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Internal Control: Preventing Error in Industries

Internal Control as a Measure of Preventing Error in Manufacturing Industries (A Case Study of Life Breweries Onitsha)

 

CHAPTER TWO

2.0     LITERATURE REVIEW

2.1     INTRODUCTION:

Every organization has an objective to achieve is objective the organization has to formulate, implement a policy from time to time. Whereas to such policies will promote the interest fo the organization. To bring this to completion the management of companies should put in place necessary control that is internal control.

1.2     DEFINITION OF INTERNAL CONTROL

Standard audit practice (SAP) define internal control system as the place of the organization and all the method and procedures adopted by the management of the organization in achieving the management objectives of ensuring as far as practicable. The orderly and efficient conduct of his business including adherence to the management policies, the safeguard of assets, prevention and detection of an error. The accuracy and completeness of the accounting records and the time preparation of financial information.

According to Milliskop (1990), “internal control is defined as all forms of control financial or set up by management to carry on the business of the enterprise, safeguard assets and operations of business, protecting its resources against waste, fraud and inefficiency ensuring accuracy and reliability account and operating data, securing companies with the policies of the organization, and evaluating level of performance in all organizational units of the organization.

Everyone within the company has sense rule to play in internal control. The rate depends upon the level of responsibility and the nature of involvement by the individual. He chief executive of the organization and senior executives establish the presence of integrity, ethics, competence, and a positive environment. The directors department heads and supervisory personnel are responsible for executing control policies and procedures at the detailed level within their specific unit. Each individual with a unit is to be cognizant of internal control procedures associated with their specific responsibility.

The internal audit role is to examine the adequacy and effectiveness of he company’s internal control and make recommendations where control improvements are needed. Since internal auditing is to rein dependent and objective, the internal audit office does not have the primary responsibility for establishing or maintaining internal controls. However the effectiveness of the internal control is enhanced through the review of performance and recommendations made by internal audit.

Whether privately or publicly owned, senior executives of the company have long sought ways to control the enterprise; they are engaged to run internal controls are put in place to keep the company income toward profitability goals and achievement of its’ mission and to minimize surprise along the customers demand and priorities and restructuring for future growth. They enable management to deal with rapidly changing economic and competitive environment to reduce risk at each loss, and help to ensure the reliability of financial statement and compliance with the regulation.

Because internal control serves much important purpose there are increasing calls better internal control system and report cards on them. internal control is looked upon more and has been of more solution to a variety of potential problems.

2.2.1  RESPONSIBILITY FOR INTERNAL CONTROL

The board of directors is responsible for the companies system of internal control. It should appropriate policies internal control and seek regular assurance that will enable it to satisfy that the system is functional. The board should further ensure that the system of internal control in the particular circumstance of the company, the board deliberation should include consideration of the following factors.

  • The nature and extent of the risk facing the company.
  • The extent and categories of risk which regards of acceptable for the company to bear.
  • The likelihood of the risk concerning materializing
  • The company’s ability to reduce the in cadence and impact on the business of risks.
  • The cost of operating particular control, relative to the benefit thereby obtained in managing relative risk.
  • It is the role of the management to implement board policies on risk and control. In fulfilling its responsibility of management should identify and evaluate the risk face of the company. For consideration by the board design, operate and monitor a suitable system of internal control which implements the policies adopted by the board. All employees same have some responsibility for internal as a part of their accountability for achieving goals to carry on the business of an enterprise in an orderly and efficient manner ensuring audience. To management policies, safeguard the assets and secure as far as possible the completeness, reliability and accuracy of records, the individual component of an internal control as a measure of correcting of errors are known as control or internal control. Since internal control comprises of internal audit and internal check, there is need for one to study the internal audit critically and efficiency control.

Internal auditing may be defined as an independent review or appraisal within organization of the accounting financial and other operation as a assist for protective and constructive sincere to management. It is conducted by the company’s own specially assigned staff and white dealing prosily with accounting and financial matters may be applied also to any other aspect of operation of the organization.

Internal control is a staff function rather than a function therefore internal auditor doe not exercise direct authority over other persons in the organization whose work he reviews. The internal auditor appraise do not in any case relieve the other persons in the organization of responsibility assigned to them.

The emphasis in many smaller companies e.g (life Breweries Onitsha) is directed towards the review of the accounting records for accuracy and properly function involved in count of cash funds, bank reconciliation inspection of securities internal counts of payroll prepared and distribution the tithe of internal auditor is some times gives to a line executive who supervises the accounting function and has no real auditing responsibility.

