EFFECTIVENESS OF INTERNAL CONTROL SYSTEM

IN PRIVATE SECTOR

BY

NOR BENEDICT

MATRIC NO.: NOU120165899

BEING A RESEARCH PROJECT SUBMITTED TO THE SCHOOL OF

MANAGEMENT SCIENCES DEPARTMENT OF ACCOUNTING,
NATIONAL OPEN UNIVERSITY OF NIGERIA IN PARTIAL
FULFILMENT OF THE CONDITION REQUIRED FOR THE AWARD OF
BACHELOR SCIENCE DEGREE.

MARCH, 2016
 APPROVAL

This project has been prudently read and accepted as meeting the requirements for
the award of Bachelor Science Degree Accounting by National Open University
of Nigeria.

……………………………... ………..……..……
Mr.Ozizi Salisu Musa
Name of supervisor Sign/Date

……………………………… ……………………
External Supervisor Sign /Date

……………………………. …………….………
Head of department Sign/Date

i
 CERTIFICATION

I certify that the research project is entirely the result of the researcher’s
independent scholastic achievement. The various sources to which the
Author/researcher is indebted to are highly and evidently acknowledged in the
references. Any error in the script are entirely my own.

…………………………………
Mr NOR BENEDICT DATE…………..
[RESEARCH STUDENT]

The above certification is confirmed.

…………………………………………………….
Mr OZIZI MUSA SALIU[PROJECT SUPERVISOR]

DATE………………………..

ii
 DECLARATION

I NOR BENEDICT, Declare that this dissertation is my own original work and
that it has not been presented and will not be presented to any other university for
a similar or any other Degree award.

Signature……………………………..

Date…………………………………..

This dissertation is a copyright material protected under the Berne’s Convention.

The copyright Act 1999 and other National andInternationalEnactments in that
behalf, on control property it may not be reproduced by any means In full or in
part, except for short extracts in fair research or private study critical scholarly
review or discourse with an acknowledge without the written permission of
National open university of Nigeria on behalf of the Author.

iii
 DEDICATION

This project is dedicated to my beloved parents Mr And Mrs AMOS NOR

IKYUMEH and the general users.

iv
 ACKNOWLEDGEMENT

I recognised fantastic support from different people throughout the course of this
programme
I wish notably to acknowledge almighty God for his grace, mercy, strength,
wisdom and amazing courage for me, to carry out this programme.
I am vastlythankful to my project supervisor Mr OZIZI MUSA SALIU, who
went through many drafts to bring to knowledge of the researcher on the research
study and correct all necessary mistakes.
Appreciates the following brothers and sisters, Moses Nor, veronica, Elias,
Andrew and Patricia Amos who were backing me morally and financially during
this research work.
I am indebted to the following friends, Mr Moses Momoh, Kabiri, Dr Uandu,
Mgbemena Onyinye, Chinwe Uandu Esq, and Mr James graduates of relevant
courses to this area of studies.
Special thanks also go to the management of NOUN and the Dean/heads of my
department.

v
 ABSTRACT

This research seeks to evaluate the effectiveness of internal control system in the
private sector.
Internal control is one of the vital tools used to control finances, safe guide assets
and to checkmate incident of fraud, irregularities in every organization.
Internal control can be liken to a network of pillars that holds a skyscraper without
which the skyscraper will collapse like a park of card.
It is in the light of foregoing that the researcher put up a study of its effectiveness
in private companies using Nugget Hotel Limited, Abuja as a case study.
The study was carried out through personal interviews, questionnaire and tabular
analysis of findings. It became obvious that internal control system is not so
effective in most private companies. hence useful recommendation were proffered
which if utilized by the private company in this category will make internal
control effective and guarantee the survival and profitability of private companies.

vi
 TABLE OF CONTENTS
TILTE PAGE I
APPROVAL II
CERTIFICATION III
DECLARATION IV
DEDICATION V
ACKNOWLEDGEMENT VI
ABSTRACT VII
TABLE OF CONTENTS VIII-IX
LIST OF TABLES XI
LIST OF FIGURES XII

CHAPTER ONE
INTRODUCTION
1.1INTRODUCTION 1-2
1.2 BACKGROUND 2-3
1.3STATEMENT OF PROBLEM 3
1.4OBJECTIVE OF THE STUDY 3-4
1.5 RESEARCH QUESTION 4
1.6 STATEMENT OF HYPOTHESIS 4
1.7 SIGNIFICANCE OF THE STUDY 5
1.8 JUSTIFICATION OF STUDY 5
1.9 SCOPE OF THE STUDY 5-6
1.10 DEFINITION OF TERMS 6-7

CHAPTER TWO
LITERATURE REVIEW
2.0 INTRODUCTION 8-11
2.1 CONCEPTUAL FRAMEWORK 11-13
2.2THEORETICAL FRAMEWORK 13-17
2.3LITERATURE ON THE SUBJECT MATTER 17-22

CHAPTER THREE
RESEARCH METHODOLOGY
3.0 AREA OF STUDY 23-25
3.1RESEARCH DESIGN AND SOURCE OF DATA 25
3.2 STUDY POPULATION AND DETERMINATION
OF SAMPLE SIZE 26
3.3 INSTRUMENTATION 26-27

vii
3.4PROCEDURE OF DATA COLLECTION AND DATA
ANALYSIS 27
3.5 LIMITATION OF THE STUDY 28

CHAPTER FOUR
DATA ANALYSIS, FINDINGS, AND DISCUSSION
4.0 DATA ANALYSIS, FINDINGS, AND DISCUSSION 29-38
4.1 FINDINGS OF THE STUDY 38
4.2 DISCUSSION OF THE FINDINGS 38
4.3 ENGLISH 38

CHAPTER FIVE
CONCLUSION ANDRECOMMENDATION
5.0SUMMARY OF FINDINGS 39
5.1CONCLUSION 40
5.2 RECOMMENDATION 40-43
5.3 PROPOSAL FOR FURTHER STUDIES 43
BIBLIOGRAPHY 44
APPENDIX 46
QUESTIONNAIRE 47-49

viii
 LIST OF TABLES

The list of tables has been designed by the researcher to show clear presentation
of tabular depiction of procedures for data collection and data analysis. These lists
of table are categorically represented in four classes these include;

a. The first class of the list of tables are mainly descriptive to operational
structured of the variables of components derived during research work
b. The second class of the list of tables state the tabular data analysis of Nugget
Hotel Limited Abuja Centre office in operation and the newly constructed
branch at Enugu not yet in operation
c. The third class of the list of tables are the staffs of Nugget Hotel Limited both
gender, qualification, age, departments in the hospitality Services at the top
level to middle level and the lower level that is from top hierarchy to bottom
line of the organisation operation
d. The fourth class of the list of table has been designed to cover the tabular data
analysis and inferential statistical methods of the procedures for data
collection and data analysis gathered during the process interviewing the
interviewee through research findings of the researcher.

