Effect of Internal Control on Organizational Effectiveness (Using Eco Bank as Organizations Under Study)
CHAPTER ONE
OBJECTIVE OF THE STUDY
The main objective of this research study is to examine the effect of internal control system on organizational effectiveness in Eco Bank of Nigeria PLC, Portharcourt as a case study. Apart from the main objective, the research also sets out to achieve some specific objectives which are;
1) To determine the effects of internal control on the organizational effectiveness in Eco bank.
2) To know the effect of the internal control in monitoring compliance Eco bank.
3) To critically examine how effective the internal control has been used to reduce the level of risks in Eco bank.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Conceptual Framework
Definition of Internal Control
Internal control can be defined as a set of mechanism designed to motivate an individual or a group towards achievement of a desired objectives (Kirsch, 2002). Ouchi (1979) was of the view that internal control must be able to achieve the objective of bringing about cooperation among people with divergent objectives in the organisation. Furthermore, Cahill (2006) defines internal control as a system of internal administrative efficiency which often leads to design of a system that will enhance financial check and balance which will support corrective actions intended by the management of the organisation and will ensure the primary goal of the organisation is achieved. Similarly, Transparency International (2006) reported that internal control is control developed by organisation to generate transparency and avoid corruption. Transparency International (2006) further stated that corruption usually arise as a result of abuse of public office for private gains. Examples includes; Bribery: kickbacks and embezzlement of public funds. International Standard on Auditing (ISA 400) defines internal control as all policies and procedure adopted by the management of an entity to assist in achieving the primary objectives of the management by ensuring that the business is conducted in the most efficient way possible and also ensuring strict adherence to management policies, safeguarding of asset, prevention and detection of fraud and timely preparation of reliable account records.
Impact of Internal Control on Financial Institution
Looking at financial institution for example a bank it is always under the control of some bodies like CBN, SEC etc. these bodies monitor and influence the activities of all banks directly or indirectly. It has been established that fraud is a very deadly disease to any commercial banks, because if allowed to grow and eat deep into the banking system, it inevitably leads to distress. Evidence from recent banks regarding fraud and forgeries in commercial and merchant banks reveals that the phenomenon has been on the upward trend,i.e the incidents of fraud and forgeries has been increasing, despite the control measures put in place by individual banks. The subject fraud has increasingly gained the attention of the monetary and supervisory authorities, in view of the fact that fraud results in huge financial losses to banks and their customers loss of confidence in banks which may ultimately bring about bank failure. It is therefore important to stress the need for all banks to comply with the statutory requirements of rendering returns for the effectiveness of all policy measures, which the monetary and supervisory authorities might design to curb this menace. The statutory requirement for financial institution is to employ external auditors to check their books and affairs. regulatory authorities exercise their powers to deal with members of the institution and management found to have grossly violated the regulatory and statutory code of conduct or to have been engaged in financial malpractice or have condoned such offences of other staff.
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