For examples executive of the line officer staff took to the internal audit group for help in supplementary their own visit to the field. They recognize without the help of the internal auditor in checking on adherence to company policies and procedures of the various plants.

Their problem of control could be considerably increased and they find it reasoning to know that there is an independent appraisal group our in the field checking the operation for any serious discrepancies.

However, in many small companies the function is properly recognized and much valuable work is performed by internal auditor who operated alone or has one or two assistances.

2.3     INTERNAL CHECK AND INTERNAL AUDIT:

Section 202 (S. 202) of the financial regulations provide that vouchers must be numbered consecutively and promptly posted to the cash book. This will prevent fraudulent act, which is an authority for cheque to be made to he person named there on usually referred to as the payee. Similarly (5,828) mandated that cancelled cheque leave and receipt must be retained in the cheque receipts books.

s.15(10) place a responsibility for signifying certificates on vouchers of all officers involved with writing, checking, passing and payment of vouchers.

s.29 states that is when money is paid to the bank, the paying in slip and the duplicate (and triplicate use) must be analyzed as to

i         Cheque

ii        ostal order

iii       Money order

iv       Notes

v        Coins

The duplicate must be examined to see that it bear an acknowledgement of receipt by the bank and that the analysis has neither been altered neither added to nor substituted for at the lodgments.

S.1444 emphasis that accounting officers must issue instruments for systematic inspection of regular. Internal check of the cash held by their subordinates, records of such inspection must be kept.

S 2039 specification mentioned that officer controlling expenditure will ensure that a completed and detailed internal check (not to be confused with an internal audit) is expected on each pay roll before payment and that the officers employed on the internal check are, officers other them those who have been currently employed on the preparation on the pay roll. The vouches under the little of “checked by” will be signed by the officers directly in charge of the internal check.

  1. 2203-S2208 are actively devoted to due** and responsibility of the internal audit, S2203 provide that the internal audit should carryout detailed audit of the accounts and records and the examination of the system and procedures, in force issues special reports if necessary when his opinion. The attention of the accounting officer and the accountant in charge must be called to irregularity in the accounting record or an objective. They collect the necessary knowledge, skill information and authority establishment, operation and monitor *****system of internal controls. This will require an understanding of the company, its objectives, the industry and markets in which it operates and the risk it faces. A good manager which is responsible for the accomplishment of goals and objective is also responsible for maintaining establishing and monitoring of the internal control system which helps to ensure the accomplishment of these goals and objectives. He or she is responsible for the sound financial condition of the unit’s protection of the companies assets including it’s human resources and compliance with federal, state, and company rules, regulations and procedur3s. he or she must be ensuring that the funds entrusted to the unit are used appropriately. The manager may delegate some of the delegated duties but cannot delegate accountability.

 

2.3.1  THE IMPORTANCE OF GOOD INTERNAL CONTROLS

Good internal control is essential to assuring the accomplishment of goals and objectives. They provide reliable financial report for management decision, they ensure accumulation with applicable regulation to avoid rise of public scandals poor or excessive internal control reduces productivity increase the complexity of processing transaction, increase the time required to process transactions and add value to the activities.

Good internal help to ensure efficient and effective operation that accomplishes the goals of the unit and still protect employees and asset.

2.3.2  ELEMENT OF INTERNAL CONTROL

Elements of a sound system internal control, an internal control system encompasses the policies, processes, task, behaviour and other aspects of the company that take together.

Facilities its’ effective and efficient operation by enabling it to respond appropriately to signification, business, operational, financial, compliance and other risk to achieve the company’s objective.

This include the safeguarding of asset form in appropriate use or from loss and ensures that liabilities are identified and managed.

  • Help ensure the quality of internal reporting; this requires the maintenance of board and the organization
  • Help ensure compliance with applicable laws and regulation and also with internal policies in respect to the conducts of business.

Internal control system is operating at different levels of effectiveness. Determining whether particular internal control system is effective as a judgement resulting from an assessment of the following five components control: environmental risk assessment, control activity, information and communication and monitoring are presented functions. Effective control provides reasonable assumptions as regards the accomplishment established objectives.