ix
 LIST OF FIGURES

The figures remained fully calculated, mathematically from every bit of tables that
required figurative representation of data analysis in a tabular form and inferential
statistical using the chi-square methods. The respondents, percentage and totals
were carefully presented and analysed orderly. These lists of figure were
generated from the following angles;

a. Figures presented from sample collection of staff population

b. Figures presented on the conceptual framework and figures on the first table
oftheoretical framework oforganisational operation indicating the component
variables and measurement
c. Figures generated during the procedures for data collection and data analysis
received why interviewing the interviewee by the researcher
d. Figures from the Nugget Hotel headquarter in operation and branch office not
yet in operation
e. Figures collected from data analysis of staff gender, qualification, department
and others

x
 CHAPTER ONE

INTRODUCTION
1.1 INTRODUCTION
The study of Auditing became necessary to check upon persons and day to day
transaction of organizations, whose business was to record the receipt and
disbursement of money on behalf of others. The ancient Egyptians, the Greek and the
Romans all utilized system of effectiveness of internal control system to carried out
check and counter-checks among various financial officers. The person whose duty
was to make such an examination of account became known as the auditor, the word
being derived from Latin meaning to hear originally. Prior to the medieval times,
auditing was referred to as a process of public hearing in which financial statement or
financial records were read aloud. The auditor was referred to as someone who has
sole authority to hear and comment on the readings. In medieval times, audit was made
to determine whether the person in position of fiscal responsibilities in government
were acting and reporting in good faith or in an honest manner.
However, auditing has taken a new dimension in our society today and it will continue
to be improved upon as a result of growth and expansion of business, especially in the
private sector.
The relevance of auditing in business world of today needs no emphasis as the solution
to problem of credibility in reports and accounts lies in appointing an independent
person called an auditor to examine and report on his findings. The process of
examining and reviewing the accounting transaction in order to give assurance that the
financial statement presents the financial position of the firm fairly as at particular
period.
Attestation to true and fair view of financial statement of a business refers as auditing.
The accounting parties were required to attend before the auditor who examines
prepared account to ensure accuracy of underlying record.
The emergence of double entry books system made it possible to record not only cash
transactions, but also all transactions involving matters of account, thereby increasing
the duties of auditor.
From the above explanation of the meaning and origin of auditing, it has a great
psychological effect on those officers or employees entrusted with money and goods
and their employers. The importance with which the public and the private sectors and
the business community attach to the practice of auditing in Nigeria engendered the
federal government to recognize the institute of chartered accountant of Nigeria by an
act of parliament to formulating standards to be followed by members of the institute
in the practice of effective accounting and auditing profession.
Every member of the institute is duty bound to follow the guidelines and code of
conduct as enunciated by the institute. Any member who infringes the code of conduct
will be punished in any other way as the institute think fit. An internal control system
[ICS] is fundamental to any business. In small business the ‘’Boss’’ can run everything
himself whilst a system would be helpful it is not a necessity. In larger organisation it
is essential and in very large organisation middle rank managers responsible for the
system. Today there is pressure to ensure the ICS is effective as part of the corporate
governance initiatives. ICS is the system which enables management to implement the

1
 business mission and ensure that implementation is correct and complies with
applicable laws and regulations.
No system will ever be perfect therefore an essential ingredient of any ICS is to be able
to detect failures and limit the consequent damages such failures to the organization.
Excellent ICS have achieved such that the level of residual failures is manageable.

1.2 BACKGROUND OF THE STUDY

In the past, there was what is called counter-check, which has been used as financial
check-up. This system was on until one person whose duty was to make an
examination of books and account of the business known as the auditor. This person’s
duty was to record the receipts and disbursement of the money on behalf of other. And
it came to pass that he became an auditor for checking the books balance sheet of the
company.
It is therefore necessary for efficient accounting records and effectiveness of internal
control system so as to enable them knows their financial condition and control.
Internal audit help private sector to carry out their work efficiently and effectively.
However, any private sector without audit programme and control is like a ship setting
out tosail without a compass.
Audit in private sector adopt what is called a cleared and special tick for effectiveness
of work done by them for example, touching of cash, casting of subsidiary books,
physical checks and posting of machines records and work on the personal ledgers,
etc. The auditor may decide to use a special coloured biro-pen in signifying the work
already done so that staff of the client i.e. those involved in the accounting work may
not make alterations to what had been audited.
Many auditors use initials of their firm to indicate the work already done, while others
simply dock right in a very characterize way to differentiate it from the one
customarily used by the organization’s staff.
A strict rule should be instituted however, that no alteration should be made in any
figure after the auditor as passes them by hi special ticks or marks as them are
sometime called.
The internal control system is the major part in any organization, ‘’internal control is
the process designed and attended by those charged with governance, management and
other personnel to provide reasonable assurance about achievement of entity’s
objective with regard to reliability of financial reporting effectiveness and efficiency of
operation and compliance with applicable laws and regulations.
It follows that internal control is designed and implemented to address,identified
business risk that threaten the achievement of any of these objectives ‘’ [sri Lanka
Auditing Standard 315, [LCASL]. According to Basu [2006], Millichamp, [1987,
1996], the institute of chartered’ Accountant of England & Wales [ICAEW], ‘’Internal
Control System is the whole system of controls, financial or otherwise, established by
the management in order to carry on the business of the enterprise in orderly and
efficient manner ensure adherence to management polices safeguard assets and secure
as far as possible the completeness and accuracy of records. It comprises of the
following components [Coso; 2002]
a. control environment
b. entity’s risk assessment process
c. information and communication system

2
 d. control activities
e. monitoring
Private sector is unique sector in the economy. It provides different kinds of services to
the customers and manages huge volume of funds every day.
Majority of activities in the economy depends on the strength and stability of the
private sector. Due to these facts the necessity of internal control system in the private
sector cannot be undermine. The basis of safe and sound private activities, the effective
internal controls are so important. A system of tough internal control can support to
ensure that the goals and objectives of the private sectors or companies will be met,
that the private will help to attain long term profitability targets. Maintain reliable
financial and managerial reporting such a system can also help to ensure that the
private sector comply with laws and regulation as well as policies, plans internal rules
and procedures and decrease the risk of unexpected losses or damage to the private
sector reputation. This will helps Board of Directors of private sectors and
management to safeguard private sector resources, produce reliable financial reports
and comply with laws and regulations. Meantime, it support to reduce possibilities of
substantial errors and irregularities and assist in their timely detection when the do
occur. Also this control system may discover mistake caused by personal distraction,
carelessness, and errors in judgement or unclear instruction in addition to fraud or
deliberate noncompliance with policies.

1.3 STATEMENT OF THE PROBLEM

In the context above background, the presence of effective internal control system and
their use is very vital to private companies which engaged in broader financial,
economic and social roles. No any argument that every private sector must have the
strong internal control system in position. Accordingly it is regard to examine that
‘whether or not the established internal control systems are effective and are they being
effectively practiced in private sectors’. The study attempts to provide answers in
respect of the private sector by studying the following question
a. Why should private sector audit their account
b. Is there any need for effectiveness of internal control system in the private sector
c. What should be done in order to ensure efficiency and effectiveness of auditors in
the private sector

1.4OBJECTIVES OF THE STUDY

The mainobjective of the study is to evaluate effectiveness of internal control system
in private sector.
Therefore the study intends to;
 Examine the nature and structure of internal control system in the private sector.
 Determine the relationship between internal control components and effectiveness
of internal control system in private sector.
 Investigate the types of fraud in private sector.
 Identify factors those contribute to the incidence of fraud in private sector.
 identify strategies that can take to eliminate fraud in private sector
 Give an explanation to why private sector need effectiveness of internal control
system

3
  The effectiveness of ICS involves measuring time it takes to find failures and time
taken to rectify the damage.
 Assess and evaluate the operation of internal control system in private sector
 To bring out the significance of auditingin the private sector.

1.5RESEARCH QUESTIONS
General Research Question
What is the contribution of the relationship between internal control components and
the effectiveness of internal control system as regardsthe financial performances of the
private sector?

Specific questions
1. What are the factors affecting the effectiveness internal control system in use in private
sector?
2. What is the relationship between internal control components and the effectiveness of
internal control system in private sector?
3. What types of frauds occur in the private sector?
4. Which factors contribute to the incidence of frauds in the private sector?
5. What kinds of strategies can take to eliminate frauds in private sector?

