable the researcher

understand if the internal control system operational in these

Colleges has any contribution to make in address proper working of

management of these Colleges. Responses obtained were tabulated

below.

Table 4.14

Responses Number of

respondents

Percentage

%

To a great extent 31 50.8

To a large extent 19 31.1

Very little extent 8 13.2

Not at all 3 4.9

TOTAL 61 100


From table 4.14 above, 31 respondent representing 50.8 percent

agree to a great extent that internal control system contribute proper

70

working of management of their Colleges, 19 respondents

representing 31.1 percent agree to a large extent that internal

control system contribute to proper working of management, 8

respondent representing 13.2 agree that it contribute to a very little

extent while 3 respondents representing disagree that internal control

system contribute to proper working of management.

4.2 TESTING OF HYPOTHESIS

HYPOTHESIS 1

INTERNAL CONTROL SYSTEM DOES NOT CONTRIBUTE TO

PROPER WORKING OF MANAGEMENT.

In this hypothesis, it relates to research question 12 which state: Has

the internal control system anything to contribute in the proper

working of management of the College?

From table 4.14

Responses Number of

respondents

Percentage

%

To a great extent 31 50.8

To a large extent 19 31.1

Very little extent 8 13.2

Not at all 3 4.9

TOTAL 61 100


71

Using chi-square x2 statistical analysis, the formula is stated as

X2 = (fo - fe)2

fe

where X2 = calculated chi-square

fo = frequency observed

fe = frequency expected

Z = summation

Level of significance in this hypothesis testing is 5% which is 0.05

Degree of freedom is (4-1) = 3

Frequency expected (fe) 61/3 = 20.3

Table 4.15

Responses Fo Fe Fo-fe (fo-

fe)2

(fo–

fe)2

fe

To a great extent 31 20.3 10.7 114.49 5.64

To a large extent 19 20.3 -1.3 1.69 0.08

Very little extent 8 20.3 -12.3 151.29 7.45

Not at all 3 20.3 -17.3 299.29 14.74

X2 27.91


The null hypothesis (H0) is hereby rejected because the calculated

chi-square value of 27.91 is greater than critical value of 12.84 at 5%

level of significance using degree of freedom of 3. In other word,

72

alternative hypothesis (H1) is accepted which mean that internal

control system does contribute to the proper working of management

in the College.

HYPOTHESIS 2

INTERNAL CONTROL DOES NOT HELP TO MAINTAIN AND

SAFEGUARD COLLEGE FUNDS, WORKING AND PROPERTY.

This hypothesis is related to research question 11 which states: has

the College been ever involved in any financial fraud or loss of asset

due to weakness of internal control system?

From table 4.13

Responses Number of

respondents

Percentage

%

Yes 10 16.4

No 41 67.2

No idea 10 16.4

TOTAL 61 100



X2 = (fo - fe)2

fe




73

Z = summation




Table 4.16


fe)2

(fo–

fe)2

fe

Yes 10 30.5 -20.5 420.25 13.78

No 41 30.5 10.5 110.25 3.61

No idea 10 30.5 -20.5 420.25 13.78

X2 31.17





alternative hypothesis (H1) is accepted which mean that internal

control does help to maintain and safeguard college funds, working

and property.

HYPOTHESIS 3

INTERNAL AUDIT DEPARTMENT DOES NOT STRENGTHEN

THE INTERNAL CONTROL SYSTEM.

74

This hypothesis is related to research question 7 which state: Is the

internal audit department given that independent status it deserves?

From table 4.9

Responses Number of

respondents

Percentage

%

Yes 26 42.6

No 29 47.5

No idea 6 9.9

TOTAL 61 100



X2 = (fo - fe)2

fe




Z = summation




75

Table 4.17


fe)2

(fo–

fe)2

fe

Yes 26 30.5 -4.5 20.25 0.66

No 29 30.5 -1.5 2.25 0.07

No idea 6 30.5 24.5 600.25 19.68

X2 20.41





alternative hypothesis (H1) is accepted which mean that internal audit

department strengthens the internal control system.

