INTERNAL CONTROL EFFECTIVENESS AND PERFORMANCE IN NIGERIA UNIVERSITY SYSTEM (A SURVEY OF UNIVERSITIES IN THE SOUTH-SOUTH GEOPOLITICAL ZONE)
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INTERNAL
CONTROL EFFECTIVENESS AND PERFORMANCE IN NIGERIA UNIVERSITY SYSTEM (A SURVEY OF
UNIVERSITIES IN THE SOUTH-SOUTH GEOPOLITICAL ZONE)
CHAPTER ONE
INTRODUCTION
1.1 Background of the work
The survival
of any organisation depends on the effective and efficient utilisation of
resources (financial and non-financial)at the disposal of the organisation.
Hence, to optimize the utilisation of resources entrusted to all employees in
an organisation, various form of control are put in place by management of the
organisation, among these major controls are internal control and internal
audit to mention a few. According to Kirsch,(2002)Internal control can be
defined as a set of mechanism designed to motivate an individual or a group
towards achievement of a desired objectives while, Ouchi (1979) stated that
internal control must be able to achieve the objective of bringing about
cooperation among people with divergent objectives in an organisation.
Similarly, International Standard on Auditing (ISA 400) defines internal
control as all policies and procedure adopted by the management of an entity to
assist in achieving the primary objectives of the management by make sure the
business is conducted in the most possible efficient way and also ensuring
strict adherence to management policies, safeguarding of asset, prevention and
detection of fraud and timely preparation of reliable account. On the other
hand, Financial Performance of an organization can be described in various
form, such as; return on assets, return on sales, return on equity, return on
investment, return on capital employed and sales growth
(Gerrit&Abdolmohammadi, 2010). Internal Control system of an entity is
strictly interrelated to the structure used by management to oversee the
activities of the organization, or to what is defined as the entity’s corporate
governance. Good corporate governance
should provide proper incentives for the board or management to pursue
objectives that are in the interest of the company and shareholders and should
facilitate effective monitoring, thereby encouraging firms to use resources
more effectively or efficiently.Like other organizations and their various
units/departments, Universitystrive for efficiency and transparency into their
services, operations and finances. There is also growing interest among these
institutions to enhance risk management through their processes and procedures
so as to promote efficient services among professionals within the institution.
The most common measure over these processes and or procedures is the system of
Internal Control. The Internal Control System is about such measures put in
place by an Organization in order to ensure the achievement of its objectives.
It is a set of policies and procedures adopted by an entity in ensuring that an
organization’s transactions are processed in the appropriate manner to avoid
waste, theft, and misuse of organization resources. The importance of internal
control in the day to day activities of individuals and corporate organizations
cannot go unnoticed as everyone experiences internal control in their daily
business activities as well as in their personal lives (DiNapoli, 2007). Kirsch
(2002) defined control as a set of mechanism designed in order to motivate
individuals to attain desired objectives. Controls are fundamental to all
organizations and these accounted for the reason why Ouchi (1979) argued that
the design of organizational control mechanism should focus on achieving
co-operation among individuals having divergent objectives. Internal control
has different meanings to different parties and that is why it is very
difficult to give only one definition of internal control system, in view of
the fact that it can be seen from different angles. Cahill (2006) defined
internal control as the system of internal administrative and financial checks
and balances designed by management and supported by corrective actions, to
ensure that the goals of the organization are achieved. According to Transparency
International (2006) internal control is entrenched to guarantee transparency
and avoid corruption. Corruption is defined as abuse of public office for
private gains. Examples include: bribery, kickbacks and embezzlement of public
fund. According to the International Standard on Auditing (ISA 400), the term
internal control system means all policies and procedures (internal control)
adopted by the management of an entity to assist in achieving management
objectives of ensuring , as far as practicable, the orderly and efficient
conduct of its business including adherence to management policies , the
safeguarding of assets , the prevention and detection of fraud and error , the
accuracy and completeness of the accounting records and the timely preparation
of reliable financial information . The internal control system extends beyond
those matters which relate to the function of accounting system. Amudo and
Inanga (2009) defined internal control as a process of integrated sets of
activities originated by top personnel of an organisation and embedded within
all the organization`s activities to achieve goals. Puttick and Van Asch (1998)
cited in Motubatse (2005) defined internal control as ‘ those methods and
procedures adopted by the management of an entity to assist in achieving
management ‘s objective of ensuring that the business of the entity is properly
conducted in an orderly and efficient manner.’ Internal control comprises the
organizational plan and all of the coordinate methods and measures adopted
within a business to safeguard its assets, check the accuracy and reliability
of its accounting data and promote operation. Knechel (2001) defined internal
control as a process that is designed by management in order to provide
reasonable assurance that the organization’s objectives are being met. Nair
(2000) outlined internal control as a process that is put in place by
management and stakeholders and is designed to provide reasonable assurances
that the institution’s objectives are being achieved effectively and
efficiently in compliance with applicable legal prescripts and that there is
reliable and accurate financial reporting. University is Institution of higher
learning. Reference further asserted that University is to provide educational
services and counseling to the general public at the right time. To achieve
this objective, institutions incurred expenditures both at capital and
recurrent nature. The Internal Control System, in other organizations, is
usually put in place to ensure that organization objective is achieved. The
effectiveness of internal control is a determinant of the quality, performance,
and efficiency of the institutions. Internal Control is a process designed and
effected by those charged with governance, management, and other personnel to
provide reasonable assurance about the achievement of an entity’s objectives
with regard to reliability of the financial reporting, effectiveness and
efficiency of operations and compliance with applicable laws and regulations.