1.6 STATEMENT OF HYPOTHESIS

The researchable statement on the effectiveness of internal control system is to test the
statement of sixhypotheseson the financial performances of the effectiveness of
internal control system in private sectorderived as follows;
1. H01 = The control environment enhance effectiveness of internal control system in
the private sector
2. H02 = The entity’s risk assessment process enhances effectiveness of internal
control system in the private sector
3. H03 = The information and communication system of top to bottom line of
management in private sector support effective internal control
4. H04 = The control activities of top management in private sector support
effectiveness internal control.
5. H05 = The monitoring controls enhances effectiveness of internal control system in
the private sector
6. H06 = There is positive relationship between internal control components and
effectiveness of internal control system
1.7 SIGNIFICANCE OF THE STUDY
The findings of the study will be of great importance to a lot of interested parties such
as the enterprise owners in private sectors and it will help the effectiveness of internal
control system in the private sectors.
The study will attract the attention of the private sectors in adoption of
effectiveinternal control system for their establishment. This is so because the finding
from this research will make them understand the importance ofgood and sound
internal control system and therefore, give the needed management support for the
internal control system to function.
The study will also enhance the existing knowledge of private sector concerning
internal controls and its effectiveness.

4
 Also research studies and text books on internal control are not comprehensive. So this
study will be a valuable reading material for student and researcher and also helps as a
manual to managers of private sector as well as other organisation. The motivation of
the research work is to evaluate the effectiveness of internal control systems. The
existence of the study will support the private sectors to put in place activities for their
day to day management of safeguarding assets, prevention and detection of frauds,
errors and irregulaties. Also, it is hoped that findings from this study will conform or
refute the present perception about the effectiveness internal control system in private
sectors. This will provide the companies to redefine approaches that would facilitate
the success of private sector objectives.Inaddition, the findings of the study will
support identify gaps in the systems of internal control in the private sectors.

1.8 JUSTIFICATION OF THE STUDY

Justification for effectiveness of internal control system in private sector organisations
that do not have proper internal controls tends to deteriorate overtime. Therefore,
companies should incorporate effective internal control system to accompany other
risk management approaches like insurance and organisation to identify and assess
operating controls, financial reporting and regulatory compliance process and to
formulate preventive measures.
justification for effectiveness of internal control system in private sector organisation
will exist to carry out their set goals and objectives to achieve these goals, they must
have set of rules that direct their efforts toward the achievement of the goals and
objectives, with this the needs for a system of internal control comes in. An internal
control is a set of policies and procedures put in place by the management of an entity
to help it achieve its goals. Internal control is a set of rules that provide fair
justification of control activities in an organisation.

1.9 SCOPE OF THE STUDY

This research emphasis on the effectivenessinternal control system in private sectors
which involves private sector and private companies are considered in the study and
the research however focused on the private sectors due to the enormous size of the
private sectors.
This study will be confined to Nugget Hotel Limited, Abuja operating in the private
sector of the Nigeria’s Economy.
It is opined that numerous guests and customers who obtained their lodging and
accommodation services that the thesis Nugget hotel has an excitingly comfortable
services and it is well established. A wide range of customers obtaining their
hospitality services here, encompassing both local and foreign customers.

1.10 DEFINITION OF TERMS

1. AUDIT
The independent examination and expression of opinion on the financial statement
of an enterprise by an appointed auditor in pursuance of that appointment and in
compliance with any relevant statutory obligation or the in depth examination of
the books of account and vouchers of a business as willenable the auditor to report
whether he is satisfied that the balance sheet is properly drawn up, so as to give a

5
 true and fair view of the profit or loss for the financial period according to the best
of the information and explanations given to him and as shown by the books, and if
not, to report in that respects that is not satisfied.
2. AUDIT STAFF
Those members of the auditor’s staff, who take a direct part in the audit
engagement.
3. COMPLIANCE TEST
These tests seek to provide audit evidence, that effectiveness of internal control
system and procedures are being applied as prescribed. The main aim of this is to
discover whether there is any deviation from the prescribed systems which may
have material effect on the reliability of the records as a basis for the accounts.
Compliance tests are also known as procedural test.
4. FINANCIAL STATEMENT
Balance sheets and profit and loss accounts [or other forms of income statements]
together with additional statements and notes as identified as being within the
scope of the audit opinion.
5. INTERNAL AUDIT
This is an independent appraisal activity within the organization for the review of
operation as a service to management. It is a management control which functions
by measuring and evaluating the effectiveness ofother controls - Institute of
Internal Auditors of Nigeria.
6. INTERNAL CONTROL SYSTEM
This is the whole system of controls, both financial and otherwise established by
management in order to carry out 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.
The individual components of effectiveness of internal control system are known as
‘’control’’ or internal control.

7. SUBSTANTIVE TEST
Those tests of transaction and balance, and other procedures such as analytical
reviews which seek to provide audit evidence as to the information contained in the
accounting records or in the financial statements. Substantive tests are also known
as weakness tests.
8. MATERIALITY
An item is considered materialits disclosure misstatements or omission is likely to
distort the view given by the financial statements or other statement under
consideration.
9. THE AUDITOR
The individual or firm carrying out the audit of the enterprise and the parties of
such individual or in such firms where appropriate the term includes audit staff
acting with delegated authority.
10. VOUCHING TEST
Vouching is the examination by the auditor of all documentary evidences, whichare
available to support the authenticity of transactions entered in client’s records. It is
therefore a particularly important form of substantive testing.

6
 CHAPTER TWO

LITERATURE REVIEW
2.0 INTRODUCTION
The internal controls – ‘’A review of current development; following the publication of
their information paper entitled Enterprise Governance – Getting the balance right, the
professional Accountant in business [PAIB] committee of the international federation
of Accountants [IFAC] issued an exposure draft entitled guidance for development of
a code of conduct. Extending its work in the governance area, the PAIB committee has
included internal control in it work program as a major area of activity, the first phase
of this program is a scene setting article briefly describing much of the current
guidance available and the regulatory regime surrounding the topic. As the severity of
high-profile corporate accounting failures has increased steadily over the last decade,
there has been a correspondence increase in the development of new legislation
standard, codes and guidelines to assist organization in improving their corporate
governance. While these standard and guidelines originated from a variety of sources,
they share a core principle that good governance by its nature, demand effective
systems of internal control. Recognition of the critical importance of internal control is
evident in the key framework and guidelines on the subject. In the 1990 internal
control frameworks such as the Coso’ [USA], Turnbull’ [UK] and Coco [CANADA]
emerged, some of which have recently been reviewed and updated or supplemented.
Inaddition there are many other publications on theory and benefit of internal control.
The internal control system is intertwined with the entity’s operating activities and
exists for fundamental business records.Internal control is most effective when controls
are built into the entity’s infrastructure and are a part of the essence of the enterprise ‘’
Built in’’ control support quality and empowerment initiative, avoid unnecessary costs
and enable quick response to changing conditions.
Internal control; A Guidance for Directors on the combined code. Commonly referred
to as Turnbull guidance was issued by the institute of chartered Accountants of
England and Wales UK [ICAEW] at the request of the London Stock Exchange to
provide guidance to directors of listed companies in implementing the requirements in
the combined code relating to internal control. The Turnbull guidance views internal
control as a system which encompasses the policies, processes, tasks, behaviours and
designed to provide reasonable assurance regarding the achievement of objectives in
the following categories.
 Effectiveness and efficiency of operation
 reliability of financial reporting
 compliance with applicable laws and regulations
Coso; stated that internal control consists of five interrelated components which are
derived from the way management runs a business and are integrated with
management process.
These apply to entities of all sizes although smaller organizations are likely to
implement them in a more informal manner.
The components are;