HYPOTHESIS 4

LIMITATIONS OF POWERS OF APPROVAL OF PROVOST DO

NOT MAKE THE INTERNAL CONTROL SYSTEM WORK.

76

This hypothesis is related to research question 2 which state: are

there limitations to the powers of the Provost on granting approvals

on expenditures?

From Table 4.4

Responses Number of

respondents

Percentage

%


Agree 11 18.0

Disagree 6 9.9

Total 61 100



X2 = (fo - fe)2

fe




Z = summation




Table 4.18

Responses Fo Fe Fo-fe (fo- (fo–

77

fe)2 fe)2

fe

Yes 44 30.5 13.5 182.25 5.98

No 11 30.5 -19.5 380.25 12.47

No idea 6 30.5 -24.5 600.25 19.68

X2 38.13





alternative hypothesis (H1) is accepted which mean that limitations of

powers of approval of provost do not make the internal control

system work.

78

CHAPTER FIVE

Summary of Findings, Conclusion and Recommendation

This chapter being the end chapter is set out to show in brief and in

clear terms what the researcher had done in carrying out a research

project on the topic. Effective internal control is the foundation of

safe and sound operation in selected organization (A case study of

Colleges of Education in Enugu). Here, the researcher presents his

summary of findings as in chapter 4, his conclusion as regard what

he had observed and found out in uncompressing term and his

recommendation as a way out of the urgly trend in his findings.

5.1 Summary of Findings

The colleges of education under study as a means of instituting an

effective internal control mechanism had a well established

organizational structure which actually defined flow of authority and

responsibilities. The principles of segregation of duties were also

discovered to be in practice to ensure that no officer starts a financial

transaction and completes it without a second eye seeing it.

It was ascertained as well that these colleges of education the basic

necessary authority documents such as conditions of service, scheme

of service and financial regulation. These documents are also in tune

79

with the contemporary documents for effective and efficient internal

control system that will prevent and detect fraudulent practices.

Effective internal control system both in the manual as well as the

computerized environment are a pre-requisite for the efficient

functioning of any organistion to this end, the organization has to

establish will designed internal control system such control are

classified as administrative control and accounting controls. The look

into the decentralisation of communication and reporting

responsibilities and accounting control covers the recording of

transaction, establishing responsibilities for maintaining financial

records including that of assets.

The contribution of internal audit department cannot be over

emphasized as far as the effectiveness of internal control system is

concerned. Unfortunately, most organization cannot afford to

establish as internal audit department in their organization. In

organization where they exist, the internal department is normally

independent and it normally papers its report when required based

on the effectiveness of internal control system in the organization

and how it can be improved.

Also internal audit is an effective tool on the hands of senior echelons

of management of an organization for periodic evaluation of the

functioning of internal control system. It is also necessary to use

external audit for periodically evaluation of the functioning of both

internal control system as well as the system of internal audit set by

80

the organization effective internal control and strong internal audit

mechanisms substantially enhance the efficiency of external audit

and hence it is in the interest of external auditors to actively

encourages setting up of such system in the organization audited by

it. It was also observed that the internal audit department as a

matter of fact was given some element of independence to enable

the carry out their duties without fear of intimidations from principal

officers. It was ascertained that internal audit reports are not

submitted as regularly as required and that these internal audit

reports are many a times not made use of. In these Colleges,

management and employees go to extra mile to adhere strictly to the

internal controls system in existence in the college by ensuring that

accounting records and information are accurate and they are made

available at the right time. This aspect of internal control is made

very effective because at different point in time and different

responsibilities, the control system establishes different responsible

personnel which make it difficult for any manipulation to be done on

the accounting records. It was also discovered that in the private

colleges, they are more interested in making effective all controls

that deal with cash and cash transactions.

This study also shows that all establish control for the authorization

and approval of transaction are strictly adhered to wherever they

exist though in companies with larger transaction the authorization

81

and approval is normally done with official documents depending on

the nature of the transaction.

It was also discovered that most organization has established

standards that guide the recruitment of employees. After

employment, in some organizations, steps are taken to subject newly

employed Staff and even old ones to training programmes that will

help them improve on their academic qualification are given the

opportunity in some of the companies under study. Also to ensure

that Staff are engagement promotion, resignation and termination.

