Effect of Internal Control System on Risk Management
Chapter One
Objectives of the study
The following are the objectives of this study:
- To examine the components of internal control system at NTA.
- To assess the effectiveness of control policies of NTA.
- To analyse the challenges of internal control systems at NTA.
- To examine the effects of control policies on the operational activities of NTA.
CHAPTER TWO
LITERATURE REVIEW
Introduction
The chapter takes a critical look on the nature and circumstance of internal control, the review of related literature in a research study is a search for the discovery of existing information on a given research problem. It sets the current research into perspective to show “the state of the art” a literature review must be done in a con text of the research problem.
In this study, related literature that highlight properly internal control system will be reviewed to enable and enhance our understanding of the research work so that the intended aims and objectives of the research can be met.
Internal control
The United Kingdom Auditing practices committee (1979) defined internal control as “the whole system of control, financial and otherwise established by management in order to carry on the business of the enterprise in an orderly band effective manner to ensure adherence to managerial policies and directives, safeguard the assets and ensure as far as possible the completeness and accuracy of the records the prevention and detection of errors the fraud ,and the timely preparation of financial information”
According to statement of accounting standards, (SAS) internal control is the combined plan, method and procedures which can safeguard the firm’s assets promote operational efficiency and encourage adherence to prescribed policies.”
Also according to Robertson and Davis (1988:169) “internal control system is a set of client procedures both computerized and manual imposed on the accounting system for the purpose of preventing, detecting and correcting errors and irregularities that might enter the system and thereby affect the firm’s financial statement.
The SAS (statement of accounting standard) further explains that internal control maybe categorized as either accounting or administrative controls. Accounting control is concerned with the plan of the organization and all the co- coordinated methods and procedures which are implemented with a view of safeguarding assets and enhancing reliability of financial records.
An administrative control comprises of the plan of the organization and all co-ordinates methods and procedures that are concerned with operatically efficiency an adherence to management policies and directives. This is also known as operational controls.
CHAPTER THREE
RESEARCH METHODOLOGY
Introduction
This chapter indicates the approaches that were adopted in conducting this study. It highlights research design, population of the study, sample size, sampling technique, data collection instrument, data collection procedure, method of data analysis, as well as a brief profile of NTA.
Research Design
The research design of this study is descriptive. Descriptive research is to portray an accurate profile of persons, events or situations (Saunders, Lewis and Thornhill, 2007). This study is descriptive because the study sought to describe whether NTA‘s internal control system has any effect on its business operations. The study is a qualitative research because, it adopted questionnaires and the data collected was analysed using statistical methods. The study also used a case study strategy by focusing on NTA Lagos state center.
Population of the Study
The population of this study are staff of NTA Organization in Lagos state. The population size to the Center Manager is twelve (12).
CHAPTER FOUR
DATA ANALYSIS, PRESENTATION AND DISCUSSION
Introduction.
The chapter focuses on the presentation, analysis and discussion of empirical data collected through the administration of questionnaires. The presentation and analysis were presented and analysed in line with the divisions of the questionnaire, which was also designed with the exception of personal data, in tandem with the research objectives. Therefore the chapter is presented under the headings; personal data, internal control components, internal control effectiveness, internal control challenges, and effects of internal control on business operations.
Respondents Personal Data
This section presents the personal profile of respondents which are respondents; gender, age, educational background, and working experience with NTA. These are presented and analysed below.
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS.
Introduction.
Chapter five has been divided into three main sub-sections. These are the summary of the findings, conclusions and recommendations.
Summary of key Findings.
The summary of the study is in accordance with the research objectives of this study. Key findings have been divided into four main thematic areas. These are the organization‘s internal control components, effectiveness of Nigeria Television Authority‘s internal control systems, Nigeria Television Authority‘s internal control challenges, and effects of internal control on Nigeria Television Authority‘s operations.
NTA internal control Policy Formulation.
The components of the internal control system of the organization in descending order are: free flow of information and communication; sound monitoring and evaluation procedures; control procedures and activities which are clearly spelt out; high staff commitment; high staff capability; sound control environment; moderate IT support and infrastructure; and moderate risks assessment. The study also revealed that NTA has adopted a hybrid control framework (COSO, CoCo, and CobiT frameworks). The study also revealed that the Board of Directors and Management of Nigeria Television Authority only are responsible for formulating internal control policies. However, it was found out that there was lack of consensus on the frequency of control policy review at the organization by the respondents
Effectiveness of NTA internal control systems and policies.
