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The research examine “Assessment of the Impact of Internal Controls on Fraud Prevention and Effective Management”, A study of Nigerian Bottling Company Plc, Uyo, with the population of all staff of champion breweries  Plc  and sample size of 100. However, out of the 100 sampled, 45 were completed and returned which was used as the bases of analysis in chapter four by the use of frequency table and the Chi-square (X2) tool was use to validate the research hypothesis. The findings reveal that an internal control on fraud prevention influences positively the performance of management of Nigerian Bottling Company Plc. In the process, the writer examined the cause of relevant fraud cases in organization, procedures for minimizing it and also emphasized that in order to have effective internal control in Champion Breweries and other organizations proper transaction, authorization of transactions, safeguarding of assets and segregation of functions have to be followed. This paper also places emphasis in the problems inherent in internal control such as fraud, collusion by management, manipulation of payrolls, carelessness, weakness and other personal factors and perpetration of irregularities. Furthermore, the writer has pointed out measures to be adopted in order to reduce internal control problems. These include segregation of responsibilities between departments and individuals, custody of assets, access to resources and the employment of honest and competent staff so as to ensure effective internal measures.


1.1   Introduction

As business and the societies become more enlightened and complex, methods of perpetrating fraud become more sophisticated. As a result of this, the issue of fraud has become a serious food for though many corporate bodies in recent times. The scenario is alarming in view of the serious threats posed by fraud to corporate growth and existence. There is no denying the fact that fraud has become a ‘recognized’ institution in the national and internal financial system and the fraudsters through their show affluence are well respected as heroes instead of villains. Most corporate management shuns the practice of reporting fraud to the public to protect their image and goodwill and to win the confidence of investors. The implication of this is that corporations are now faced with the arduous task of how to prevent, control and minimize the canker worms. As a result of this, internal control which is an indispensable tool necessary for the prevention, detection and control of fraud in both the public and private sectors should be given grater consideration and emphasis.

1.2   Background of the Study

Nigerian Bottling Company Plc, Uyo was incorporated as a private limited liability company on the 31st July, 1974 the same time with South East Breweries limited to Cross River Breweries Limited, because of political imperative in Nigeria and thereafter to Champion Breweries limited. On the 1st of September, 1992 the latter name, Champion Breweries limited was change to Nigerian Bottling Company Plc.

The government of the south Eastern State of Nigeria on the 24th of November, 1974, the then eastern State of Nigeria Signed an agreement with Messrs. Haase Braverie GMBH of Humbry (“Technical Partners”) for the supply and construction of  a turkey Brewery in Uyo with a  capacity of 150,000 hectoliters. The foundation stone of the Brewery was officially commissioned and it’s product, Champion larger beer launched into the market with success on the 11th December 1976. The Brewery was officially commissioned and its products, champion larger beer launched into the market with initial capacity of 150,000 hectoliters per annum. The second expansion which incorporated more sophisticated machinery was complete and put on trial run in September, 1979. The second product line was officially commissioned on the 11th of December, 1997 with enhanced capacity of 500,000 hectoliters per annum. The same year company’s product “Champion larger beer” and “champion Malta” won silver medal for quality at the 16th world selection for beer and non-alcoholic beverages in Luxemburg. Consequent upon pressure of demand for its capacity to one million hectoliters. The third expansion, which gulped substantial resources, could not be realized. The non-completion of the expansion programme coupled with lack of working capital and inadequate maintenance of the plants forced the company to close its doors for business between 1990 and 1991.   All subsequent reactivation attempts did not yield the desired results with the advent of democracy in Nigeria in May 1999; the government of Akwa Ibom State made the reactivation the Brewery a cardinal activity. Consequently, the Akwa Ibom State investment and industrial promotion council (AKIPOC) was changed with the responsibility to reactivate the company pursuant of this mandate, AKIPOC, in conjunction with the Board of Directors of the Company went to the market of solicit for core investors/technical managers. In the process, Messrs Montgomery ventures incorporated of panama (with offices in Geneva, Switzerland) was indentified and brought into the company as core investors/technical managers after a memorandum of understanding was signed. Based on the memorandum, a reactivation committer was sent up a board of the company to work with core investors/technical managers for the revamping of the company.

The reactivation process, which commenced in February, 2000 lasted about nineteen months. Now, the plant has been revamped and restricted to used one hundred percent locally sourced raw materials. The Brewery is now fully operational and the capacity id 500,000 hectoliters per annum. The reactivated Brewery was officially commissioned on the 23rd of October, 2001. Champion larger beer is now in the market and is doing well. The company has as at 2006 incorporated other products into it production line such product are “Cham Malta” fondly known and called “The new way to Flow” and “Becks Beer”. The company has successfully held an extraordinary. General meeting of the shareholders during which approval was given for the authorized share capital of the company to be increased from N26 million to N450 million. As at now, the core investor/technical managers Messrs Montgonery ventures incorporated ownership status in the company is 57%.