7
  Control Environment – sets tone for organization providing foundation all
other components of internal control. Itincludes integrity, ethical values and
the competence of the people.
 Risk Assessment – Identification and analysis of relevant risks, internal and
external, to the achievement of objectives, forming a basis for determining
how risk should be managed.
 Control Activities – These help ensure that the necessary actions are taken to
address risks relating to achievement of entity’s objectives.
 Information and Communication – Internal and external information must
be identified captured and communicated in a form and time frame that
enables people to carry out their responsibility. Effective communication also
must occur in a broader sense, flowing down across and up the organization.
 Monitoring – Internal control system need to be monitored. Processes that
assess the quality of the systems performance overtime this is accomplished
through on-going monitoring o activities separate evaluation or a combination
of the two.
The review alsotell us that ‘’the principle of internal controls are the same for and
other environment’’ and the processes of internal control system may conveniently
be look at A. H. MILLICHAMP AUDITING; AN INSTRUCTIONAL
MANUAL FOR ACCOUNTING STUDENT ELBS EDITION PUBLISHERS
LTD. FOURTH EDITION 1987 described the nature and use of formal control
system for management control and strategy implementation of the system for
controls, financial and otherwise, established by the management in order to carry
on the business of the enterprise in an orderly and efficient manner. It is designed
to ensure adherence to management policies, safeguard the assets and secure as far
as possible, the completeness and accuracy of the records.
Effectiveness of Internal control system brings into plays both internal checks and
internal audit. It encompasses much more than just financial and accounting matters.
Quality control operations research and work study [none of which are financial
accounting matters] come under internal control. The auditor must be honest i.e. he
must not certify what is not believe to be true. In the case between Rolando and
general bank limited [1895] the court held that an auditor who is fully aware that the
balance sheet of the financial accounts of the company does not represent a true states
of affairs and who does not draw attention to this fact, in his report to the shareholders,
he is guilty of misfeasance i.e. a wilful breach of duties.
According to E.O. AjorinJuly, [2000].[Challenges to peace and security].A review of
operation and records stock in hand as shown in the balance sheet but some time
continuous, undertaking withina business by specially assigned staff. A statement from
ICAE & W on accounting matters. The main objective of internal audit is to ensure
management that the internal check and accounting system are effective in design and
in operations.Further reviews on internal control components can be described as
follows
Authors likeOfori [2011], Douglas [2011], Millichamp [2002], Amudo and Inanga
[2009], [http;/www.newpaltz.edu/internalcontrols/accessed on 10.12.2012,
Whittingtom and pary [2011], messier [1999], sri Lanka Auditing Standard [2013,
315] have mentioned that control environment is the attitude towards internal control
consciousness established and maintained by the management and the employees of an

8
organization. it may be view as the foundation for other components of internal control
providing discipline and structure. Millchamp [2002] describes control environment
as the overall attitude, awareness and actions of directors and management regarding
internal control and their importance in the entity.

The second major component of internal control is risk assessment. Risks are the
happenings that threaten achievement of objectives. They finally affect an
organisations ability to achieve its mission. Risk assessment is the process of detecting,
assessing and determining how to succeed these things there are both internal and
external risk that could prevent achievement of established objectives at every levels in
an organizations.Ofori [2011], Douglas [2011], Millichamp [2002], Amudo and
Inanga [2009], [http;/www.newpaltz.edu/internalcontrols/accessed on 10.12.2012,
Whittingtom and pary [2011], messier [1999],

The information and communication system focuses on the nature and quality of
information needed for effective control that the system use to develop such
information and reports necessary to communication it efficiency, information is
needed at all levels of organization to assist communicate it effectively. Information is
needed at all levels of organisation to assist management in meeting organisation
objectives. This information should be communicated from top to bottom level that
needs it in form and within a time frame that helps them to carry out their
responsibilities. The literature highlights those benefits of relevant timely and effective
internal and external communication.
 Improved communication about expectation, responsibilities and objectives of
organisation.
 Enhanced decision making
 Reduced dependence on individual employees who assist in the prevention and
detection of frauds. Douglas [2011], Ofori [2011], Messier [1997],
Whittington and pary [2001].

The control activities are tools – both manual and automated – that can helps prevent
or reduce the risk that can impede accomplishment of the organisation objectives and
mission. Management should established control activities and effectively and
efficiently to accomplished the organization objectives and mission. Messier [1997]
noted that control activities are the policies and procedures that help ensure that
necessary actions are taken to address the risk involved in the achievement of the
entity’s objectives. Accordingly the control activities that are relevant to the audit
include
 performance review
 information processing
 physical control
 segregation of duties
Amudo and Inanga [2009] viewed that authorised segregation of duties, verification
before making the payments, control over access to resources reconciliation, review
operation and supervision as control activities in any organisation.

9
 Internal control system and application of controls change overtime. This can be due to
the arrival of new personnel, varying effectiveness of implementing the procedures of
supervision time and resources constraints or changes in the circumstance for which
the internal control system originally was designed. The purpose of monitoring is to
determine whether internal control is adequately designed properly executed and
effective. Internal control is adequately designed and properly executed if all five
internal control components control environment, risk assessment, control activities,
information and communication and monitoring are present and functioning as
designed [Ofori 2011]. Monitoring, the last component of internal control, is a process
that assess the quality of internal control overtime. Monitoring is the evaluation of an
organization events and transaction is gauge the quality of performance throughout the
period and to decide whether controls are effective. Management should emphasis
monitoring efforts of internal control and accomplishes operating as intended and
whether any modifications are necessary. All employees need to understand
organisation objectives and responsibilities and risk tolerance level. Simmons [1995]
monitoring can be done through on-going activities or separate evaluation.

2.1 CONCEPTUAL FRAMEWORK

The following figure 7 show the conceptual frame work which presenting the
relationship between independent and dependent variables for the present study. The
effectiveness of internal control system is the dependent variable.
Control environment, risk assessment, information and communication system, control
activities and monitoring as independent variables. The dependent variable is achieved
by the presence and proper functioning of all the prescribed independent variables in
relation to each category of the organization objectives.
The same dependent and independent variables used by Amudo and Inanga [2009] to
examine the internal control practice in African Development Bank Group. Also sultan
and Hague [2011] have used same dependent variables independent variables for their
study on evaluating the internal control structure of six banks in Bangledesh.
Meantime, though both of above mentioned studies have used authority and working
relationships as moderating variables, the study do not consider then as the study will
become more complex. Based on the above literature a conceptual framework for the
study has developed to achieve the objective that given in the chapter as follows;

10
 FIGURE 7
CONCEPTUAL FRAMEWORK

Control Environment H1
Risk Assessment H2
Information and effectiveness
Communication H3 of internal
H6 control system
Control Activities H4

Monitoring H5

To decide whether controls are effective.

Management should emphasis motion efforts of internal control and accomplishes
operating as intended and whether any modifications are necessary.
All employees need to understand organization mission, objectives and responsibilities
and risk tolerance levels.
Simmon[1995] monitoring can be done through on-going activities or separate
evaluation.
OPERATIONALIZATION

The First Class of Table

Table A
Present the details of variables, work definition and measurements.

