CHAPTER ONE

1.0    Introduction

1.1    Background to the study

Every organization both profit or non-profit organization has its objectives and goals in mind to achieve. For the non-profit making organization, their goal is to satisfy the social need of the citizens and in the effort to achieve these purposes supervision more often than not play a vital role. The size and scope of these organizations have sometimes made it hard for the executors to exercise personal and first hand supervision of operation. It is in this light that internal control established by management is initiated. For an organization to carry out its business there must be some factors put in place for the smooth running of the organization like materials, machines, money etc. These need to be well co-ordinated in order for the success of the organization to be achieved. These factors are used by a group of persons known as management. Neither can management exists without an organization both are inseparable.

The system of internal control provides assurance to management of the dependability of the accounting data used in the decision making of the organization. Management use internal control as a tool to check it staff due to the fact that managers are not able to monitor the activities of the organization. It therefore adopts the internal control in such a way that the system checks itself and any irregularity within the system is been detected and corrected. To ensure that the system checks itself, management could use devices such as segregations, supervision of work and acknowledgement of performance.

The effective arrangement and implementation of this control system would ensure proper management. High-profile organizational failures typically lead to the imposition of additional

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rules and requirements, as well as to subsequent time-consuming and costly compliance efforts. However, this obscures the fact that the right kind of internal controls—enabling an organization to capitalize on opportunities while offsetting the threats—can actually save time and money, and promote the creation and preservation of value. Effective internal control also creates a competitive advantage, as an organization with effective controls can take on additional risk.

According to Chambers (1995), Cosserat (1999), Ridley and Chambers (1998), internal Controls are systems comprising of the control environment and control procedures. They further state that the internal control systems include all the policies and procedures adopted by the directors and management of an entity to assist in achieving their objective of efficient conduct of its business, including adherence to internal policies, the safeguarding of assets, the prevention and detection of fraud and error, the accuracy and completion of the accounting records and timely preparation of reliable financial information. Successful organizations ensure that they attain and consolidate continued survival in a competitive environment Drucker (1999). Thus successful organizations set performance measures that focus attention that identifies and communicates the success, support organization learning and provide a basis for assessment and reward (Brown, 1996).

1.2    Statement of problem

We might not really understand the impact of internal control system in an organization until probably we run an organization void of internal control system. Because internal control is so important to the reliability of financial statements, there are times when the internal control system should be examined closely. Examining the design of internal controls can be extremely beneficial and is usually much less costly than an audit of the organization wide financial statements .Control itself exists to keep performance of an organization within what is expected

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by the organization, control built within a process is internal in nature and takes place with a combination of interrelated components such as social environment affecting behavior of employees, information necessary in control and policies and procedures (COSO 2001).The absence of adequate internal control measures exposes the financial management of an organization to certain threats such as:

·         Improper use of organizational resources and funds, due to inadequate internal control to keep a proactive check on the way the resources and funds are utilized.

·         Non-existence of Value for Money requisites and principles in the management of organizational resources and funds.

·         Financial and operating reports and data are not relevant, reliable and misrepresent what they purport to represent.

·         Non-availability of appropriate mechanism to ensure that policies, plans, procedures, statutory requirements and regulations that govern the operation and reporting process of the organization are been complied with across the organization

1.3    Objective of study

The overall purpose of this research work is to evaluate and determine the impact of internal

measures in an organization and its significance in making it a basis for decision making in

Unilorin .A well-defined organizational structure helps management to run the business in an

orderly manner. This enhance operational and efficiency, which is the important features of

internal control. Specifically, this research work stands to achieve the following objective.

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·         To determine the impact of internal control to proper use of organizations funds and assets.

·          Appraise the economy, efficiency and effectiveness with which resources are employed.

·         Appraise the relevance, reliability and integrity of management, financial and operating data and reports

·         Review the systems established to ensure compliance with those policies, plans, procedures, statutory requirements and regulations which could have a significant impact on operations.

1.4      Research Questions

The following research question guided this study: