ABSTRACT

Its is not possible for the owners of a business enterprises to personally supervise every employee in his/her daily activities to ensure compliance with the organizational goal and mission - hence, internal control measures are put in place to guide and check the employees. Many private enterprises fail or suffer distress due to ineffective internal control system, which is fraudulent employees exploit. The major concern of the study is to critically evaluate the internal control systems of private enterprises in the Nigerian economy using three selected trading companies. To do this, the study examined the internal control measures used by the companies their adequacy and effectiveness, the problems associated thereto and made recommendation, which would enhance effectiveness of the measures. Review of related literature provided theoretical base for the study stratified random sampling was used and research instrument were questionnaire and interview. Chi-square was used to test the hypothesis. The operational internal control measures in the companies have some loophole. There is absence of clearly defined organization chart; sensitive financial responsibilities are heaped on a single individual, internal auditing is used to the exclusion of independent external auditors services, and authorization of expenditure is most often by oral instruction. Inventory accounting system in the companies is good and effective. It is recommended that clear organization chart with proper separation of duties and responsibilities should be put in place, authorization of payments should be in writing and services of independent external auditors should be used. Staff training and development as well as appropriate motivation are also necessary for proper functioning of any system of internal control in an • organization .

TABLE OF CONTENTS Title page - Project assessment Declaration Certification Dedication - Acknowledge Table of content - List of tables Abstract II IV v VI VII VIII IX x XI

CHAPTER ONE: INTRODUCTION 1.1 1.2 Background of the study Statement of the problem 3 4 1.3 Objective of the study - 4 1.4 Research questions 5 1.5 1.6 Research hypothesis - Justification for the study 5. 7 1.7 Scope of the study 7 1.8 Limitations of the study . 7

CHAPTER TWO: REVIEW OF RELATED LITERATURE .. IX ,,. ... ..

CHAPTER THREE: RESEARCH METHODOLOGY 3.1 Research design - 38 3.2 Area of study 38 3.3 Population of the study 39 3.4 Sample and sampling techniques - 41 3.5.1 Primary data source 42 3.5.2 Secondary data source 42 3.6 Data collection instruments and procedures 42 3.6.1 Personal interviews 43 3.6.2 Questionnaire 43 3.6.3 Validity and Reliability of instrument 44 3.6.4 Administration of instrument - 44 3. 7 Data analysis technique 44 3.7.1 Use of table figures and percentage 45 3.7.2 Statistical technique used 45 3.7.3 Testing of hypotheses - 45

CHAPTER FOUR: DATE PRESENTATION, ANALYSIS AND DISCUSSIONS 4.1 Presentation of data 46 4.2 Analysis of data - 4 7 4.2.1 Demographic profile of respondents 48 4.2.2 Analysis of research questions 4.3 Hypothesis testing 4.3.1 Testing for. (Ho1 :) - 4.3.2 Testing for (Ho2:) - 59. 59 61 62

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS 5.1 Summary - 64 5.2 Recommendations 66 5.3 Conclusion - 67 Bibliography 69 Appendices 72 x I I

LIST OF TABLES Table 3.1: Population for the study 39 .. Table 3.2: Distribution of the sample size among the selected Companies 41 Table 4.1: Table 4.2: Distribution and collection questionnaire - Distribution of recovered questionnaire - 46 47 Table 4.3: Gender group of the respondent 48 Table 4.4: Age distribution of the respondent - 49 Table 4.5: Education qualification of the respondent 49 Table 4.6: Availability of internal control system 50 Table 4.7: Rating of the internal control - system of the companies 51 Table 4.8: Availability of organization chart 52 Table 4.9: Existence of separation of duties and responsibilities 53 Table 4.10: Auditing of activities 54 Table 4.11: Authorization of cash payment in writing - 55 • Table 4.12: Table 4.13: Stocktaking of physical goods in warehouse Non-compliance with established control 57 procedures as a major cause of fraud 58 Table 4.14: Effective internal control systems enhance Profit - 58 XI