2.3.3  CONTROL ENVIRONMENT

The control environment as established by the organization sets the time of an institution as it influences the control consciousness of its people. Leaders of each department area or activity establish local control environment. This is the foundation for all other components of internal control provide discipline and structure control environment facts include:

  • Integrity and ethical value
  • The commitment to competence
  • Leadership philosophy and operating style
  • The way manager assigns authority and responsibility and organizes and develops its people.
  • Policies and procedure.

2.3.4  RISK ASSESSMENT:

Every entity faces varieties of risk form external sources that must be assessed consistently. Risk management is establishment of objectives, including link at different levels and internal object, forming a basis for determining how the risk should be managed. Because economics, regulated and operating conditions will continue ot change mechanism are needed to identify and deal with special risk associated with change.

Objectives must be established before managers can identify and take necessary related to effectiveness and efficiency of the operations, including performance and financial goals safeguard resources against loss. Financial reporting objectives per tern to preparation of reliable published financial reporting compliance, objectives pertains to laws and regulation which establish minimum standards of behaviour.

The process of identifying and analyzing risk in an on going process and is a critical components effective internal control systems. Attention must be taken to manage. Risk can pertain to internal and external factors after risks have been identified thy must be evaluated.

***    INTERNAL CONTROL AS A MEASURE OF PREVENTING ERRORS IN MANUFACTURING COMPANY

Having given a pure introduction techniques and political background of this study, beyond doubts it has been convinced that there is no better way of reducing fraud and errors to a barest minimum apart from installation of working internal control.

However, for far sake of emphasis, internal control seen as an effective tool of preventing errors through the following ways:

i         Orderliness: One of the factors responsible for quick collapse of many manufacturing companies is lack of orderliness and control. As a result of defective application of good internal control mechanism, orderliness is established giving room in detection and prevention.

  1. Check and Balance: By this, I mean that through the application of internal control, the independence of auditors is achieved which allows him a total freedom on all receipt, payments and financial transactions in related years and as such, security all such circumstances special instruction. The requirement which must be approved after consultation will be the auditor general.

S.3307 writes on inspection of stores and the reports there on while S.3307 states that the report of inspection will provide the result of the following checks:

a       A ttest verification of additions and subtractions in the store ledger and a test comparison of ledger with receipt and issue vouchers.

b       A test comparison of he ledger balance with the actual stick and tally cards.

c       An examination of security measure stores of excess stores together with any necessary recommendation.

d       An examination of the book and register in use will be up to data and the relevant vouchers properly filled

S.3308 provides that officers to whom plant and tools have been issue for current use will make periodical checks to ensure that no shortage exist any discrepancies should be reported to he head of division department.

2.4.1  ISSUE OF STORES:

The financial regulation goes further to enumerate guideline on the store issue procedures, S.350, 390.3903, 3902 and 2908 provide attained per-cautionary measure on issue of store authorization checking recording and chromyl of stores. The provisions area analyzed below:

i         Issue will be made on the authorization of a numbered stores requisition a numbered combined store requisition. In case of issue of stock from unallocated stores; the requisition etc must be signed by the officer authorized to income and expenditure who must ensure that funds are available

ii        Requisition will be prepared in duplicating the original of which would be the stores, issuing department quantities will b written in both words and figures and each type of article requirement will be given an item member. To prevent unauthorized additions, a line will be drawn immediately below the cast entry. The requisition form will be clearly marked original and duplicated.

iii       When a combined requisition issue voucher is used three copies will be sent to the stores issuing department and the original will become the leave vouchers. After issue of the original and one copy of the voucher should be sent to the requisition that will sign and return the original to the issuing officer, as acknowledgement.

S.3902: All local punches of store must be authorized by the officers controlling expenditure and the punches order (L.O.P) must be sent by the firm concerned and a register containing the names of all offices will be kept.

s.3903 voucher on store purchase in Nigeria the cost of which exceed N500. It provides that such purchase must be obtained by contract after public tender expected as otherwise specifically authorized by the commissioner of finance.

Condensation of this regulation must be attempted by tracking down a single order exceeding the limit into several orders for lesser that he:

i         L.P.O will be prepared in words and figures and that the order will be ruled offer the last item. The original and duplicate of the order will be submitted to the suppliers who will return the original with invoice or bill when payment is made, the original of the order together with the invoice or bill will be attached to the voucher.

ii        The triplicate copy will be sent to the store keeper if the goods are to be taken in change, the quadruplicate will remain in the book.

iii       Any alteration to the wording on a local purchase order must be signed by officer authorizing the order S. 3908 provides that.

iv       If the original and duplicated of local purchase order is before delivery of the goods, the issuing officer, will inform the supplier of cancellation immediately the copy of the order must be record from the store keeper, replace in the order book, and the triplicate and        quadruplicate suitable endorsed. A fresh L.P.O may than be insured a report should be made to head of division / department and to the accountant generations will.