5.2 CONCLUSION

In conclusion, it is good to say that though internal control system is

in operation in these Colleges under study, however, it requires to be

strengthened more. It is obvious that internal control system in

operation is a stage managed system because the organizational

structure made for the Colleges are not actually put to function, this

made it impossible for some staff to understand what was happening

in many instances and made them to answer in affirmative to

questions put across. The flow of authority and responsibilities should

be determined by the structure put in place in these Colleges. Again,

82

the powers of Provost for approval of expenditures are limited to

ensure that there is control over expenditure in line with the financial

regulations.

Permit me to say here that internal control is a necessary evil that

needs to be established in every organization be it profit or non profit

organizations. It is also imperative that in some Colleges, especially

the smaller ones, attention is given to controls that deal with cash

more than other controls, it should be noted that without the

combined effort of all the resources of the organization, the College

cannot achieve the objectives for which it was established.

Every one is experienced in internal control, both in their daily

business activities and in their personal lives. Yet it is a subject that is

very often misunderstood, ignored or under valued. Internal control

helps bring order direction and consistency to our lives and our

organizations. So how can a subject of such importance be so

unappreciated? More than ever, there is demand from governing

council and public that Colleges as well as other higher learning

institutions’ resources be used efficiently, economically and

effectively. College employees entrusted with resources are

responsible, among other things for complying with laws and

regulations, meeting goals and objectives and safeguarding assets. A

good internal system can assist management in carryout these

responsibilities.

83

5.3 Recommendation

Having drawn up the conclusion that internal control is a necessary

evil that needs to be established in every organization be it profit or

non profit organisations, the following recommendation have been

made.

More efforts should be made by management to educate all the

employees of all the controls that are in existence in these Colleges,

more attention should be focused on the unskilled workers in

Colleges where there services are needed.

It was discovered that in some companies especially the smaller

ones, attention is given to controls that deal with cash more than

other controls, it should be noted that without the combined effort of

all the resources of the Colleges. The College cannot achieve the

objectives for which it was established at such, effort should be made

to see to it that controls on the safeguard of assets are effective and

are in existence.

Colleges should place a high priority on the quality of personnel’s

being employed as much as possible, effort should be made to see it

that the standards for Staff employment are received from time to

time and improved upon. Again staff should be given opportunity to

84

improve on their quality and get used to contemporary issued that

will affect the productivity of the Colleges.

Internal audit department should be adequately and appropriately

staffed with competently qualified officers instead of this situation

where the head of the department is the only qualified staff available.

Other subordinates and support staff should as well be qualified in

the field of accounting and internal control.

External auditors should help to strengthen the internal audit

department so as to ensure a continuous review of the internal

control system that is in operation. Even new control can be

recommended on a continuous basis to ensure an ongoing strong

and unbeatable system of control.

Finally, the research would recommend that it a further study is done

on this topic. It should be done in such a way as to reflect the size of

the colleges under study in the course of this study. The researcher

discovered that the control established by management is dependent

on the volume of transaction that it experience on daily basis.

85

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South Africa: Printnny,

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Association

Aguol, O. (2002), Internal Auditing in Nigeria, Problem and

Prospoects, Onitsha: Mendian Associattion

Alam, H. (2000), The Role of Internal Control System in

Government Establishment, USA: Tiandia

Anao,A.R and Uche, C.U (2000), Research Design and

Implementation in Accounting and Finance, Benin and

Lagos: UNIBEN and ICAN respectively

Anyafo, A.M.O (2002), Public Sector Accounting, Enugu: GOPRO

foundation publishers

Aromolaran, E.A (1998), A Guide on Research Techniques (with

revision questions and answers), Lagos: Top hill Associates

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Belverd sr. N.E. (1991), Financial Accounting, U.S.A: Mittilin

Publishers Beston

Borg, W.R and Call (1989), Educational Research; An

introduction, 5th Edition, New York: Longman

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and Co Publishers,

Folarin, B.A (1999), Survey Research Methods, Lagos: Ideal Press

Harper, W.M. (1977), Statistics, Plymount: MacDonald and Evans,

Haves, A. G. (1999), Standards for Internal Control System,

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89

Department of Accountancy,

University of Nigeria,

Enugu Campus.

