CHAPTER ONE
1.00 INTRODUCTION
1.01 GENERAL DESCRIPTION OF THE AREA OF STUDY
Internal
control is an integral part of accountancy and auditing. Any discussion in
auditing literature will not be complete without internal control. Internal
control can be likened to the “heart” which regulates the business “blood”. No
business can succeed without effective internal control system. Internal
control can also likened to the “brake” and “steering” in a vehicle, which if
are not there, the business “train” will get crushed. It can also be likened to
the laboratory or quality of products by all financial activities of an
establishment. It plays an important
role as far as prevention and detection of crime is concerned and protecting
the organization’s resources.
It
is a process affected by an organizations’ structure, work and authority flows,
people and management systems, design to help the organization accomplish
specific goals or objectives. It is also a means by which organization’s
resources are directed, monitored and measured.
Based
on this, this research work is centered on internal control framework in the
construction companies in Nigeria. With reference to Setraco Nigeria limited
Ishiagu – Ebonyi State.
1.02 HISTORICAL BACKGROUND OF SETRACO NIGERIA LIMITED
Setraco was established by two young
entrepreneurs called Said Walat and Inno Umoru with merely N100,000. It was located in the then Bendel State. It started by
constructing township and district roads and undertaking the rehabilitation of
various roads in Bendel state before being awarded the construction phase I of
the Atuze - Otuo - Uzebba road.
Over
the last 30 years the company has been rapidly grown to become one of the
largest constructions company in Nigeria specialized on roads and bridges with
its branches in around 20 states of the federation. The states include Kogi
state, Ebonyi state etc. Setraco has played a key
role in developing Nigeria’s infrastructure as the Country strives towards
becoming a developed nation. Setraco ensures that all projects are successfully
completed to specification and in line with the company’s sense of
responsibility towards our Clients and host communities.
Affiliations
Setraco Nigeria is a member of the Setraco International Holding
group of companies. The Company is also technically partnered with a number of
leading design and consulting firms across the globe which enables us to present our clients
with cutting edge solutions for their needs.
Setraco Nigeria Limited is a leading engineering company with over
35 years in delivering value-added civil and infrastructural projects in
Nigeria.
Vision
Having continually executed and delivered projects in Nigeria over
the past 35 years, the company has cemented its reputation as a competitive
contractor guaranteed to deliver standards set by our Clients.
Our vision is to build on that reputation and continue executing
projects across Nigeria, in the hope of being able to touch the lives of all
Nigerians positively by completing much needed infrastructure development in their region.
Corporate Principles
It is our belief that the success achieved by the company is a
result of the management's attention towards community relations, customer
satisfaction, supplier relations and employee motivation.
With dedicated Corporate Relations, Procurement, Human Resources
and Contracts Departments the management
has put in place the necessary policies and procedures upon which Setraco can
build going forward.
In
Ebonyi State, it is located in Amaeze Ishiagu in Ivo Local government area. The
branch of the quarry site is called Amaeze quarry site. It is a member of
Setraco technically partnered with a number of leading design and consulting
firms across the globe.
1.03 PROBLEM ANALYSIS
This
research work is centered on internal control framework in Setraco Nigeria
limited. Despite the effectiveness of internal control in Setraco Nig. Ltd, the
following problems still occur.
a) Loose
system of management in the organizations management system
b) Lack
of adequate system of internal control
c) Lack
of internal checks and balances in the various level of the organization
d) Lack
of adequate internal auditors services
e) Lack
of effective utilization of the framework
1.04 PURPOSE OF THE STUDY
The
purpose of this research work is to review the essential of internal control
framework in Serrano Nigeria limited. The following objectives are to be
achieved:
a. To
find out internal control frameworks in private organization in Nigeria.
b. To
find out the extent to which internal control frame work guiding the
organization is being adhered to.
c. To
identify the common internal control frameworks in Nigeria.
d. To
find out the role of internal auditing in the internal control framework in
private organization.
1.05 RELEVANT RESEARCH QUESTION
This
research work is set out to answer the following questions
a. What
is the internal control frameworks used in private organization in Nigeria?
b. To
what extent is internal control framework adhered to in private organization?
c. What
are the common internal control frameworks in Nigeria
d. Does
internal auditing has a role in the internal control framework in private
companies?
1.06 DELIMITATION (SCOPE) OF THE STUDY
The
use of internal control in an organization is an efficient and effective
management system in an organization, thereby ensuring accountability,
standardized management system and successful operation. But the researcher
limits her work solely on the use of internal control framework in the
organization through the analysis of the rules of managing directors and internal
auditors in the organization.
The
problems encountered as a result of carrying out this research are:
a) Regulation
on organisation’s internal control and risk management system
b) Problems
are compounded when the term, if not management directives are carried out throughout
the organization
c) Misappropriate
management of the framework.
1.07 ASSUMPTION
It
was assumed that the management and staff of Setraco Nigeria Limited Ishiagu,
Ebonyi State will review the essential of internal control framework to help enable
work efficiency and segregation of duties in the company.
It
was also assumed that the organization will gather literature to propose an
appropriate study on internal control framework
And
also to ensure that provision of laws, rules and regulations guiding the
organization are strictly adhered to.
1.08 SIGNIFICANCE OF THE
RESEARCH QUESTION
Every
research work is expected to yield good result both to the society and the
researcher when conducted. Therefore, this research work has been proposed to benefit
the researcher and the entire students of Akanu Ibiam Federal Polytechnic
Unwana, Ebonyi State, and also for accountancy students embarking on their own
project research as a secondary source of data and for other purposes outside
the school environment.
Thus,
this study is aimed at revealing the internal control framework as stipulated
by COSO updated in 2011.
Finally,
it teaches the use of internal control framework as a tool for effective and
efficient management skill.
1.09 DEFINITION OF UNFAMILIAR
TERMS
a. Internal Control: this can be defined as a
whole system of controls, financial and otherwise established by management in
order to carry out business of the organization in an orderly and efficient
manner, ensure adherence to management policies, safeguard assets and ensure
completeness and accuracy of the record.
b. Framework: A set of assumptions, concepts,
values and practices that constitute a way of viewing reality.
c. Management: This is the organization and
coordination of the activities of a business in order to achieve a defined
objectives.
d. Auditing: Is a systematic examination of the
books and records of a business or the organization in order to ascertain or
certify and to report upon the facts regarding the financial operation and the
result thereof.
e. Auditor: This is a person responsible for
examining the financial statements prepare by the management to see that the
financial statements agree with the underlying accounting records, give a true
and fair view.
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