The study discovered that the organization ensures that its activities comply with laws and regulations in the non-bank financial industry. It also revealed that regular control system audits are conducted to ensure that directives are complied with and that errors and risks can easily be detected by the control systems in place. Moreover, the study highlighted that the control system has helped to achieve the organization‘s operational objectives and that the control systems in place reduces errors and risks. Additionally, it was revealed that, the control system enables the preparation of reliable financial statements and the Organization has back-ups for all its activities. Lastly, it was found out that, the control systems moderately correct all detected errors. In general it was revealed that the control systems of the organization are strong and effective.
Challenges to NTA internal control systems and policies.
The study found out that: inability of the control system to detect people who do not comply with control policies; inadequate physical control measures and procedures over the organization‘s assets to protect these assets against theft and unauthorised access; slow level of correspondence between Head office and centers especially over new product launch; lack of proper explanation and unnecessary blame sharing over control system failures; lack of sufficient and well-equipped internal control supervisors; improper market segmentation and over concentration on corporate market; and poor banking operations software are some of the internal control policies challenges in the organization.
Effects of NTA internal controls on its business operations.
The control system has led to positive financial and non-financial performance at Nigeria Television Authority. The control system helps to determine the level of confidence that the organization‘s Credit officers should place on the financial records of customers. It has helped to eliminate fraud in the organization. The control system can easily detect creditworthy borrowers. The organization‘s control system has provided the accuracy and reliability of records. The control system has helped identify measures that can secure or improve stakeholder‘s access to vital information as well as making it easier for the organization to comply with existing legislation. The internal control system has enabled Nigeria Television Authority to generate adequate and reliable information on both the staff and the customers at large. The control system has enabled staff easy access to operational information since every staff know where and who to consult when in need of information relating to a staff‘s core duties. The supervisory controls (as part of internal controls) of the organization has helped it to ensure that staff perform their task properly and as required. The organization‘s internal control systems have enhanced the effectiveness and efficiency of its daily operations. The internal control system has ensured law and order, and staff and customers discipline at its operational premises.
Conclusion.
The general purpose of this study was to examine the effects of NTA internal control systems on its business operations. In order to achieve this purpose, literatures relating to the subject area was reviewed and empirical (field) data from NTA were collected and analysed as a case study. After the analysis and discussion of the empirical data, it was found out that Nigeria Television Authority has adopted multiple control frameworks (COSO, CoCo, and CobiT frameworks) and that the Board of Directors and Management of Nigeria Television Authority only are responsible for formulating internal control policies. It was revealed that the control systems of Nigeria Television Authority are highly strong and effective. The study found out that: Inability of the control system to detect people who do not comply with control policies; inadequate physical control measures and procedures over the organization‘s assets to protect these assets against theft and unauthorised access; and slow level of correspondence between Head office and centers especially over new product launch were some of the challenges of Nigeria Television Authority‘s control systems and policies. Notwithstanding the negative effects of the system, the control system has led to positive financial and non-financial performance at Nigeria Television Authority.
Recommendations.
Based on the findings of this study, the following recommendations are made:
Staff of NTA should be involved in the formulation of control policies. Employees must be made a natural element of how entities work and so must be involved in some aspect of policy formulation. This will ensure commitment and they will have a clear view of what is expected of them for the achievement of set targets.
The organization should conduct regular control system reviews. This can be done at least semi-annually. Conducting regular control system review will enable the organization to determine if the control systems are working effectively and efficiently. The organization can learn from the outcome and improve on the policies.
The organization should put in place adequate physical control measures and procedures over the organization‘s assets to protect these assets against theft and unauthorised access.
The organization‘s head office should improve the level of correspondence with its centers by releasing information to the centers quickly.
The organization should investigate all control failures to determine the cause(s) of the failure for proper explanation to staff.
The organization should put in place measures to recruit or train more internal control staff and equip them properly to carry out their functions efficiently. Employees must be competent to discharge control policies, access risks and ensure controls make it easier to deal with these risks.
The organization should properly segment its market and target other segments in addition to the corporate market.
Nigeria Television Authority should put in place measures to acquire modern non- bank operation software to aid effective operations.
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