He observed that internal control, like any other system consist of input, processing unit and output. The input he said are the objected standard, policies and planes, financial resources etc. which are processed. The result of the evaluation is to know what is happening in the organization and perhaps what will happen in further and this take corrective measures he called on management to ensure conductive environment at all times.

He further recognized the function of the internal and which he said to be effectively performed if it is not independent form excessive control.

The independence must include, independence is scheduling his activities in determing what to investigate and method of investigation (LE Comp. Bell 1955p 87). They will enable him to defect and report fraud, for him to be independent the head of unit must be responsible of an officer of a higher rank. He cited countries like Italy where audit department scrutinized transaction before they area settled. Under such system, according to him, it could be difficult exonerate the audit in use of any amount of fraud and it is administrative cumbersome.

He was of the opinion that the independence does not help in certain situation because employees usually do not report identified fraud for fear of being sacked or even being killed thus he said render internal control users.

He advocated for employment of trained competent auditor inclusion, he called for the establishment of an audit department audit and promulgation of decree imposition stem punishment of fraudulent acts.

2.5     DELEGATION OF AUTHORITY

In this part of the study, foreign auditor whose articles and books on internal and released copies are too considered. These include A.H. Mill champ cashier R. Howard, De Vickey, 1983, Koonty, O. Daniel and Edcltrich and several othrs A.H. Mill Champ, (1991) gave two ays by which the auditor must convince himself of the reliability of this by using the vouching approach that is, by examining each individual entry and vitrifying or vouching it or he can:

  1. Determine that there is a system for recording transactions, preparing documents and entry up company’s book and records
  2. Determine that there is a system of procedures which if effectively applied all the items will ensure that the records are liable.
  3. Determine that the system has been so applied he also give a brief description of and definition of internal check vise:

The check on the day to day transactions which operates continuously as part of the routine system where by the work of one person is proved independently and is complementary to the work of another, the objective being the prevention or early defection of fraud and errors. It includes matters such as the delegation and allocation of authority and the division of work. The method of recording transactions and the use of independently ascertained totals against which a large number of individual items can be provided.

He enumerated seven characteristics of a good internal control as a measure of prevention of errors namely

a        segregation of duties

b        Proof measure e.g trail balance price list

c        Acknowledgement of performance by signature internal, rubber stamp etc.

d        Protection device like safes lowed as registers etc.

e        Formal transfer of responsibility for goods

f        Pre-view

g        Post review

h        Verification, review and amendment of the system

i         internal audit

j         Management control.

He also gave three essential structure of all internal controls a measure of prevention of error, viz:

  • The plan of the organization
  • Authorization recording and custody procedures
  • Management supervisor and review.

He summarized the various types of contracts as laid down by the auditing standard and guidelines:

ORGANIZATION:

Managing change requires a constant assessment of risk and the impact of internal control. Economics, industrial and regulation environment change entries evolve mechanisms are needed to identify and react to changing conditions

INTERNAL CONTROL MONITORING

Monitoring ensure that the internal control system is operating as respected. It should be performed by supervising personnel and focused on high risk area. it identifies change in circumstances that may require change to the internal control system. monitoring activities include:

*        Spot check of transaction to ensure compliance with policies and procedures.

*        Review of financial reports such as comparison of current and prior months or year activities.

*        Review department ledger and related reconciliation to departmental accounting records.

*        Reviews of outstanding encumbrances

*        Review of High risk accounts of records including payroll pay list and employee level record

*        Evaluation of trend

*        Reviews of supporting documentation

*        Surprise cash and other assets counts

*        Documentation of software license

*        Review of tangible personal property and related records.

*        Fellow up of complaints, rumors and allegations.

Where internal control are weak increased compensation control such as supervisory review are necessary.

2.6.1  REMEDIAAL ACTION

The level of detail provided by the company about the remediate actions taken in response to these weakness varies greatly. Disclosure ranged form a generic statement to details of specific actions.

There are four areas where control deficiencies ahs been identified.

