This project titled “The Role of Internal
Control as the Foundation of Quality Management: a study of the Broadcast Media
in Nigeria” is both a descriptive and an analytical study designed to evaluate
the role of internal control in an organization to see whether, or otherwise,
it is the bedrock of quality management. The entire work is chronicled into
five chapters with each addressing an important segment of the research work.
The objectives of the study are to identify and evaluate: the importance of an
Internal Control System in the management of an organization using Broadcast
Media in Nigeria the study; the features of a good Internal Control System; the
factors responsible for the increase of frauds, embezzlements or
misappropriations of funds/assets in modern-day Nigeria; and also to find out
why some of them remain undetected for a good number of years whereas the books
of accounts of the organization are often being examined by her internal and
Furthermore, the population of the study is
the Broadcast Media in Nigeria and the determined sample size is 171. Data used
for the study were obtained from primary and secondary sources, making use of
oral interviews, questionnaires, and literature review. Again, the data
collected were analyzed by the use of tables, simple percentages, and absolute
numbers, while the chi-square (x2) technique was used to test the hypotheses
formulated in the study.
Moreover, the major findings made in this
dissertation are as follows: that some of the factors responsible for increase
of errors, frauds, embezzlements or misappropriations of funds/assets, in this
modern-day Nigeria are: greed and lack of contentment; non-compliance with the
laid down internal control procedures; non-adherence to financial policies and
guidelines; collusion; employment of unqualified and incompetent personnel;
poor remuneration; glorification of ill-gotten wealth in Nigeria; and delay in
payment of salaries by some employers – that undetected errors, frauds,
embezzlements or misappropriation of funds/assets for quite a good number of
years (whereas the accounts of the organization are being reviewed by her internal
auditors on regular basis and the external auditors yearly) are due to the
following: collusion; employment of inexperienced internal auditor; negligence
on the part of some external auditors; and noncompliance of
companies/organizations to auditors’ management letters (letters of
Finally, based on the major findings above,
the following recommendations aimed at improving the situations are made:
establishment of adequate accounting system and effective internal control
measures; employment of honest, dedicated and competent personnel; proper
supervision of staff; compliance with Auditors’ management letters; adequate
remuneration and regular payment of salaries, and reorientation of the Nigerian
citizens towards the glorification of ill-gotten wealth in our society today.
Title page i
Table of contents vii
List of tables
CHAPTER ONE: INTRODUCTION
1.1 Background of study 1
1.2 Statement of the problem 6
1.3 Objectives of study 7
1.4 Formulation of research hypotheses 8
1 .5 Significance of study 9
1.6 Scope of study 10
1.7 Limitations of study 10
1.8 Classical definition of terms 11
1.9 Overview of study 14
CHAPTER TWO: THE REVIEW OF RELATED LITERATURE
2.1 Historical Development of Internal
Control System 16
2.2 Internal Control System Defined 18
2.3 Objectives of Internal Control System 24
2.4 Features of Good Internal Control System
2.5 The Importance of Internal Control System
2.6 Internal control and Management 39
2.6.1 Design and Installation of the System
2.6.2 Operation of the System 41
2.6.3 Performance Evaluation and Monitoring
of the System 42
126.96.36.199 Internal Audit 43
188.8.131.52 Definition of Internal Audit 43
184.108.40.206 Functions of the Internal Audit 46
2.7 Internal Control and the Auditor 47
2.7.1 Review of System of Internal Control 48
220.127.116.11 Systems Descriptions 50
18.104.22.168 Form of Systems Descriptions 50
22.214.171.124 Obtaining Detailed Systems Information
2.8 Internal Control in Computerized
2.9 Limitations of Internal Controls 55
2.10 Foundation 58
2.11 Quality 58
2.12 The Concept of Management 59
2.13 Fraud 61
2.13.1 Factors Responsible for Increase of
2.13.2 Types of Business Fraud 67
2.13.3 Indication of Errors and Frauds 70
2.14 The Historical Development of One of the
Media Studied Federal Radio Corporation
Of Nigeria, FRCN 71
2.14.1 The Establishment of the Nigeria
Services, NBS 71
2.14.2 The Nigeria Broadcasting Corporation,
2.14.3 The Federal Radio Corporation of
Nigeria, FRCN 74
CHAPTER THREE: Research Design And
3.1 Research Design 81
3.2 Population 81
3.3 Sample Size Determination 82
3.4 Sources of Data 84
3.5 Questionnaire Administration and
3.6 Statistical Tool For Data Analysis 85
3.6.1 Acceptance / Rejection of Hypotheses 86
3.7 Validity and Reliability of the
CHAPTER FOUR: Data Presentation, Analysis
4.1 responses to the Questionnaire and
4.2 Test of Hypotheses Using Chi-square 104
4.2.1 Decision Rule 104
4.2.2 Hypothesis One 104
4.2.3 Hypothesis Two 108
CHAPTER FIVE: SUMMARY OF FINDINGS,
AND CONCLUSION 113
5.1 Summary of Findings 113
5.2 Recommendations 116
5.3 Suggestions for Further Research 119
5.4 Conclusion 119
Appendix I – Letter of Introduction 123
Appendix II – Questionnaire 124
Appendix – Table of Critical Values of the
Chi-square Distribution 132
1.1 BACKGROUND OF THE STUDY
It is a well-known fact that everything in
this world has a foundation. The foundation of anything be it a building, an
idea, a career, belief, etc matters a lot: it determines, to a very large
extent, the strength, durability, quality and success, or otherwise, of that
The Oxford Advanced Learner’s Dictionary of
Current English defines a foundation as a strong base of a building, usually
below ground level, on which it is built up; that on which an idea, belief, etc
rests; underlying principle; basis; a starting point.