Variable Work Definition Measurements

The control environment The control environment Management philosophy
independent variable Ofori includes the attitudes, and operational style,
[2011], Doyglas [2011], awareness and action of integrity and ethical values,
Millichamp [2002], management and those a commitment to
Amudo&Inanga [2009] charged with responsibility competence, participation
concerning the entity’s of managing directors audit
internal control and its officers, organization
importance in the entity. structure, assigning
authority and
responsibilities, human
resources policies and
practices.
Entity Risk assessment An entity’s risk assessment Changes to operating
process independent process is its process for environment, new personal
variables Ofori [2011], identifying and responding rapid growth, new lines
Duoglas [2011], to business risks and product and activities
Milichamp [2002], results thereof. corporate restructuring,

11
 Amudo&Inanga [2009] foreign operation,
Accounting
pronouncement.
The information and An information system Information needs,
communication system consist of infrastructural information control
independent variable Ofori [ physical and hardware management
[2011], Duoglas [2011], components] software communication upstream
Milichamp [2002], people, procedures and practice data base contents,
Amudo&Inanga [2009] data infrastructure and introducing new systems,
software will be absent or data input process and
have less significance in output storage and backup.
system that exclusively or
primary manual many
information system make
extensive use of
information technology
[IT]
The control activities Control activities are
Performance review
independent variable. Ofori policies that help ensure information processing
[2011], Douglas [2011], that management directives physical control
milichamp [2002], are carried out for examplesegregation of duties,
Amudo&Inanga [2009] that necessary action are authorization procedures,
taken to address risk that independent check,
threaten the achievement adequate documentation,
of the entity objectives. job rotation, compulsory
leave.
Monitoring independent An important management On-going supervision,
variable Ofori [2011] responsibility is to internal audit.
Douglas [2011] Simmons establish and maintain
[1995] internal control on an on-
going basis
Effectiveness of internal Efficient and effective
control system depenedent operations reliability of
variable Ofori [2011], financial reporting
Douglas [2011], milichamp compliance with rules and
[2002], Amudo&Inanga regulation.
[2009]

2.2 THEORETICAL FRAMEWORK

Angella Amado and Enol.Inanga has done a study on the evaluation of internal
control systems. A case study from Uganda in [2009], this study is based on the
regional member countries [RMCs] of the African Development Bank Group [AFDB]
focusing on Uganda in East Africa and developed a conceptual model used in
evaluating the internal control system in public sector projects in Uganda financed by
the African Development Bank. This drawssimilarattention of the researcher’s project
on the effectiveness of internal control system in private sector a case study of Nugget
Hotel Limited, Abuja. The result found that some control components of effective

12
internal control system are lacking in these projects. These reason out that the current
control structures are ineffective. The study identified internal control components as
independent variables effectiveness of internal control systemas dependent variables,
while authority and working relationship as moderating variables. The independent
variables determine effectiveness of internal control system. The presence and proper
functioning at all components of independent variable ensures effectiveness of internal
control system. The model Shows as Figure 1.

FIGURE 1
MODEL 1

Control Environment Authority

Risk Assessment
Control Activities

Effectiveness of
Internal Control Objective
Communication
Information and Working
Technology Relationship

In 2011, the same model as mentioned above used by sultana and Hague for their
research on evaluation of internal control structure; Evidence from six banks in
Bangladesh. They have evaluated effectiveness of the established internal control
system in listed bank in Bangladesh. Figure 2

FIGURE 2
MODEL 2

Control Environment Authority

Risk Assessment
Control Activities
Information and Effectiveness
Of Internal
Control System
Communication
Monitoring

Objectives

Fadzil, Haron and Jatan [ND] has done a study to achieve two objectives to determine
whether the internal audit department of companies listed in Bursa Malaysia complies

13
with standard for the professional practices of internal auditors IIA [2000] and to
determine whether compliance to SPPIA will affect the quality of internal control
system of the company. The study evaluated internal auditing practice as independent
variables and quality of internal control system as dependent variables. As quality of
internal control system focused on control environment, risk assessment, information
and communication system, control activities and monitoring. It was found that
management of internal audit department; professional proficiency, objectivity and
review significantly influence the monitoring aspects of internal control system, scope
of work and performance and communication aspect of internal control system.
Figure 3

FIGURE 3
MODEL 3

Internal auditing practice quality of internal control system

 independence and objectives * control environment

 professional profession * risk assessment
 scope of work * control activities
 performance of audit work *information & communication
 Management of internal
Auditdept. * monitoring

William and Kwasi in 2013 have done research on the significance of internal control
in the rural banking sector, they wanted to examine whether effective internal control
system is adopted by the bank in the Eastern Region of Ghana. The population for this
study includes internal Auditors management, Account personnel and other staff in the
bank. The employees of senior level, middle level and lower levels were included in
the study too. They study concluded that internal control system assist management
and auditors in executing their duties, the internal control are established by
management by adopting policies and procedures with each system of control having
specific functions perform. The computers should be provided with passwords
to provides security for the information of the banks to prevent fraudulent acts,
auditors should employ professional judgement to assess and design audit risk
procedure in other to minimize audit risk. Substantive test should be used by auditors
to appraise the performance of internal accounting control and identified weakness
communicated. The figure 4 shows the model developed for the study.

FIGURE 4
MODEL 4

Internal Control System Achievement of Company Objectives

 management control *conduct business in an orderly and

efficient manner
14
  internal Accounting
Control * safeguarding of assets
 Internal Audit * prevention and detection of fraud and errors
*Accuracy and completeness of accounting
records and timely preparation of reliable
financial information.

Karagiogos, Duoglas, Dimou have studies the effectiveness of internal control system
in the Greek Bank sector. The objective of the study is to highlight the interaction
between components of internal control and effectiveness of internal auditing. They
have considered control environment, risk assessment, information and communication
system, control activities, and monitoring as internal control component and
independents variables. The effectiveness of internal Auditing used as he dependent
variable. The results indicated that all components of internal control is vital in the
effectiveness of internal audit and consequently in the business survival and success.
The Figure 5 elaborates the link between internal control and internal audit.

FIGURE 5
MODEL 5

Internal control effectiveness of internal audit

 control environment
 risk assessment
 information and communication system
 control activities
 monitoring

In 2008 Mawanda examined the effects internal control on financial performance and
institutions of higher learning in Uganda. The objective was to establish the
relationship between internal control system and financial performance in an
institution of higher learning in Uganda. Internal con focused from the view point of
control environment, internal audit and control activities while financial performance
looked at liquidity, Accountability reporting. The study found that management of
higher learning institution is committed to the internal control system actively
participates in monitoring and supervision. All the activities of the institution are
initiated by the top level management. However the internal audit department is not
efficient, is understaffed doesn’t conduct regular audit report. The study also found
that there is lack of information sharing and inadequate security measures to safeguard
the asset to university. The study established a significant relationship between internal
control system and financial performance. The conceptual model developed can be
presented in the figure 6.

15
 FIGURE 6
MODEL 6

Internal Control Financial Performance

 Control Environment * Liquidity

 Internal Audit * Accountability
 Control Activity * Reporting

MediatingVariables
 Governing Council Policies
 National Council For Higher Education
 Ministry Of Education