*        The structure and design of certain financial information reporting process.

*        Inadequate or ineffective policies for documenting transactions

*        The design of policies and execution of processes related to accounting transactions and

*        The environment.

The following presents except form Catalina (1999) disclosure regarding its remediation actions which typically, can be categorized in one of five areas.

2.6.2  POLICIES AND PROCEDURES

Many remediation disclosures refered to personnel changes. The most common method for reassuring investors was the appointment fo new staff, especially at the controller’s level. Experienced employees were considering being better able to understand and meet SEC reporting requirement. For disclosure explicitly referred.

  • INTERNAL CONTROL ACTIVITIES AND

COMMUNICATION

Control activities are the policies and procedures that help to ensure management directives are carried out. They help ensure that necessary actions are taken to address risk ot achievement of the entity’s objectives control occurs throughout the organization. At all level and in all function. They include a range of activities as divers as approvals, authorizations verification, reconciliation, review of operation, performance security of asset and segregation of duties. A control activity usually involves an element, a policy establishing what should be done and procedures to attract the policy. All policies must be implemented through fully conscientiously and consistently.

2.7.1  INFORMATION AND COMMUNICATION

Pertinent information must be identified captured and communicated in a form and time frame that enable people to carryout their responsibilities. Effective communication must occur in a broad sense. Flowing down across and up the message form top management that control system as well as how individual activities relate to the work of others. They must have a means of communicating significant information upstream.

2.7.2  MONITORING OF INTERNAL CONTROL

internal control system need to be continuously monitored a process that assesses the qualify of the system performance overtime on going monitoring occurs in the ordinary course of operation and includes regulate management and supervisory activities and other actions personnel take in performing their duties that assess the quality of internal control system performing.

The scope and frequency of separate evaluations depend primarily on an assessment of risk and the effectiveness of on going monitoring procedures in internal control deficiencies should report upstream, with serious matters reported immediately to administration and governing boards.

Furthermore, circumstance for which internal control system was originally designed also may change because of condition, management needs to determine whether the internal control system continues to be relevant and able to address new risk.

2.7.3  THE COMPOONENTS OF INTERNAL CONTROL

According to Horgen (1918) who stated that internal control ely on principles of check and balance in the workplace. The following component focus on the internal activities

ADMINISTRATION

Personnel need to be component and worthy with clearly established lines of authority and responsibilities documented in written job description and procedures manual organization charts provide a visual presentation of line of authority and period updates of description ensures that employees are aware of the duties hey are expected to perform.

AUTHORIZATION OF PROCEDURES:

It needs to include a thorough review of supporting information to verify the property and validity to transaction. Approval authority is to be commensurable with the nature and significance of the transaction used in compliance with the company policy.

SEGREGATION OF DUTIES.

It reduces the live hood of errors and irregularities. An individual is not to have for they are more then one of the transaction components. Authorization custody and record keeping; when the work of one employee I checked by another and when the responsibility for assets. There Is appropriate segregation from the responsibility for maintaining the record related to these assets, there is timely manner and determine improper activities and at the same time it should be devised to prompt operational efficiency and allow for effective communications.

PHYSICAL RESTRICTIONS:

These are the most important type of protective measure for safeguarding company assts, it process and data.

DOCUMENTATION AND RECORD RETENTION:

This is to provide reasonable assurance that all information and transaction of value are accurately recorded and retained. Records are to be maintained and controlled in accordance with the established retentions period and pro disposed off in accordance with established procedures.

MONITORING CREATIONS

The financial impact on any events that do occurs which we describe in our model use the impact penalty I.P.

The cost of fixing or otherwise resolving he damage caused by h events which we described in our model as the cost of fixing the CF.

Having optimized the operational effectiveness of the ICS, as set of inequalities using the financial métiers then allow us to turn the ICS for cost effectiveness. Note that those procedures which are created to facilitate recovery from an event or to minimize the impact of an event are described in this paper as a business continuity plane (BCP).

In practice, an ICS address many different type of events and the optimum control for each one could fall into any one of the seven different categories. Thus a real ICS may have control belonging to each and every category, we therefore propose a methodology for choosing the optimum control for an ICS that must address wide variety of different events and impacts.

