Appraisal of Internal Control System in Large Firms

 Appraisal of Internal Control System in Large Firms

Appraisal of Internal Control System in Large Firms


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Chapter one on Appraisal of Internal Control System in Large Firms



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 persons 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.    


The control environment set the tone an organization by influencing the control consciousness of the people. It may be viewed as the foundation for the other components of internal control. Control environment factors include integrity and ethical values; commitment to competence board of directors or audit committee, managements philosophy and operating style organizational structure; assignment of authority and responsibility to human resource politices and practices.  


The second component of internal control is risk assessment. Management should carefully identify and analyze the factors that affect the risk that the organizations objectives will not be achieved and then attempt to manage that risk. Managements risk assessment involves consideration of those factors that effects all of the organizations objective.  
3. The accounting information and communication system information is needed at all levels of an organization to assist the management in meeting the organizations objective of major concern to the auditors is the accounting information system, and the way in which responsibilities for internal control over financial reporting are communicated throughout the organization. Accounting information system should include a chart of accounts and a manual of accounting policies and procedure as aids for communicating policies. 


 Control activities are policies and procedures that help to ensure that management’s directives are carried out. These policies and procedures promote actions and address the risks that face the organization. There are many different types of control activities performed in an organization.


Monitoring is a process that assesses the quality of internal control overtime. It is important to monitor internal control to determine whether any modifications are necessary. Monitoring can be achieved by performing ongoing activities or by separate evaluations ongoing monitoring activities include regularly performed supervisory and management activities such as: continuous monitoring of customers complains or reviewing the reasonableness of management reports.   In Nigeria, much emphasis is plaid on account ability and the keeping of accurate records of transportation by those who manage the affairs of all business enterprises. 


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.     How far has the existence of internal control audit has helped to minimize errors in the company?
2.     do all staff see the company’s goal as a joint responsibility?
3.     are all empolyee’s motivated by the process of strong internal control?
4.     are all transportations from beginning to the end been carried out by the same set of individual?
5.     Whether the internal control has successes in protecting the company against errors and irregulatives and ensure the reliability of accounting data? 


The purpose of the study is the aim of the researcher to undertake the study. It examines the overview of internal control in making sure that objectives of the organization are achieved by strictly adhering to the management policies without deviation.  


The scope of the study is the appraisal of internal control in large firms. The firms are made up of several departments and sections. For a better approval, one has to visit several departments to assess their system of control. How ever this is not feasible judging from the set backs that the researcher encounters.     


1.     Does internal control system exist in large firms
2.     How effective is the internal control system in large firm
3.     Does internal control system help in minimizing fraud and loss of property in your firm?
4.     How far does staff respond to their responsibilities
5.     Does the internal audit exist in your company
6.     Does the Audit section achieve the goal for which it has been set?
7.     Does the staff see the company’s goal as a joint responsibility
8.     Does the large firm take adequate steps to safeguard their assets?
9.     For large firms to safeguard their assets, what step do they take?
10.   How far does the step taken by companies help in safeguarding their assets?  


The hypothesis is the core of the study and therefore acts as a beacon light in the course of the research. It is therefore a suggested answer to the problem of the research under investigation. For the purpose of this research, null hypothesis will be used which is deviated by HO
HO: I: I internal control system in public limited companies are not effective 1:2 internal control system in public limited company are effective.  


This refers to the usefulness of the research to the public limited companies. The individuals, the government and society. The ultimate aim of every research is to provide knowledge and information that will about a better understanding of the topic under review. It is aimed at providing an understanding of the effectiveness of internal control system as obtainable in the private and public limited companies in Enugu State. The researcher will be able to know the extent to which internal control system has held the management in the realization of their firm’s objectives. It will enable the management to appraise the internal control system in operation with a view to correcting any lapse, which may be evidence during the investigation process.  


This study is limited to the availability or time, finance and the semesters work load.




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