CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
The old English adage has it that ‘the taste of the pudding is in the eating’, and so it is with the appraising of the internal control system of the Nigerian Agricultural, cooperative And Rural Development Bank Limited, Akamkpa Branch, which necessitate a case study to be conducted in order to establish to what extent the system of internal control installed by the management is working.It is known that the success or failure of any business depends upon the ways and manner by which the business is conducted, the rules that were developed to run the firm and how far these were consistent with the type and nature of the business.
In order to ensure efficiency, effectiveness and profitability, the operations of the business must be installed to suit its structure and control the firm’s resources.There can be no effective internal control without an adequate plan of the organization. This involves the separation of a company’s operation into appropriate divisions and sub-divisions, the appointment of persons to assume responsibility therefore, the establishment of clear lines of responsibility between each division and sub-division and the board of directors, and the overall co-ordination of the company’s activities.The objects of financial and accounting control procedures are to ensure that the funds and property of the company are kept under proper custody and may not be improperly applied, either by error or intents,; that expenditure may be incurred only after authorization and is properly accounted for, and that all revenues are properly accounted for and received in due course of time.
The achievement of these objects involves a suitable division of duties, the establishment of an appropriate accounting system and the institution of forms of internal checks on day-to-day transactions which operate continuously as part of the routine system, whereby the work of one person is proved independently or is complementary to the work of another, the object being the prevention or early detection of errors or fraud.This overall planning and its practical operation is included under the title of internal control system. The concept of internal control function has therefore assume an important position in the minds of management whose responsibility it is to establish a sound and efficient system in view of the failures which has been experienced in the entire economy.Internal control system is therefore, the whole system of controls, financial and otherwise, established by the management in order 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 its records. (the Association of certified Accountants 1980: P. S204-1)
While in practice this management technique has been accepted as a working tool for the control of activities within the operational realm of the business, how then can we ascertain its existence, soundness in principle and effectiveness in operation? The companies and Allied Matters Act’ 1990 of the country has made it mandatory for companies to have their accounts audited year by year.In co-operation and collaboration with this, the authorities of the Accountancy Profession have put up some regulatory rules to govern the conduct of their members. As a matter of good practice, auditors are required, among other things, to ascertain and test for any system of control in force at the onset of each audit.It is against this background that the researcher has chosen to conduct this research, and was partly informed by the requirements for award of the Bachelors of Science degree in Accountancy.
The research work is thus planned to cover five chapters. As part of the research, the objectives and significance of having a functional internal control system will be highlighted, followed by the benefits an organization would derive if the internal control system was functioning well. The research method to be used covers description and analytical presentation. Also, the method of collating data would be obtained through questionnaires which would be analyzed using simple percentage and shown in a tabular format.