2.8     INTERNAL CONTROL ENVIRONMENT

The control environment includes the general attitude that is then reflected in the employee’s attitude. They should support ethnical value and goods business practice. A manager should promote companies policies and procedures through his or her action as well as through unit policies and procedures he or she should ensure that employees also support ethical value and have the technical competence of the position background check should be performed prior to hiring for key position, policies and procedures should be written provided to all staff, and expectations for compliance communicated to staff. There should be no tolerance for fraud if or conflicts of interests. Disciplinary action and procedures if thy expected employees to have that attitude.

2.8.1  ANALYSIS OF RISKS

Management should identify and analyze the risk to the achievement of unit goals and objectives. He or she should be determining what can go wrong / what have the mot risk. What assets are at the risk and who is in position of risk, risk may insult.

  • Public scandal
  • Revenues not received or if received are not reaided***** properly.
  • Assets (financial, personnel, space, personal property) not used efficiently
  • Assets (financial, personnel, space, personal property) not used to accomplish unit goal and objectives.
  • Assets financial, personnel, space and personal property) may be diverted to personal use.
  • Information used for decision making is not reliable, timely or available methods to control risk should be identified and the associated cost of controls may be prohibitive.

Uncontrolled risk may result in insufficient resources to achieve established goals trough loss, misuse or mismanagement of resources.

2.8.2  INTERNAL CNTROL ACTIVITIES

Control activities are those activities that provide a reasonable level of assurance is not possibly due to costs, collusion, human error and managements ability to over rise controls. Control activities include;

  1. Authorization to initiate or approve transaction should e limited to specific personnel. Authorization can be limited by type of transaction of amount of transaction.
  2. Separation of duties provides that one employee does not have the responsibility for all phase of a transaction. Generally an employee with physical access to an asst should also be responsible for accounting records related to that asset.
  3. Assets should be physically secured.
  4. Access to asset should be limited.
  5. reconciliation of assets to accounting records should be prepared periodically and reconciling
  6. Physical asset should be counted periodically **** the result of the count compared to accounting records, discrepancies should be reported to appropriate managers and designed to provide a reasonable level of assurance that the goals and objectives will accomplished.

2.8.3  INFORMATION AND COMMUNICATION SYSTEM

The purpose of information control system is to ensure that employers are aware of unit goals objectives how they are to be accomplished, and who responsible for the specific task to accomplish them. The information and communication system must also provide manager accomplishing established goals and objective and to allow manager to make appropriate decisions and information communication systems include:

  • The company’s written policies and procedures
  • The unit’s goal and objectives
  • Organization charts
  • Position descriptions
  • Performance evaluations
  • Training programmer.

In periodic reports measuring progress towards the accomplishment of goals and objectives. An essential part of the internal control system is effective information and communication systems that ensure that employees know what they are to do.

2.8.4  INTERNAL CONTROL MONITORING

Monitoring ensure that the internal control system is operating as expected. It should performed by supervisory personnel and focused on high-risk area. It identified changes in circumstances that may require change to the internal control system. monitoring activities include:

  • Sport check of transaction to ensure compliance with policies and procedures.
  • Review of financial report such as comparison of current and prior months or year activities.
  • Review department ledger and related reconciliation to departmental accounting records.
  • Review of outstanding encumbrances
  • Review of high risk accounts or records including payroll pay list and employee level record.
  • Evaluation of trend
  • Review of supporting documentation
  • Surprise cash and other assets counts
  • Documentation of software license
  • Review of tangible personal property and related records.
  • Follow up of complaints, rumors, and allegations.

Where internal controls are weak increased compating**** control such as supervisory review are necessary.

2.9     WEAKNESS INTERNAL CONTROL AND REMEDIAN ACTION

Weakness in internal control can relate ot weakness design or the operation of internal control. The remedial disclosures did not always distinguish between the implantation and actions taken to improve operating deficiencies. Most company’s remediation action however focused on improving operation deficiencies. The most common type of deficiencies for which remediation actions were being taken includes inadequate staffing, inadequate segregation of duties and problems. With the financial closing process, account reconciliation and application of accounting principle. Consistent with identified deficient being linked to significant control over important. Financial reporting area. The area of financial reporting recognition accounting for contact, accounting for complex financial institution cut-off and taxation issues.

2.9.1  REMEDIAN ACTION

The level of detail provided by the company about the emediate actions taken in response to these weakness varies greatly disclosure ranged form a generic statement to details of specific actions

These are four areas where control deficiencies had been identified.

