INTERNAL CONTROL AS A TECHNIQUE USED IN ENHANCING PROFITABILITY AND EFFICIENCY IN A COMPUTERIZED ACCOUNTING SYSTEM
ABSTRACT Due to the rapid growth of modern technology and computerization, there is increase in computer usage in organizations and this tends to increase fraudulent practices. This study therefore aims at examining internal control in a computerized accounting system and how it enhances profitability and efficiency. In this study, the primary source of data which is the questionnaire was used and the chi-square (X2) hypothetical test instrument was employed to carry out the data analysis and to test the formulated hypothesis. From the analysis, it was found that an occasional evaluation and review of internal control system increases profitability and efficiency, enhances workers efficiency and also help in reducing fraud. It was therefore concluded that as a technique, internal control is a very important aspect of an organization and therefore recommends to the management whose duty is to ensure the smooth and effective operation of the organization to ensure an occasional evaluation of the internal control system, to establish an internal audit department and to ensure a sound and effective internal control system to enhance business operations.
CHAPTER ONE 1.0 INTRODUCTION 1.1 Overview
1.2 Statement of the Problem In spite of the sophisticated and expensive internal control put in place, there is still an increasing rate of computer fraud, misappropriation of fund, malpractice and other fraudulent practices in organizations. In some situations whereby an individual is entrusted with the functions of recording and storing of data in a computerized accounting system, it will be easier for such an individual to perpetrate fraud which invariably will lead to a big set back to the company and might cause the liquidation of the company. Also, there are problems of computer manipulation by unauthorized staffs and when all these are incurred, it will reduce profitability in the organization and may lead to the liquidation of the company. With regards to this, Fayol states; in an undertaking control consist of identifying whether everything occurs in conformity with the plan adopted, the instructions issued and principles established. It has for its object to point out weaknesses and errors in order to rectify them and to prevent reoccurrence. It operates on everything, things, people and actions”. There is therefore a need for internal control to be instituted in a computerized accounting system as it will enhance profitability and increase efficiency of the staffs and also reduce fraud.
1.3 Objective of the study The objective of this study is to examine the profitability and efficiency of internal control in a computerized accounting system to see if the existing internal control system is effective enough to hinder the fraudulent practices engaged in by some staffs and other problems associated with the system. The study will also look into the loopholes and weaknesses of the internal control in existence and make recommendation for areas that will be improved upon within the system. Also, measures that the organization will employ to ensure that opportunities for fraud or misfeasance are minimized and ensure management policies are adhered to. Finally, the study will analyze the efficiency of internal control system in an organization as it helps to increase profitability and efficiency in the organization. 1.4 Research Questions Based on the purpose of the study, the following research questions will be used in the course of this research:
- Does your organization have an effective internal control system?
- Will internal control be effective in a computerized accounting system?
- Do you think internal control will enhance profitability in an organization?
- How can internal control enhance the efficiency of workers?
- What strategy should be put in place to reduce computer fraud?
1.5 Research Hypothesis Hypothesis is a general assumption which may be true or not Kerlinger (1986), defined a hypothesis as a tentative, conjectural statement of the relationship between two or more variables. The research work is intended to test the following: Ho: There is no significant relationship between occasional evaluation and review of the internal control system in an organization and the increase in efficiency and profitability. Hi: There is significant relationship between occasional evaluation and review of the internal control system in an organization and the increase in efficiency and profitability. HO2: There is no significant relationship between effective application of internal control in a computerized accounting system and the efficiency of workers. Ha2: This is a significant relationship between an effective application of internal control in a computerized accounting system and the efficiency of workers.
Ho3: There is no significant relationship between the internal control strategy put in place to reduce computer fraud and the occurrence of computer fraud. Ha3: There is a significant relationship between the internal control strategy put in place to reduce computer fraud and the occurrence of computer fraud. 1.6 Scope of the Study