2.3LITERATURE ON THE SUBJECT MATTER

Coso; states that; There is synergy and linkage among these components, forming
an integrated system that reacts dynamically to changing conditions.
 General comments;
A company’s system of internal control therefore has a key role in
the management of risk that are significant of fulfilment of its
business objectives.
 Internal control pre-2002
A number of key internal control frame works such as the Coso
[USA], Turnbull [UK] and Coco [CANADA] were developed prior
to high profile accounting scandals at the turn of country. The
framework described internal control as a process established
operated and monitored by those charged with governance and
management of a company to provide reasonable assurance
regarding achievement of company’s objectives.
 Committee of Sponsoring Organization Treadway Commission, In
1992, Committee of Sponsoring organization of Treadway
Committee [Coso] defined internal control as; A process, effected
by an entity’s board of directors, management and other personnel
and other aspects of a company that taken together;
o Facilitate its effective and efficient operational, financial
compliance and other risks to achieving the company’s
objectives
o Help ensure the quality of internal and external reporting;
and
o Help ensure compliance with applicable laws and
regulations, as well as internal policies with respect to the
conduct of the business.
 CICA’s criteria of control board guidance on control. [Coco] defines
control as comprising those element of an organization including its
resources, system, processes, culture and task that taken together to
16
 support people in the achievement of organization objectives. This
guidance defines control and sets out criteria that can be used to
assess effectiveness of control.
A statement from J. U. T. OKOLO; the concept and practice of accounting, Evans
brothers [Nigeria publishers limited First published 1987]. State that management
control is one of the essential features of the auditor’s work to make a critical review of
the effectiveness of internal control system in order to decide the extent of examination
of the available evidence which is necessary. Detailed checking must be reduced to the
minimum consistent with the system of internal control and cost limitations. ICAE&W.
statement U4 states that; an auditor must not be deemed to be a detective to approach
his work with the forgone conclusion that there is something wrong. He is justified in
believing retired servants of the company and he is entitled to rely upon their
representation provided he takes a reasonable care.
In Kingston mill co. ltd. [1896] case, it was held that an auditor is not anevaluator
and in the absence of ‘’suspicious circumstances’’ that, he is entitled to rely upon the
certificates of reliable officers. He is not bound to do more than to exercise reasonable
care and skill, and he cannot therefore be held liable for failing to detect indigenous
scheme of fraud which has remained undetected by management. Here the auditors
rely on clear value presented. Such reliance should be stated thus [as certified by
management director] etc.
Effectiveness of internal control system may conveniently be considered under the
following two main headings;

2.3.1 APPLICATION CONTROLS

These relate to the transaction and standby each application, documentary control and
mechanical accounting machines. The design of form and control and their use can
effectively enhance internal control system. Payment voucher with space for
responsible officials to initial control, the payment vouchers with space for responsible
officials to initial form their part in payment of cash pin responsibility down to
individuals. For example, person responsible for authorization, writing and signing of
cheques should have space on the payment vouchers initials with additional spaces for
other information like local purchase order number, good receipt number, cheque
number, invoice number and amount charged seriallyprinted numbered invoice provide
another area of control. The uses of accounting machines like cash register where
totals are automatically recorded are also internal control. Accounting machines also
permit the simultaneous preparation of several documents with similar information and
thus prevent errors in re-coping.

[a]. ELECTRONIC DATA PROCESSING AUDITS

This is also known as the computers, it is an electronic machine that
Accept data as input and process it by following a set of instructions to produce
accurate and efficient results called output.
A computer accounting environment or system exists when a computer is any type or
size is involved in the processing for entity of financial information of significance to
audit whether that computer is operated by entity or by a third party.

17
 [b]. AUDIT PROCEDURES IN AUDIT OF ELECTRONIC DATA PROCESSING
SYSTEM
In accordance with ISA [risk assessment and internal control], the auditor should
consider the EDP environment in designing audit procedures to reduce audit risk to an
acceptable level. The auditor’s specific audit objectives do not change whether
accounting data is processed manually or by computer. The auditor can use manual
audit procedures, computer-assisted audit techniques or combination of both to obtain
sufficient evidential matter.
The auditor has to test himself to computer revolution and therefore familiarize himself
with certain feature of computerized systems, which may necessitate changes for some
audit approach. The auditor can use various procedures which include;
[i] THE AUDIT TESTING ROUND THE COMPUTER
This means treating the computer as a separate item and the booking at the input and
output and ignoring the processing aspect of the data. The execution of normal audit
test on records, which are produced by computer, is usually described as audit testing
round the computer.
[ii] AUDIT THROUGH THE COMPUTER
This suggests the test applied will necessitate the used of client’s computer as well as
the programme and master files under scrutiny. The auditor is forced to test the
invisible processes which are various controls towards producing authentic outputs.
In auditing through the computer, the auditor starts by providing the accuracy of input
data and then thoroughly examines [by applying test] the processing procedures with
view of the following;
i. That all input is actually introduced into the computer.
ii. Those unusual conditions in the input do not cause miss-processing.
iii. That neither the computer nor the operator cause undetected irregularities in the
final reports.
iv. That the programs appear on the evidence of rejection/ exceptional reporting to
be functioning correctly.
v. That all operation intervention authority, the application of such test calls for a
wide knowledge of data processing and also characteristics of particular clients
system and programs.
Broadly therefore, these are controls over day to day running of each appreciation.

2.3.2 GENERAL CONTROLS/ INTEGRITY CONTROLS

These are controls other than application controls which relate to the environment
within which the computer based accounting system are developed, maintained and
operated and are therefore suitable for all applications.

2.3.3. EDP AUDITS; NWEKE.M.M.EKUEME.C.M & OKOYE P.V.C. MODERN

AUDITING; FIRST PUBLISHED 1997 by SNAPP PRESS LTD.
INPUT DEVICE; this is the medium through which data can be entered into the
computer system to be passed to the central processing units CPU for processing. Input
devices include keyboard, mouse, scanner, light pen, and joy stick. In EDP, this
designed is to provide reasonable assurance that;
i. Transactions are properly authorized before being processed by the computer

18
 ii. Transactions are accurately converted into machine readable form and
recordable in the data files
iii. Transactions are not lost, added or duplicated or improperly changed.
iv. Incorrect transactions are rejected, corrected and if necessary, resubmitted on
timely basis.

2.3.4. SOTRAGE DEVICES/PROCESSING DEVICES

This refers to the manipulation of data by computer to yield desired result. The unit,
which carries out this processing in a computer system, is called the central processing
unit [CPU] and it is the brain of the computer, it is also designed to provide reasonable
assurance that;
i.Transactions are properly processed.
ii.Transactions are not lost, added or duplicated or improperly
Changed.
iii. Incorrect transactions are rejected, corrected and if necessary, resubmitted on a
timely basis.

2.3.5. OUTPUT DEVICES

These are the devices for displaying or producing the result of the processing which
the computer performs on the input data. Output devices include; monitors, printers
etc. in EDP, this is also designed to provide reasonable assurance that;
i. Results of processing are accurate.
ii. Access to output is restricted to unauthorized personnel
iii. Output is provided to appropriate authorised personnel on
timely basis.

2.3.6. IMPORTANCE OF EDP IN EFFECTIVENESS OF INTERNAL CONTROL

SYSTEM
1. It helps to achieve the overall objectives of internal control, including manual
procedures and computer procedures.
2. It provides a reasonable level of assurance that the overall objectives of internal control
are achieved.
3. Policies and procedures relating to control functions are appropriately carried out.
4. Processing errors are deleted and corrected.
5. Authorization structure is established over transaction being entered into the system.
6. The process through system procedure enables easy recovery of transaction lost in case
of event of theft, loss,and fireoutbreak, collapse of building, damages or destruction.

2.3.7 MANUAL OR PROGRAMMED AGREEMENT CONTROLS TOTAL

According to MAYO BPP ICAN PRACTICE & REVISION KIT PUBLISHED
BY MAYO ASSOCIATES LIMITED AND BPP PUBLISHERS LTD. FIRST
EDITON 1989;The following expressed his view over the literary review of manual/
programme control;
i. prelisting of totals on source document; if a batch of 200 purchase invoice is
totalled a dummy or header, record is created showing the date, the batch
number and sterling amount when the batch is inputted into the computer. The
machine is programmed to add sterling fields and compare this total with

19
 prelist. A disagreement may cause the entire batch to be rejected as above but a
record control total is prepared i.e. the batch contains 200 records, totalling
ii. N17,501.87, this record total and control total are validated against a validation
report showing the number and total of records to output.
iii. Checking input source records to output; this is a simple but effective manual
procedure to ensure completeness of processing. If 200 sales orders are in a
batch, hopefully 200 sales invoices [serially numbered] will be produced. Any
variance will lead to investigations to discover the cause of rejected date.
iv. Controls over resubmitted data; procedures must exist to ensure that when input
records are rejected, they are returned to source corrected and resubmitted.
v. Sequence checking; certain documents are input into the systemserially and gap
in the numbering may indicate incomplete data. This type of check can be done
manually or by using the computer programme.

