THE IMPACT OF INTERNAL CONTROL SYSTEM IN A MANUFACTURING INDUSTRY WITH A SPECIAL REFERENCE TO COCO COLA AND ANAMMCO COMPANIES
This research work “The Impact of Internal
Control System in manufacturing Industry with reference to coca cola and ANAMCO
Companies” aims at determining the strength and weakness of internal control
system and exposing the areas of weakness in the operation of the system and
how it effects the productivity and hence profitability of the organization. To
examine the extent the internal control have gone in bringing about efficiency in
the operation of manufacturing industries. To recommend approaches to proper
designing installation and operation of an adequate internal control system
which will improve and ensure further survival of manufacturing firms. Source
of data used include both primary and secondary data. The data collected were
analyzed using the chi-square test method. The findings are lack of knowledge
of internal control system by the staff has affected its application in the
running of the business and the weakness in internal control system of business
manufacturing companies affect the projected profit of the companies. Some
recommendations are audit department should be created in each company and
should be made independent to be able to report deliberate errors, falsifications
or improper use of record or other forms of irregularities that comes to it
Table of Contents
List of table
List of figures
Chapter One: INTRODUCTION
Background of the study
Statement of the problem
Objective of the study
Significance of the study
Scope and Limitation of the study
Definition of Terms
Chapter Two: REVIEW OF RELATED LITERATURE
Definition of Internal Control
Elements of a good Internal Control System
Area of Internal Control
Internal Control System in Electronic Data Processing System
Limitations of Internal Control System
The Impact of Internal Control on coca cola and Anammco Companies
Chapter Three: RESEARCH DESIGN AND
Description of Respondents
Sources of Data
Primary Sources of Data
Secondary Sources of data
Population of Determination of Sample Size
Methods of Investigation
Chapter Four: PRESENTATION, ANALYSIS AND
INTERPRETATION OF DATA
Analysis of Data
Testing of Hypothesis
Chapter Five: SUMMARY OF FINDINGS, CONCLUSION
Summary of Findings
Background of the Study
The sizes, capabilities, and complexities of
modern companies even the smallest requires internal control in the activities
of the organization. As an organization grows, the management needs more formal
information system in order to maintain control. The control can no longer be
carried out by the man on top. Since the organization is now complex, and
subject to such influences without that one person can possibly hope to exert
the detailed and sophisticated control needed. The management therefore, needs
assurance that the accounting data it receives are accurate and dependable.
This assurance is provided in large part by developing strong system of control
that comes from within the functioning of the organization itself. This strong
system is the internal control system. It is the system where each level of
management acts as a siege so far as possible. Adverse factors are dealt with
on the spot by lower management before they grow to worse.
The institute of chartered accountants of
Nigeria defined this internal control as the whole system of control,
financial, personal, operating and good information management system and
otherwise established by the management in order to carry on the business of
the enterprise to achieve their aim and set objectives in an orderly and
efficient manner, ensure adherence to management policies, safeguard the assets
the assets of the organization and secure as far as possible the completeness
and accuracy of record. This definition recognizes that a system of internal
control extends beyond to the functions of accounting and financial departments
infact, the concept of internal control is so vast that it effects all the
assets of business, all liabilities, the revenue and expenditures, periodic
operating reports, statistical analysis and dissemination therefore, it also
taught across standard costing training programmes designed to aid the
personnel in meeting their responsibilities, internal audit and every aspect of
The main purpose of internal controls can be
deducted from the above definition are:
To ensure adherence to management policies.
To safeguard the assets of the organization.
To secure as far as possible the completeness and accuracy of records.
To evaluate the level of performance in all divisions of the company
Infact, internal controls aid in the
efficient operation of a business. The increased size of business units have
encouraged the adoption of different methods which will both increase the
efficient of the business and act as a safeguard against fraud and error which
adversely affect profitability. The basic divisions of the elements of internal
Plan of Organization
Plan should cover the activities of both
management and staff at all levels stating clearly their duties
responsibilities and their power to authorize various activities of the
Authorization, Recording and Custody
Where these are concerned, the financial and
accounting controls should be as such as to facilitates efficient working, at
the same time obviate any chance of fraud or error arising.
Management Supervision and Review:
Management should constantly review and give
consideration to the financial position and financial procedures within the
organization. This may include the use of an internal audit department, but not
necessarily so. Budgeting control whereby variances are revealed and
investigated special reviews of department systems may also take time apart
from normal internal audit procedures.
However every company designs its own
internal control according to the needs of the establishment or the area in
question needs to be in relationship with the cost benefit. All departments
needs to be scrutinized properly before an adequate and strong system which
will provide all the necessary informations that can be understood and concise
form can be designed. The success and continued existence of all manufacturing
companies and all business enterprises lies on the internal controls that exist
there. In other words, the internal control system is the key to profitability
of all manufacturing companies.
Statement of the Problem
Although internal control is highly effective
in increasing the reliability of accounting data and in protecting against
fraud and errors and promoting the efficiency and growth of the organization no
system of internal control is fully proved. Today, there are news of bankruptcy
and folding up of many manufacturing companies due to some problems like:
Lack of raw material for production of enough goods for quantity
demanded of the people;
Different companies have not been manufacturing or producing the
expected or projected number of units.
Most companies have not been adhering to the system of internal control.
It is being neglected and poorly operated.
Internal control in most companies is not operational rather it held in
Lot of money is lost through non adherences to internal control system
thereby denying its expected profit.
Objectives of the Study
The objectives of this study include among
To examine the extent to which management have designed, installed and
operated the internal control;
ii) To expose the areas of weakness in
operation of the system and how it effects the productivity and hence
profitability. Profitability here is related to the level of internal control
To examine the extent the internal controls have gone in bringing about
efficiency in the operation of manufacturing industries;
To recommend approaches to proper designing, installation and operation
of an adequate internal control, system which will improve and ensure further
survival of manufacturing firms.
To what extent has internal control system, improved the activities of
the manufacturing industry?
Can in adherent to the system of internal control affect the
profitability of the manufacturing companies?
Has internal control system reduces the chances of fraud and errors in
the manufacturing companies?
Manufacturing companies have failed to maintain strict and efficient
internal control over their cash.
Manufacturing companies have maintained strict and efficient internal
control over their cash.
Lack of knowledge of internal control system by the staff has negatively
affected its application in running of the business.
Knowledge of internal control system by the staff has positively
affected its application in running of the business.
The weakness in internal control system of manufacturing companies
affects the projected profit of the companies.
The weakness in internal control system of manufacturing companies does
not affect eh projected profit of the company.
Significance of the Study
This work will undoubtfully be of a great
help to management of various manufacturing companies and other business
enterprises. The importance of it brings the dream of designing and internal
control system and throws more light on the need for adequate system of control
which helps in bringing efficiency in operation and achievement of objective
which leads to increased profitability of the company it shows that areas of
weakness of internal control and suggests appropriate measures of correcting
those weaknesses. It also moves on the state the negative effect of poor
internal control operation which most at times lead to leakage in the projected
profits. This will help waken most companies in order to tighten their loose
ends, maximize profit, survive and succeed. Others who will benefit from this
work are other researchers on this topic, it will help them for further
researcher. The researcher found this work invaluable to his academic
advancement because it has exposed him to so many things which ordinary he
would not have come across.