  • The structur3 and design of certain financial information reporting
  • Inadequate or ineffective policies for documenting transactions
  • The design of policies and execution of processes related to accounting transaction and
  • The internal control

The following presents and except form Catalina (1999) disclosure regarding its remediation actions which typically, can be categorized in one of four areas.

2.9.2  POLICIES AND PROCEDURS:

Many remediation disclosures referred to personnel changes. The most common method for reassuring investors was the appointment of new staff, especially at the controller’s level. Experienced employees were considering being better able to understand and meet SEC reporting requirement. For disclosure explicitly referred.

TRAINING: One of the most frequently cities remediation actions was improved training, however, often little details was provided regarding the nature or extent of training.

BOARD PROCEDURES: Despite remediation actions promoted by the failure to met adequate control requirement for significant control relatively, few disclosure referred o extent of training.

INTERNAL OPERTIONS: Change is personnel, changes in authority or increase review with the aspect to over seas financial reporting operation. Five companies relocated financial operations centralizing their accounting functions ot improve control.

2.9.3  MORE IMPORTANCE OF INTERNAL CONTROL

Internal control performs many functions that help in error control and detection in an organization

i         It helps to facilitate control on finance and other procedures in the organization.

ii        The functions of internal control are carried out by staff of the organization

iii       It enforces orderliness in the organization

iv       It also safeguards the business assets

v        It help to enforce accuracy and reliability of the business record

vi       It aids the prevention and defection of frauds.

2.9.4  THEORETICAL FRAME WORK / MODELS

The theoretical framework of the study was using the HFACS to determine and evaluate human error. The basis of the study of human error is human factor theory, which researchers developed within the nuclear industry and that allows for the evaluation of deviations and errors to make operations safer. Investigators in the aviation industry use human factor theory to evaluate their accident (Reason 199). Human factor theories incorporate elements of organizational theories and their effects on examining the behaviors and actions using human error. Investigators have incorporated those element in various models in an approach to accident investigation.

Among the concepts developed for the approach to accident causation, or the SWISS cheese framework, was the idea that employees present the activities in productive system in layers representing preconditions. In developing the SWISS cheese framework, reasons (1990) divided the actions that can be available as follows:

Control environment:

This is sometimes referred to as the ‘tone at the top’ of the organization, it described the ethics and culture of the organization, which provides a framework within which other aspects of internal control operate.

Risk assessment:

There is a connection between the objectives of an organization and the risks to which it is exposed. In order to make an assessment of risks, objectives of the organization must be established.

Control activities:

These are policies and procedures that ensue that the decisions and instructions of management are carried out.

Information and communication:

An organization must gather information and communicate to the right people so that they can carryout their responsibility. Managers need both internal and external information to make informed business decisions and to report externally.

2.9.5  EMPERICAL STUDIES

According to Milliskop (1990), “internal control is defined as all forms of financial control or sed up by management to carry on the business of the enterprise, safeguard assests and operation of the business, protect it operation against waste, fraud and inefficiency ensuring accuracy and reliability account and operating data, securing companies with the policies of the organization, and evaluating the level of performance in all unit of the organization.

According to Chris A. Osondu (204) internal control is defined in accounting and auditing, is a process for assuring achievement of an organization’s objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies. A broad concept, internal control involves everything that controls risks to an organization.

It is a means by which an organizations resources are directed, monitored, and measured. If pays an important role in detecting and preventing fraud an protecting the organization’s resources both physical (e.g machinery and property) and intangible (e.g reputation or intellectual property such as trademarks).

At the organizational level, internal control objectives relates to the reliability of financial reporting, timely feed back on the achievement of operational or strategic goals and compliance with laws and regulation.

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ACCOUNT NAME: ODUNUKWE RAPHAEL CHIEMEKA

ACCOUNT NUMBER: 3092548117

After paying the sum of N3, 000 into any of our bank accounts, send the below details to our Phone: 07035282233

  1. Your Depositors Name
  2. Teller Number
  3. Amount Paid
  4. Project Topic
  5. Your Email Address

Send the above details to: 07035282233 AFTER payment. We will send your complete project materials to your email 30 Mins after payment.

uniprojectsearch.com will only provide papers as a reference for your research. The papers ordered and produced should be used as a guide or framework for your own paper. It is the aim of uniprojectsearch.com to only provide guidance by which the paper should be pursued. We are neither encouraging any form of plagiarism nor are we advocating the use of the papers produced herein for cheating.

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