2.3.8. AUDIT TEST PACKS

[DICUSSED BY E. O. ANJORIN JULY, 2000;
Audit test pack comprises of data prepare for the specific purpose of testing the
operation of a computer programme; it should contain a mixture of valid data,
including all the error conditions in which the auditor is specifically interested. The test
pack may be the standard test data used by the computer as prepared by the auditor or
internal auditor to test the department of the programme when it was created.

2.3.9. MERIT OF AUDIT TEST PACKS

a. they provide assurance of the correct function of the programme controls actually tested.
b. they can be used on continuing basis until the programmes are changed.
c. once set up running costs from year to year are low.

2.3.10. THE DIFFICULTY IN THE USE OF TEST PACKS DISCUSS BYWILLIAMS

NEWMAN
a. Stated that, management for the future where test are to be used against the client,
[rather than just copies] great care is required that the client records are not
corrupted. The use of test packs in this way is to know theconfident of auditor.
b. The use of test packs is easier when only one application is involved. They may be
difficult to apply in data base systems where transactions affect a number of files.
c. Test packs will only test the particular programmes against which they are run. The
auditor will need to review and test organizational control to gain confidence that
programmes tested are those used by the client in lives runs.
d. Test packs are used primarily to verify the adequate functioning of programmes
controls used for substantive testing is somewhat limited as they do not represent
actual transactions.
e. Test packs required the use of the client’s computer and so limited by the computer
time available.

20
 CHAPTER THREE

RESEARCH METHODOLOGY
3.0 AREA OF STUDY
The Nigerian classic hospitality services Nugget HotelLimited is a modern stylishly
built and totally unique place for high calibre guest. Determined to meet client’s
expectation and maximise pleasure with incomparable comfort, the hotel services are
handled by well-trained experienced staff.
The Nugget Hotel limited is a first class 5 – star Hotel, established in 2009 and located
in a superbly serene environment with unique panoramic views over the new Abuja
city of Utako Districtand a new branch under construction in Enugu state. Its
providential proximity to various important locations within the city is an added value
to this pleasurable ‘’ Home away from Home’’ edifice.

MISSION STATEMENT
Our resolve is to have an excellent customer driven hospitality services.
To give our guest an exciting comforts of Home away from Home and a bit of our
global reach. And it’s operational structure

OPERATIONAL STRUCTURE
The hotel service has several heads at different levels and departments structurally
designed by the owner to ensure effectiveness of service delivery at any particular
moment required.
The hotel owner is the chairman; the General Manager is the acting chief Executive
officer deployed to manage, of which it has other managerial supporting team of
Functional Executives heading each department and general work force put together.
Such departments are administrative, account, personnel, front office, food and
beverage, all charge with the responsibility of policy initiating, formulating,
articulation and implementation that each stated policies is adhered to and executed by
the general work force as planned

MEASURE FOUNTIONS OF NUGGET HOTEL LIMITED INCLUDE

The hotel has well-staffed and thorough services that endear them more to serve their
customers well, such as rooms and apartments, café and business centre, restaurant and
bars, shuttle airport service pick and drop, tourist guide, boutique shop, beauty salon
and barber shop, car hire services, 2500kv standby generator, 350kv as back up, 24
hour security, 24 hours room service, Gym and fitness centre, book shop, swimming
pool, exclusive club bar are few among others. Indoor and outdoor facilities and
quality services are meant to give customers value for their money.
From the main entrance gate to reception on the ground floor, the hotel have unrivalled
welcoming gesture that make you feel more at home that even an angel will agree that
you are within ‘’ a heaven away from home on earth’’ environment. There is provision
for customer’s vehicles 180 parking space, automatic door and welcoming machine,
charming receptionist etc.

21
The Nugget hotel service will probably impact more on the guest in the area of room
service and other little internal control processes. It is apparent that the guests are
poorly served and this gets to attribute a number of factors some of which include;
i. internal issues pertaining poor maintenance of facilities management outfit
ii. Poorly trained staffs that are unwilling to communicate with guest kindly
iii. Poor services offered to guest at different designation.
iv. Lack of effectiveness of maintenance control regularly
v. Poor planning and financial management
vi. Lack of effectiveness of internal control system
vii. Books of account not properly checks
viii. Non reviews and non-evaluation of records kept
ix. Weak and untimely check of routine activities
x. Fraudulent and erring staffs who cannot be fetched out or sacked
xi. General poor working conditions.

Cumulative of these effects is that, guests complaints keep alarming day and night at
each and every service offer to most of the prospective
customers average 9 months to 2 years now, there were also frequent cases of frequent
shortage of water supply to hotel rooms for guest usage arising from poor control
system.
Working under the guiding principle of management and its hospitality services
charter, the researcher assumed that Nugget Hotel Limited should take a new
dimension to make a significant improvements in meeting guests or customers
expectation or satisfaction through the following approaches;

i. The two essential aspects of operation are effectively carried out that is the
accommodation and food services.
ii. To make sure that the three types of hotel operationsthe product processing
operation, the consumer processing operation and information processing
operation are properly productively operational and in good shapes
iii. Provision of effective maintenance control and facility managers
iv. Constant training of staff programmes should be instituted to enhanced
excellent and effective service delivery.
v. Efficient and standard services must be set at a continuous pace for customer’s
satisfaction.
vi. Effectiveness of internal control system should be adheres to
vii. Planning of activities should be continuously check and monitored with all
needed finances used properly.
viii. Books of account should always be clause check and kept orderly by the
required persons
ix. Review of guest services and books of account is very important and must be
evaluated
x. The weak aspect must be work upon to ensure full and effective service
delivery, also timely check of routine work must be regular
xi. Erring members must be fetch out to face punishment or discipline
xii. The business environment should be coordinated in such a way as to enable
every working members and the guest to adapt to it friendly.

22
 xiii. Constant supply of water at standard machine use.
xiv. Promotion of attitudinal change by staffs for improved customer’s relation.
xv. Effective information generation in clear and concise terms for documentation
and transfers.
xvi. Complaint or suggestion box should be channel at strategic location to enable
the hotel received guest issues to work or act upon.
xvii. Officers must be tags or identify for clear recognition by guests and other
important cases.
It is clear that, if these series of new outlines and measures are seriously taken, the
hotels will move to effectiveness of service directions.
‘’The Research is aiming at dependable solutions to problems through planning and
procedure for data collection and data analysis’’
This chapter discuss the various research techniques the researcher employed in
conducting this study. By nature of the topic being studied a great proportion of the
information needed was sought from top and middle management level of Nugget
Hotel limited, Abuja concerning the effectiveness of internal control system. Because
of this, great deal of interviews with the management of Nugget Hotel limited was
carried out.
Questionnaires were distributed to the staffs, the aim being to supplement information
obtained from the interviews. It is worth mentioning of research being conducted is not
of an explanatory nature. A lot of existing literature on the subject was available.
The use of existing literature was of immense help because it helped the researcher
draw up an elaborate plan on how the research is going to be conducted and
determined, information needed and their source, and areas of stress in the research
work

3.1. RESEARCH DESIGN AND SOURCE OF DATA

For the purpose of this research design and source of data two main sources of data
were primary source and secondary source.

3.3.1. PRIMARY SOURCES

The following source of data considered information obtained from;
i. Oral interviews.
ii. Responses to questionnaire
iii. Observations.