Management and operations of finances in the Nigerian Universities is a sole
responsibility of the Bursary department of the institution. The Bursary
department is central as far as the coordination of finances for the
achievement of the institution’s objective is concern. Because the department
is considered as most important, the internal control measures in place are to
be adhered to, by staff of the unit. Adherence to a good set of control would
encourage efficient and effective use of company resources. This implies therefore,
that adhering to the internal control process shall be a measure toward
achieving efficiency and quality of learning in the institutions. It is in this
view the researcher want to examine the internal control effectiveness and
performance in Nigeria University system.
1.2 STATEMENT OF THE PROBLEM
Despite the
fact that internal control system have been in existence for many years in most
organization, the problem of internal management, have continued to be on the
increase. Which include financial irregularities within the departments,
collusion among senior or highly-trusted employees, breaches of control etc.
Researcher, have affirmed that internal control set by management in most
Universities has not been able to completely prevent these fraudulent
occurrences because these controls have not significantly reduced the
reoccurring fraud and corruption perpetuated by employees in most Universities.
1.3 OBJECTIVE OF THE STUDY
The main
objective of this study is internal control effectiveness and performance in
Nigeria University system in south- south geopolitical zone. But for the
successful completion of the study; the researcher intends to achieve the
following sub-objectives;
1. To
identify the effectiveness of internal control system in South-South
Universities
2. To
examine the relationship that exist between internal control and effective
performance of University system in South-South geopolitical zone
3. To
examine the relationship between effective internal control system and the
efficiency of educational services in south- South Universities.
4. To
ascertain if internal control has relationship with fraud perpetration in the
University system in South-South geopolitical zone.
1.4 RESEARCH HYPOTHESES
For the
successful completion of the study, the following research hypotheses were
formulated by the researcher;
H0:there is
no effectiveness of internal control system in South-South Universities.
H1: there is
effectiveness of internal control system in South-South Universities
H02: there
is no significant relationship between effective internal control system and
the efficiency of educational services in south- South Universities.
H2:there is
a significant relationship between effective internal control system and the
efficiency of educational services in south- South Universities.
1.5 SIGNIFICANCE OF THE STUDY
It is
believed that at the completion of the study, the findings will be of benefit
to University system. This is because if proper internal control system is
implemented in the university system, it will enhanced effective management.The
study will also be of great benefit to the researchers who intends to embark on
research on similar topics as it will serve as a guide. Finally, the study will
be of great importance to academia’s, lecturers, teachers, students and the
general public.
1.6 SCOPE AND LIMITATION OF THE STUDY
The scope of
the study covers internal control effectiveness and performance in Nigeria
University system in south-south geopolitical zone. The researcher encounters
some constrain which limited the scope of the study;
a)
AVAILABILITY OF RESEARCH MATERIAL: The research material available to the
researcher is insufficient, thereby limiting the study
b) TIME: The
time frame allocated to the study does not enhance wider coverage as the
researcher has to combine other academic activities and examinations with the
study.
c)
Organizational privacy: Limited Access to the selected auditing firm makes it
difficult to get all the necessary and required information concerning the
activities.
1.7 DEFINITION OF TERMS
INTERNAL
CONTROL: Internal control, as 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.
EFFCETIVENESS:
Effectiveness is the capability of producing a desired result or the ability to
produce desired output. When something is deemed effective, it means it has an
intended or expected outcome, or produces a deep, vivid impression.
PERFORMANCE:
A performance, in the performing arts, generally comprises an event in which a
performer or group of performers present one or more works of art to an
audience. Usually the performers participate in rehearsals beforehand.
Afterwards audience members often applaud.
UNIVERSITY:
A university (Latin: universities, “a whole”) is an institution of higher (or
tertiary) education and research which awards academic degrees in various
academic.
1.8
ORGANIZATION OF THE STUDY
This
research work is organized in five chapters, for easy understanding, as follows
Chapter one
is concern with the introduction, which consist of the (overview, of the
study), historical background, statement of problem, objectives of the study,
research hypotheses, significance of the study, scope and limitation of the study,
definition of terms and historical background of the study. Chapter two
highlights the theoretical framework on which the study is based, thus the
review of related literature. Chapter three deals on the research design and
methodology adopted in the study. Chapter four concentrate on the data
collection and analysis and presentation of finding. Chapter five gives summary, conclusion, and
recommendations made of the study.
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