CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Internal control has attained greatest significance in large-scale business organizations. It is of great assistance to both the management and auditors of such organization because it enables them to carry on the business in an orderly and efficient manner. It safeguard its assets and secure the accuracy and reliability of records. The primary aim of an organization that is profit oriented is to operate the business in the most efficient way. That is to maximize profit at a minimum cost. This can be made possible by establishing strong internal control which acts as regulator of an organization. The internal control can be compared to a person’s nervous system. It embraces the entire organization internal control as the nervous system has five component that help it to coordinate the activities of the organization. They are:
1. The control environment
2. Risk assessment
3. The (accounting) information and communication system
4. Control activities and
5. Monitoring. In this chapter our discussion dealt with the following.
objective of the study hypothesis, research questions, significance of the study scope of the study.
1.2 STATEMENT OF THE PROBLEM
The statement of research problem serves to explain in detail the information in the title of the study. This research seeks to find out the extent to which the system of internal control has helped to prevent both employee fraud and fraudulent reporting, assuming control over manufacturing and other process through the following questions.
1. Management interview
2. Lack of clarity of job deception and segregation of functions in a private sector.
3. Lack of qualified personnel in the system.
4. Master employers or servants relationship
5. Inadequate detection of errors in the large system.
1.3 OBJECTIVE OF THE STUDY
This is to investigate how for internal control have achieved its objective in a manufacturing company. Internal control are techniques employed by managers to ensure that specific control objective are contionevely met. Control can be implemented to protect anything of value to a company’s economic performance or continued sustain ability. The objective of internal control system of private company are:-
1. Property of transaction: An important objective of internal control is to ensure that all monetary transactions conducted by the organization are in line with the company’s operational activities. Control in this area are focused around accounts payable and account receivable, ensuring that money is not being last, stolen or posted to erroneous accounts.
2. Compliance: Complain with government regulation can require significant. Investment of time and money. Implementing internal controls to maintain compliance with applicable laws can help you avoid costly legal consequence as well as greatly reduced the cost associated with compliance related to activities.
3. Efficiency: Efficiency is very important to the achievement of competitive advantage and maximization of profitability.
4. Safety and security:- Say plays a large part in any system of internal controls, rules and procedures play a vital role in maintaining a safe atmosphere for your employees and customers and limitations of the study.