Management as an essential ingredient of all
organized endeavour has an underlying principle and that is the internal
control system. How successfully an organization achieves its objectives,
satisfies social responsibilities or both, and depends upon how well the
organization’s managers do their jobs. In another word, how well the managers
adhere to the whole system of controls, financial and otherwise, established by
the management to carry on the business of the enterprise. How well managers do
their jobs – Managerial performance – is measured in terms of two concepts:
efficiency and effectiveness.
According to Stoner and Freeman (1 989:10),
efficiency means “doing things right,” that is, the ability to get things done
correctly and effectiveness mean “doing the right thing,” that is, the ability
to choose appropriate objectives.
The sum of these two concepts is quality
management which is itself the product of the Internal Control system. Nwoko
(1997:202) defined quality management as a systematic approach for ensuring
that all activities within an organization happen according to the plan. This
approach was evolved primarily by a group of American quality experts: W.E.
Deming, Joseph Juran and Philip Grosby. Before implementing quality management,
there must be a quality system in existence. A quality system is an assembly of
components, such as organizational structure, responsibilities, procedures,
processes, and resources.
In the same direction, Stoner and Freeman
(1989:4) defined management as the process of planning, organizing, leading,
and controlling the efforts of organization members and of using all other
organizational resources to achieve stated organizational goals.
A process is a systematic way of doing
things. Management is defined as a process because all managers; regardless of
their particular aptitudes or skills, engage in certain interrelated activities
to achieve their desired goals.
Planning implies that managers think through
their goals and actions in advance. Plans give the organization its objectives
and set up the best procedure for reaching them.
In addition, plans become the guides by
which: the organization obtains and commits the resources required to reach its
objectives; members of the organization carry on activities consistent with the
chosen objectives and procedures, and progress toward the objectives is
monitored and measured so that corrective action can be taken if progress is
The first step in planning is the selection
of goals for the organization.
Then objectives are established for the
subunits of the organization — its divisions, departments, and so on. Once the
objectives are determined, programmes are established for systematically
Organizing means that managers coordinate the
human and material resources of the organization. Once managers have
established objectives and developed plans or programmes, to reach them, they
must design and staff the organization to be able to carry out those programmes
Leading describes how managers direct and
influence subordinates, getting others to perform essential tasks. After plans
have been made, the structure of the organization has been determined, and the
staff has been recruited and trained, the next step is to arrange for movement
toward the organization’s defined objectives. This function can be called by
various names: leading, directing, motivating, actuating, and so on. But
whatever the name used to identify it, this function involves getting the
members of the organization to perform in ways that will help it achieve its
Whereas planning and organizing deal with the
more abstract aspects of the management process, the activity of leading is
very concrete; it involves working directly with people.
Finally, controlling means that managers
attempt to assure that the organization is moving toward goals. Managers must
ensure that the actions of the organisation’s members do move the organization
toward its stated goals. This is the controlling function of management, and it
involves four main elements: establishing standards of performance (budgets);
Measuring current performance and comparing it against the established standards;
detecting deviations from standard goals to make corrections before a sequence
of activities is Completed; taking action to correct performance that does not
meet those standards.
Through the controlling function, managers
can keep the organization on its chosen track, keeping it from straying from
its specified goals.