1.3   Statement of the Problem

Cases of fraud are becoming a recurrent feature of our present administrative system as private and public sectors continue to occupy conspicuous positions in the Nigeria Deposit Insurance Corporation (NDIC) annual report and Accounts. 1991 account Report which disclosed that since 1989 to date, clerks and cashiers have continued to maintain the lead among other categories of staff in frauds and forgeries in the private and public sector.

1.4   Objectives of the Study

The objectives of this research centers on the following:

1.   To determine whether internal control system could lead to efficient and effective management of the company.

2.   To discover other factors leading to the decline in the profitability of Nigerian Bottling Company Plc, Uyo.

3.   To find out the areas of weaknesses of the internal control system and possible remedial actions necessary to reverse the trend.

4.   To determine the extent of compliance with the laid down controls in the organization.

5.   To make recommendation and suggestions on the findings of this research.

1.5   Research Questions/Hypothesis

Research question are interrogative statements to find out the likely outcome of a given situations. It is probing in nature. In reviewing of the assessment of the impact of internal control on fraud prevention and effective management in Nigerian Bottling Company Plc, Uyo, the researcher formulated the following research questions to aid the study.

·        Has any case of fraud been reported recently?

·        Is the internal control system sound enough to detect fraud?

·        What are the causes of fraud in this company?

·        How could fraud be prevented in Nigerian Bottling Company Plc, Uyo?

Research Hypothesis

Hypothesis is a statement of relationship between variables; it is a tentative answer to research problem n a declarative statement about something.

Hypothesis One

Ho:  There is no significant relationship between internal control system and effective management of Nigerian Bottling Company Plc, Uyo.

Hi:   There is significant relationship between internal control system and effective management of Nigerian Bottling Company Plc, Uyo.

Hypothesis Two

Ho:  There is no direct relationship between internal control and fraud prevention in Nigerian Bottling Company Plc.

Hi:   There is direct relationship between internal control and fraud prevention in Nigerian Bottling Company Plc.

1.6   Significance of the Study

The significance of the research work need not to under estimate. The study on completion would serve as a reference material for other researchers who may carry out a research on similar topic. The research study would help the management of Champion Breweries to assess the effectiveness of their internal controls system.

It will act as an eye opener to other organizations on the procedure to be followed in instituting a proper system of internal controls. It will add to the stock of existing literature in the internal controls as a tool for effective management and fraud prevention; thereby providing a source of reference materials to other researcher. Finally, it will be an aid in providing further techniques of safeguarding assets of the organization against waste, fraud and inefficiency.

1.7   Scope of the Study

The study would be exclusively carried out in Nigerian Bottling Company Plc, Uyo Akwa Ibom State with particular attention to the Assessment of the Impact of Internal Controls on Fraud Prevention and Effective Management.

1.8   Limitations of the Study

The following were constraints to the conduct of the survey:

Firstly, the time allotted for the study was grossly inadequate; hence it may impede the quality of the data gathered and in turn the quality of the result.

Secondly, the huge financial requirement for the conduct of this survey was unaffordable. Thus, only materials that were easily assessable and affordable were used.

1.9   Definition of Terms

For the purpose of making the terms used in this research clearer, the following terms and defined according to their usage in this study.

Internal control: The Auditing Practices committer defined internal control system, in their guideline as “the whole system of controls financial or otherwise established by the management in order to carry on the business of the enterprise in an orderly and efficient manner, ensure adherence to managements policies, safeguard the assets and secure as far as possible the completeness and accuracy of the records”. Adeniyi (2004:165).

Fraud: The term “refers to as an intentional act by one or more individuals among management, employees or their parties which result in a misrepresentation of financial statement, Adeniyi (2004:165). The advance learners Dictionary defines fraud as “criminal deception, act of this kind person or thing that deceives” while the international Auditing Guideline (IAG) defines fraud as a particular type of irregularity according to the IAG, this refers to irregularities involving the use of deceits to obtain an illegal or unjust advantages which ever perspective the fraud is looked at, it connotes an international distortion of financial statement  for whatever purpose, misapplication of assets, whether or not accompanied by distortions of financial statement.

Company: “A company is a legal person or entity by association of a number of person in accordance with the law, for the purpose of a defined object”. Garbutt (1962:463).

Corporation: “A corporation is an artificial being, invisible, intangible and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the Charter (license) of its creation center upon it either expressly or incidental to its very existence, Smith and Robertson (1971:787).

Financial Statement: This is a set of accounting report which taken together describes the financial position of the business and the result of its recent operation.

Financial System: The financial system refers to a set of rules and regulations and the aggregation of financial arrangement, institutions and agents that interact with each other and the rest of the world to foster economic growth and developments of a nation. Ekezie (2002:6).

Error: This refers to unintentional mistakes in financial statement such as Mathematical or clerical mistakes in the underlying records and accounting data.

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