Abstract
This study exposed the researcher to the evaluation of the effectiveness of the internal control system in the banking industry. “ internal control is the whole system of control, financial and otherwise, established by the management in order to carry on the business of the enterprise in an orderly and efficient manner, ensure adherence to management policies, safeguard the assets and secure as far as possible the completeness and accuracy of the records. “Internal control system has the following element. Organization: The enterprises must have clear corporate objective, plan policy and duties of the employee should be clearly defined segregation of duties: Basic to the concept of internal control system is the segregation of duties of the employee to ensure that no one person is able to record and process a complete transaction. Physical:
These involve procedural and security measures designed to ensure that access to asset is limited to authorized personnel. Authorization and approval: All transactions require authorization and approval by appropriate and responsible personnel. Personnel: there should be procedures to ensure that personnel have capabilities commensurate with their responsibilities. Supervision: any system of internal control should have means of supervision by responsible officials for the day to day transactions and their recording thereof. Arithmetical and Accounting; these are the controls within the recording function which check that transactions to be recorded and processed have been authorized and that they are complete and accurately processed. Internal control which can be likened to the heart which regulates the business, it helps to adhere to prescribed managerial policy, it also promotes operational efficiency.
TABLE OF CONTENTS
TITLE PAGE – – – – – – – i
APPROVAL PAGE – – – – – ii
DEDICATION- – – – – – –
– iii
ACKNOWLEDGEMENT – – – – – iv
ABSTRACT – – – – – – – – v
Table of Contents – – – – – –
vi
CHAPTER ONE
- INTRODUCTION- – – – — – – 1
1.1 BACKGROUND
OF THE STUDY – – – –
1-4
1.2 STATEMENT
OF THE PROBLEM – – – – 4-5
1.3 OBJECTIVE
OF THE STUDY- – – – – 5
1.4 RESEARCH
QUESTION – – – – – 5-6
1.5 STATEMENT
OF HYPOTHESIS – – – –
6
1.6 SIGNIFICANCE
OF THE STUDY- – – – 6-7
1.7 SCOPE OF
THE STUDY- – – – – –
7
1.8 LIMITATION
OF THE STUDY- – – – – 8
1.9 DEFINITION
OF TERMS- – – – – – 8-9
CHAPTER TWO
- LITERATURE
REVIEW – – – – – 10
2.1 BRIEF HISTORY OF INTERNAL CONTROL IN FIRST BANK PLC – – 10
2.2 OBJECTIVE
OF INTERNAL CONTROL- – – 10-11
2.3 ELEMENT
OF INTERNAL CONTROL- – – –
12-14
2.4 INTERNAL CONTROL IN A SPECIFIC AREA OF MANAGEMENT- 14-28
2.5 LIMITATION TO THE EFFECTIVENESS OF INTERNAL- – – 28-29
2.6 COMPONENTS OF INTERNAL CONTROL- – – –
29
CHAPTER THREE
- RESEARCH DESIGN
AND METHODOLOGY- – -36
3.1 INTRODUCTION – – – – – – -36
3.2 RESEARCH
DESIGN- – – – – – 36-37
3.3 POPULATION
OF THE STUDY- – – – –
37
3.4 METHOD OF
DATA COLLECTION- – – –
– 37-38
3.5 SAMPLE
SIZE – – –
– – –
– 38
3.6 SAMPLING
TECHNIQUES- – – – – – 38
3.7 VALIDITY AND RELIABILITY OF MEASURING INSTRUMENT – – – – 39
3.8 METHOD OF
DATA ANALYSIS- – – – –
39-40
CHAPTER FOUR
- PRESENTATION AND
ANALYSIS OF DATA- – 41
4.1 INTRODUCTION- – – – – – – 41
4.2 PRESENTATION OF DATA AND CLASSIFICATION- – – – – – 42-43
4.3 ANALYSIS
OF DATA- – – – – – 43-50
4.4 TEST OF
HYPOTHESIS- – – – – – 50-56
4.5 INTERPRETATION
OF DATA- – – – –
56-57
CHAPTER FIVE
- SUMMARY,
CONCLUSION AND RECOMMENDATION-58
5.1 SUMMARY
OF FINDINGS- – – – – – 58-59
5.2 CONCLUSION – – – – – – –
59-60
5.3 RECOMMENDATION- – – – – –
60-62
REFERENCES- – – – – – – –
62-63
QUESTIONAIRE- – – – – – – 64-67
CHAPTER ONE
- INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Every business unit has certain goals and objectives to accomplish, no matter the size and scope, management has the responsibility of establishing, maintaining a goal of its objectives.