QUESTIONNAIRE:

Sir/Madam,

I am MBA student of the Department of Accountancy, University of

Nigeria Enugu Campus, undergoing a thesis research on the topic,

effective internal control is the foundation of safe and sound

90

operation in selected organization (A case study of Colleges of

Education in Enugu)

I will appreciate it, if you will assist me by filling theses

questionnaires.

Thanks.

Nnamani Emmanuel Ekene

08057104419, 08135011825

QUESTIONNAIRES

Please tick √ as appropriate

Personal information

Name ………………………………………………………………

91

Gender……………………………………………………………..

Name of College…………………………………………………..

Rank ………………………………………………………………

Division/department/unit…………………………………………..

General Information

1. Has the college any established organization structure.

[a] Agree strongly

[b] Agree

[c] Disagree

2. Does the organizational structure depict the function authority

and responsibility of employee?

[a] Agree strongly

[b] Agree

[c] Disagree

3. Are budgets closely monitored by supervisors heads?

[a] Yes

[b] No

4.. Are transactions posted to the general ledger account checked

for their appropriate?

92

[a] Yes

[b] No

5. Are there specific limits for approval and authority by

department division?

[a] Agree strongly

[b] Agree

[c] Disagree

6. Are these limits closely followed?

[a] Yes

[b] No

7. Are the balances in the detailed records periodically reconciled

with the control account balance?

[a] Yes

[b] No

8. Is there segregation of duties as it relates to transaction e.g.

authorization, recording and custody?

[a] Always

[b] Sometimes

[c] Not at all

[d] No idea

93

9. Is cash collected paid into the bank immediately?

[a] Yes

[b] No

10. How often is lodgment made into the bank?

[a] weekly

[b] Daily

[c] Twice a month

[d] Monthly

11. Are payment vouchers kept by the company pre-numbered?

[a] Yes

[b] No

12. Are those who authorize orders independent of those who issue

requisition?

[a] Yes

[b] No

13 Is a review made on a regular basis to determine the reasons

for any documents which have not been accounted for within a

reasonable period of time?

94

[a] Yes

[b] No

[c] No idea

17. Are the result of the procedures in [16] above reviewed and

approved by a responsible official?

14. Are totals for posting a control account established before they

are passed to the persons who post them in the accounts

receivable subsidiary records?

[a] Yes

[b] No

15 Is the strong accommodation adequate to provide protection

against deterioration and access by unauthorized person?

[a] Yes

[b] No

16. Is there physical stock count carried out in the company?

[a] Yes

[b] No

17. How often is physical stock count carried out?\

95

[a] Weekly

[b] Monthly

[c] Quarterly

[d] Annually

18. Are the stock issue vouchers supported by daily authorized

requisition?

[a] Yes

[b] No

[c] No idea

19. Are the records controlled in such a way that it can

subsequently be established whether all the related transaction have

been accounted for?

[a] Yes

[b] No

20. Are all recruitment done by the standard set by the colleges?

[a] Yes

[b] No

21. Does the colleges have programmes that help improve the

quality of its staff?

96

[a] Yes

[b] No

22. Does the college encourage staff to improve their academic

qualification?

[a] Yes

[b] No

[c] no idea

23. Does the college carryout periodic nature checks on staff to

ensure that there are no ghost workers?

[a] Yes

[b] No

24. Does the college maintain detailed records of staff engagement

resignation and termination?

[a] Yes

[b] No

25. Are there established standards that guide staff promotion?

[a] Yes

[b] No

26. Is there an internal audit department?

[a] Yes

97

[b] No

27. Is the internal audit or given access to all documents that relate

to the company at any time?

[a] Yes

[b] No

28. Is the internal audit department independent in the company?

[a] Yes

[b] No

[c] no idea

29. How often does the internal audit department furnish it report?

[a] Weekly

[b] Monthly

[c] Quarterly

[d] Annually

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