But it is a sad commentary to say that even
in those organizations in which quite competent managers and skilled supporting
staff are known to be at the helm of affairs for attaining the goals of the
organizations, the problems of frauds, irregularities, embezzlement,
misappropriation of funds/assets, mismanagement or poor management, or whatever
name it may go with, are still being encountered, and even at an alarming rate.
Why? It is the opinion of the researcher, therefore, that a study on internal
control systems as a foundation of quality management would provide an insight
into the way of solving the problems.
Bethel, et al (1971:27) pointed out that an
enterprise may possess the most modern plant and equipment, highly skilled and
experienced labour and sales force, ample Financial resources and an adequate
source of raw materials yet fail to perform efficiently. They argued that
although several reasons are involved the major factor is poor management.
The question now is: what is poor management?
Poor management, in the context of this study, simply means deviation from any
of the system of controls, financial and otherwise, established by the
management to carry on the business of the enterprise in an orderly and
efficient manner, ensure adherence to management policies.
Poor management occurs only where there is no
internal control system in existence or where in existence, it is weak.
Therefore, the only solution to poor management is the establishment of good
internal controls and observing them.
Santocki (1972:12) opined, “By internal
control, is meant not only internal check and internal audit, but the whole
system of controls, financial and otherwise, established by the management, to
carry on the business of the company in an orderly manner, safeguard its assets
and secure as far as possible the accuracy and reliability of its
Internal control is the bedrock of quality
management, and to achieve its purposes, it must be adequate in design and
effective in operation.
STATEMENT OF THE PROBLEM
In the early sixties, one hardly heard of
frauds, irregularities, embezzlements or misappropriation of funds/assets,
mismanagement or poor management, or whatever
name it may go with. But nowadays the reverse is the case: there are a lot of
cases of the aforesaid social evils in modern-day Nigeria. Why?
Also, there has been a general outcry from
the public sectors, private sectors, and the general public why some of the
above fraudulent practices are not easily detected, or if at all detected, they
may have taken some time, even though these organizations may have engaged
internal auditors and the services of external auditors who audit the accounts
of the organizations year after year.
These are the main problems that led the
researcher into this study/ dissertation.
What are the factors responsible for the
increase of frauds, irregularities, embezzlements or misappropriation of
funds/assets, mismanagement or poor management in modern-day Nigeria?
Does your organization have a good, adequate,
and operational Internal Control System in existence presently?
Does your organization have a good, adequate,
and operational Internal System in existence presently?
Does your organization have an Internal Audit
Has your organization experienced frauds,
embezzlements or misappropriation of funds/assets before, and what were the
OBJECTIVES OF THE STUDY
The main objectives of this study are to:
Identify and evaluate the importance of an
Internal Control System in the management of an organization using Broadcast Media
in Nigeria for the study.
Identify and evaluate the features of a good
Internal Control System.
Identify and evaluate the factors responsible
for the increase of frauds, embezzlement or misappropriation of funds/assets in
modern-day Nigeria, and also find out why some frauds, embezzlement or
misappropriation of funds/assets remain undetected for a good number of years
whereas the books of accounts of the organization are often being examined by
her internal and external auditors.
FORMULATION OF RESEARCH HYPOTHESES
In considering the nature and extent of the
problems of the study, the researcher shall make some ‘intelligent guesses upon
which the research will be based.
1. The persistence of frauds, embezzlements
or misappropriation of funds/assets and other fraudulent practices in any
organization is not due to noncompliance with the established internal control
The persistence of frauds, embezzlements or
misappropriation of funds/assets and other fraudulent practices in any
organization is due to non-compliance with the established internal control
2) There are no cases where errors, frauds,
embezzlements or misappropriation of funds/assets remain undetected for quite a
good number of years whereas the accounts of the organization are being audited
by her internal auditor on regular basis and the external auditors yearly.
SIGNIFICANCE OF THE STUDY
Generally, research work helps the management
of organizations and intending investors to solve problems and have a sense of
direction for effective and efficient management and profitable operations.
This study is significant in that it will help managers of organizations to
understand whether Internal Control System plays any significant role toward
prevention and detection of errors, frauds, embezzlements or misappropriation
of funds/assets, proving the claim right or wrong that Internal Control System
is the foundation of quality management.
It will also help to explain the features of
a good Internal Control System and the role of Internal Audit in the Internal
Furthermore, it will help to identify and
explain certain factors that are responsible for the increase of frauds,
embezzlement or misappropriation of funds/assets in various organizations in
this modern-day Nigeria.
Finally, it will be of tremendous help to
future researchers who may wish to develop and research more into the study.
1.6 SCOPE OF
This research work focused on “The Role of
Internal Control as the foundation of quality management,” a study of the
Broadcast Media in Nigeria.