The role is not an easy one especially in organizations that are large in size and scope. It is not possible to exercise first hand supervision of operations as such, the installation of internal control system as an indispensable aid to efficient management is inevitable.
According
to Pyle, and Larson, (1981), Fundamental Accounting Principles traced the
origin of internal control to the complexity of modern business techniques. Although
effective system may be operated, in large companies, but smaller enterprises
may have to rely less on formal controls due to personal involvement of
management in the enterprise itself.
Internal
control is very necessary for every business unit whether large, medium or
small. It does not only increase the efficiency of business, but also helps to
self-guard the assets and secure accuracy of the record against error. From
textbooks and research work done by other people on this, it is generally
accepted that internal control is an indispensable aid to efficient management
due to the Fact that it provides assurance to management. It keeps management
informed if the financial position is sound.
Internal control is as important as the
organization itself and should be carefully designed and effectively carried
out. Failure to do this results in creation of loopholes, which encourages all
forms of fraud. At this point, it is necessary to define internal control.
According to auditing standard guidelines, it is the whole system of control,
financial and otherwise, established by the management in order to carry on the
business of the enterprise in an orderly and efficient manner, ensure adherence
to management policies, safeguard the assets and secure as far as possible the
completeness and accuracy of the records. Internal control is divided into
accounting control and administrative controls and it is elucidated according
to Horngren and Foster (1990-1910).
1“Accounting control comprises the method and
procedures that are mainly concerned with the authorization of transactions,
the safe-guarding of assets and the accuracy of the accounting records. Good
accounting controls help increase efficiency; they help decrease waste,
unintentional errors and fraud.
2 Administrative controls Comprises the plan of
organization and all management planning and control of operation.
First bank
Nigeria Plc is one of the universal banks in Nigeria. It was founded in the year
1894, more than a century ago, by Sir Alfred Jones, a shipping magnate from Liverpool. The
bank started out as a small operation in the office of Elder Dempter and
company in Lagos.
They render Universal banking services to the public, some of which are
acceptance of cash lodgments and savings deposit. They were among the first
banks that introduced western Union Money Transfer Services to the public.
Another interesting aspect of services which the researcher found they render
to the public is the Automated Teller Machine (ATM) services, which they offer
to the public recently. These three services, you need not to have account with
them to affect such transactions.
Telegraphic transfer is an aspect of transaction
where by a customer or potential customer come up to a bank and request for a
transfer of fund to another branch of first bank in another town which if
affected by Fax and receives a spontaneous remittance at the correspondence
branch. Equally they have the same effect of transfer, but in the case of draft
the purchaser handles the drafts to the paying branch unlike the telegraphic
transfer whereby the fund is already at the branch.
On a daily basis First Bank open more than fifty (50) new savings bank accounts, and their internal rate is as stipulated by the central bank of Nigeria (CBN).
STATEMENT OF THE PROBLEM
Every financial institution strives for fair public
recommendation, efficiency, strong management and profitability. However, with
complexities in modern day business network, overwhelming introduction of
information technology and other human Factors, these objectives seems
unachievable except with the infusion of strong internal control system into
the main stream of the organization process.
No
internal control system can by itself guarantee efficient administration, completeness
and accuracy of records. This could be attributed to
1. Employment of incomplete and dishonest personnel
Inadequate documents and records
Lack of proper procedures for records keeping
EVALUATION OF EFFECTIVENESS IN INTERNAL CONTROL SYSTEM IN BANKING INDUSTRY A CASE STUDY OF FIRST BANK NIGERIA PLC ABA
