INTERNAL CONTROL SYSTEM IN GOVERNMENT PARASTATALS(A CASE STUDY OF PHCN ADO EKITI)
1.1 BACKGROUND TO THE STUDY
Several studies have been carried out
in Nigeria to find out why many government parastatals or industries which
started of well later fall or remain stagnant in their operations. The major
causes of this situation were traced down to poor internal control system which
emanated from a lot of factors, part of Horngren (1982) therefore defined internal
control as referring to both Administration control and accounting control.
Administration control organization showing who reports to who and all the
methods, planning and control of operations. Accounting control comprises the
methods and procedures that are mainly concerned with authorization of
sections, the safeguarding of assets and the accuracy of the financial records.
Good accounting control helps maximize profit; they help minimize waste,
unintentional errors and frauds.
This well designed control measure is a
step towards the achievement of an organizational accountability which in other
words means success of organization. The use of internal control system by
government parastatal in Nigeria has been recently on great increase. Internal
control has been recognized in the most organization as one of the most
essential ingredients, necessary for the survival of the business enterprise
and government agencies. Apart from the problem of scarce resources,
organizations run a high risk of fraud, errors, miss appropriation of minimize,
if not eliminate completely, these risks, by establishing internal control
system. For every organization, there are risks that the organizational goals
and objectives are not achieved. All efforts aimed at preventing such risks or
identifying and correcting such risks are viewed as internal control.
Anthony (1998) defined internal control
as “the process by which managers assure that resources are obtained and used
effectively and efficiently in the accomplishment of the organization
objectives. Garrison and Noreen (2000) suggested a different definition for
internal control as follows: “those steps taken by management that attempt to
increase the likelihood that the objectives set down at the planning stage are
attained and to ensure that all parts of the organization function in a manner
consistent with organizational policies. He further defined internal control as
those sets of organizational activities which include: planning, co-ordination,
communication, evaluation and decision making as well as informal processes
aimed at enhancing the efficient and effective use of the organizational
resources towards the achievement of the organizational objectives.
Anthony and Govindavajan (2004)
identified several aspect or activities of management / internal control
namely: planning, coordinating, communication, evaluation, decision-making and
influencing. Planning what the organization should do to achieve proper
accountability. Planning could be view as budget preparation. With planning the
organization decides what to do and the responsibilities of its different
Koontz and Donnel (1992) defined
internal control as all the measures of a public or private organization that
could be said to be strategies of owners and managers to monitor and control
the activities within the organization.
1.2 STATEMENT OF THE PROBLEM
Internal control is management tools
that are built into the entity as a part of its infrastructure to help managers
and administrators run the entity and achieve their aims on an ongoing basis.
Internal control is affected by people: people are what make internal control
work. The responsibility for good internal control rests with all administrators
and managers. Management sets the objectives, put the control mechanisms and
activities in place, and monitor and evaluates the control. Internal control
provides reasonable assurance, not absolute assurance; management design and
implement internal control based on the related cost and benefits. No matter how
well designed and operated, internal control cannot provide absolute assurance
that all organization objectives will be realized. However, the researcher is
examining the internal control system in
1.3 OBJECTIVES OF THE STUDY
following are the objectives of this study:
examine the internal control system in government parastatals.
examine the process of internal control system.
determine the impact of internal control system on productivity and
accountability in government parastatals.
1.4 RESEARCH QUESTIONS
is the state of internal control system in government parastatals?
is the process of internal control system?
are the impact of internal control system on productivity and accountability in
1.6 SIGNIFICANCE OF THE STUDY
following are the significance of this study:
results of this study will be useful to the managers and administrators in both
governmental and non-governmental organizations on the benefit and process of
internal control system for organizational effectiveness.
research will also serve as a resource base to other scholars and researchers
interested in carrying out further research in this field subsequently, if
applied will go to an extent to provide new explanation to the topic.
1.7 SCOPE/LIMITATIONS OF THE STUDY
study on internal control system will cover the proper process of internal
control system that can be used as a tool for the realization of organizational
goals and objectives.
LIMITATION OF STUDY
Financial constraint- Insufficient fund tends to impede the
efficiency of the researcher in sourcing for the relevant materials, literature
or information and in the process of data collection (internet, questionnaire
Time constraint- The researcher will
simultaneously engage in this study with other academic work. This consequently
will cut down on the time devoted for the research work.
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