However, the findings and recommendations
will certainly be of immense help to managers of other organizations in Nigeria
and elsewhere and other research scholars.
LIMITATIONS OF THE STUDY
Research of this nature especially in
developing countries like Nigeria is usually subjected to some constraints.
In the process of obtaining the data for this
work, some specific problems worthy of mentioning were encountered.
They were as follows:
In the conduct of this kind of study,
reliance is on the data collected and the appropriate officials within the
organization who will make the data available, and if necessary, explain those
that are rather technical. The researcher, while trying to collect the data,
could not, in most cases, get the officials on the seat, and where they were
met in the office, some of them were always in a hurry to attend one meeting or
the other and as a result could not grant enough audience. These problems
hindered some of the information that could have been obtained.
Also, some of the officials were too reserved
and reluctant to make available certain required information, and this posed a
big obstacle during the study.
Furthermore, finance was another constraint
since there’s searcher, in most cases, had to repeat his series of visits
before he could get some of the officials in the office.
Although the researcher tried to minimize the
effects of these constraints, he, therefore, cannot claim that the report
Presented here is with 100 per cent precision.
The validity of any research work rests
heavily on the availability and reliability of the data required and utilized
for the research work.
This research work, although it was starved
of much of the required data, especially from primary sources, took much from
the secondary source data but this does not in any way diminish the validity of
the work and its recommendations. Truly, the impact of the result of this study
will be of immense assistance to both lecturers and students who may wish to
research in this field of study.
CLASSICAL DEFINITION OF TERMS
This is an internal control that is designed
to discover errors that have occurred and to assure that they are corrected on
a timely basis.
This is defined as the unintentional
This is a failure to perform an internal control
procedure as prescribed; or
This is a misstatement in an account or a
required financial statement disclosure.
Financial Institutions Training Centre (FITC)
defined fraud as an act or course of deception deliberately practised to gain
unlawful or unfair advantage; deception directed to the detriment of another.
Millichamp (1987:96) defined Internal Control
as “Internal Control System — the whole system of controls, financial and
otherwise, established by the management to carry on the business of the
enterprise in an orderly and efficient manner, ensure adherence to management
policies, safeguard the assets and secure as far as
possible the completeness and accuracy of the
Internal Audit is defined as an independent
appraisal activity within an organization for the review of accounting,
financial and other operations as a basis of service to management. It is a
managerial control, which functions by measuring and evaluating the effectiveness
of other controls.
This means the intentional misstatement of an
account or required financial statement disclosure.
Bank (1976:88) defined it as “a collective term
that refers to the system, function, process or office of planning, providing
coordination, directing, evaluating and controlling all available efforts and
resources of an organization for the accomplishment of the objectives and
policies which are designated by, and handed down from top executive of the
These are errors that could occur and should
be the object of internal controls and/or audit procedures.
This is an internal control that is designed
to prevent errors from occurring.
This refers to an arrangement of many parts
that work together, e.g. the digestive system. Again, a system can mean an
established order or arrangement of things, e.g. in a business, in a society,
OF THE STUDY
According to Odo (1992:31) overview of the
study deals with exposing in a bird’s eye view the nature of the entire study.
Chronologically, chapter one contains the
introduction which includes among others the background of the study, statement
of the problems, objectives of the study, basic research hypotheses,
significance of the study, the scope of the study, limitations of the study and
classical definition of terms.
Chapter two is concerned with the rumination
of works previously done by scholars in the field of study.
Chapter three deliberated on the research
design and methodology of the study, which includes, population and sample
description, an instrument for data
collection, techniques for data collection and course of this work. Chapter
four centred on data presentation and analysis while chapter five centred on
the findings, recommendations, conclusion and suggestions for further study.
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Learner’s Dictionary of Current English. 18th ed. (Great Britain: Oxford
Millichamp, P, A. H. (1987)Auditing: An
Instructional Manual for Accounting Students, 4 ed. (London: ELBS and DP
Nwoko, C. 0. (1997) Decision Accounting for
Executives, 1st ed. (Enugu: Gethsemane Consulting and Publishing).
Odo, M. 0. (1992) Guide to Proposal Writing
in Social and Behavioural Sciences, (Enugu: SNAAP Press Ltd.)
Santocki, J. (1972) Case Studies in Auditing,
1st ed. (London: Macdonald and Evans Ltd.)
Stoner, J. A. F. and Freeman, R. E. (1989)
Management, 4th ed. (New Delhi: Prentice Hall International, Inc.)