3.3.2 SECONDARY SOURCES

The following sources of data considered information obtained from newspaper,
articles, libraries, journals, paper presentation at seminars organised by Nugget hotels
staff in connection with Hotels Owners’ Forum Abuja [HOFA] and text books relating
to the topic

3.2.0STUDY POPULATION AND DETERMINATION OF SAMPLE SIZE

The study population is the staff of all Nugget Hotel Limited, Abuja or to some extent
on their internal control operations. The samples of 100 to 120 staff of [Nugget Hotel
Limited Abuja and branch at Enugu]were chosen due to accessibility to sufficient
information on which to base conclusion made by the researcher.

23
3.2.1 SAMPLE USED
Sampling is the population which is being investigated. The sample populations were
made up of some Nugget hotel staffs covered all from the top to the button of the
hospitality service hierarchies. All these makes up the sample which were drawn from
the hotel centre Utako District of Abuja and Enugu branch not yet fully in operation.
The method of choosing the sample was by random sampling board on the judgement
of the researcher.

3.2.2. SAMPLE SIZE

The sample- is the process of aiming at dependable solution to problem through the
procedure for collection of data and data analysis. A sample of 1/4 of the population
was chosen for case of Administration, account, personnel, front management and food
and beverages department.

3.3.0 INSTRUMENTATION
As mentioned in the earlier brief, the survey instruments employed in the research
work are as follows;
i. Existing literature
ii. Oral interviews
iii. Questionnaires
iv. Observations

3.3.1 ORAL INTERVIEWS

The nature of the study was such that a lot of interviewing of various management
personnel had to be done to generate sufficient information. And it was preferred to
use questionnaire, the aim of study was to determine whether the use of effectiveness
of internal control system is relevant in the private sector. This can best be done by the
higher echelons of the management since they are responsible for monitoring the
operation and analysing the results of internal control system in the hospitality
industry. They are in a better position to give out information’s needed by researcher,
which could not be provided the use of questionnaires.
The interviews conducted were of constructed and indirect nature. The mode of
interview used was necessary to allow management talk freely on questions posed
before them. All intervals during the course of the interview, leading questions were
thrown in order to direct the course of the interview when managers seemed to deviate
from the object of the discussion.
The questions asked were indirect because the interviewer intended to adopt approach.
The approach therefore, not exposing his real intent. This was necessary to prevent the
chairman or owner of the hotel withholding desired information.

Questions asked in the interviews were used to direct attention to areas like auditing
and investigation of the books and accounts on the effectiveness of internal control
system.
The results in these areas could be measured both quantitatively and qualitatively and
inferences down as to whether the computer had performed better than the manual
system.
24
 3.3.2QUESTIONNARIE
The use of questionnaire is to supplement quantitative and qualitative information
already obtained from the interview conducted as well as provide statistical
information. An important point to note is that the main objective the researcher had in
mind to achieve by using questionnaire was to obtain an idea of the extent of
acceptance among the staffs, auditors and their management and their attitude towards
the auditing and control of the hospitality service.
The questions were relatively clear and simple and framed in such a manner as to elicit
the desired information and prevent misunderstanding or misinterpretation on the part
of the respondent and save the researcher the trouble of making more enquiries to
response on returned questionnaire.
Lastly, the questionnaires is a mixture of ‘’yes and no’’type of questions and
subjective ones that will allow the respondent room to express his/her opinion in
details on the question asked.
The questionnaires were distributed personally by hand and collected in the same
manner; it is no overstatement to say that the research method employed was adequate
to generate information that is relevant, reliable and sufficient for the study.
The study was therefore based on the following;
i. Information obtained from existing literature
ii. Information obtained from responses to questions asked in the course of
interviewing auditors, accountants and computer specialists.
iii. Information obtained from the use of questionnaires.
iv. Observation

3.4 PROCEDURE FOR DATA COLLECTION AND DATA ANALYSIS

3.4.1 PROCEDURE FOR DATA COLLECTION
The data, from which information constitute the findings, were collected from
theheadquarter and newly established branch not yet in operation. This involved
travelling to the above mentioned state and asking the officers in charge, some
prepared questions in which answers were provided accordingly. Data was obtained
from the primary and secondary sources, which includes, interview, structured
questionnaire, journal publication, e-library, textbooks, newspapers, internet facilities.
Secondary data are used to compliment the primary data as the primary data is the
original work.

3.4.2 RESEARCH DESIGN

Data captured for the study were analysed through descriptive and inferential methods
only. The descriptive analysis involves the use of tabulation and percentages. While
the inferential statistical involves the use of the chi-square. This means that the
analysis will be descriptive in nature that is, it would include tabulation and
percentages. Chi-square will be used for all relevant hypotheses.

3.4.3 DATA ANALYSIS

The result of the study had been presented according to the problems and testing the
hypothesis, analysis of key aspect of the questionnaires. Sixty questions were
distributed to respondent but forty were retrieved. For the case of the procedure for

25
 data collection and analysis, data collected were analysed based on the Reponses
received from the questionnaire and other primary data’s gathered and presented in a
tabular form. Most of the information as findings of this research has been reduced to
tables using percentages where applicable.
The percentage of responses of forty respondents was calculated as follows;

Mathematically, x/40*100/1
‘X’ - The number of responses received
40 - The total number of respondents
100 - Is the calculating percentage

3.5 LIMITATIONS OF THE STUDY

This study is limited to some extents which are common to most Nigerians within the
country. This has been imposed on the study of limitation of time on my part as well as
on my case study in terms of access to interviewees and obtaining their responses to
questionnaires being interviewed and accessed to sufficient information necessary to
write a well-founded thesis also has its own limitations.

26
 CHAPTER FOUR

DATA ANALYSIS, FINDINGS AND DISCUSSION

4.0. DATA ANALYSIS, FINDINGS AND DISCUSSION
This is the chapter in which the data analysis, findings, and discussion are presented
and interpreted. Analysis of internal control system;it is an investigation of auditor
decision process in the evaluation of internal control and audit scope decision,
introduction over the past decade numerous studies have focused on auditor’s
judgment with few exceptions. These studies have found that when auditors are given
the same task, they frequently make different decisions. This result has been obtained
for relatively simple task [e.g Joyce [1976] and relatively complex task e.gRecker&
Taylor [1979], Whittington. R&Pany. K [2004] principle of Auditing & other
Assurance. In this chapter, the researcher states what he actually did and gave a
detailed description of the data he gathered. The analysis was first of all directed
towards testing the hypothesis through tabular presentation of data analysis, findings
and discussion in area under studying it. The effectiveness of internal control system in
the private sector and to certified the following.
The importance of effectiveness of internal control system in the private sector is
effective.
Whether there is good Audit control in the system.
Whether the organizations has tendency of inviting external auditors to audit their
books of accounting and how often do they come.
And after the final auditing, whether the auditors give true and fair view of the audit
report.
Finally, to also find ways of improving on the components of internal control through
the effectiveness of internal control system of the sector for better achievement of the
management.
I took a demographicsample of Nugget hotel limited headquarter and the hotel branch
indicate the staff population and location. The departments covered include; the admin
and account, personnel, front office, food and beverage, maintenance and facility
department.

THE SECOND LIST OF CLASS OF TABLES

Table B, - Table C & Table D

DEMOGRAPHY AND OTHERS
HEAD STAFF LOCATIO BRANC STAFF LOCATIO
OFFIC POPULATIO N H POPULATIO N
E N N
Utako, Utako Enugu Enugu
Abuja 100 District State 20 central

27
 TABLE C
Do you considered the effectiveness of internal control system in your sector as a
paramount tool for effectiveness of sex distribution of workers?

GENDER OF STAFF DISTRIBUTION

SEX DISTRIBUTION PERCENTAGE %

MALE 30 68.5

FEMALE 31.5
10

TOTAL 40 100

Thedistributions of both male and female workers were collected from the personnel
department sampling the gender distribution of Nugget hotel staffs as described above
accordingly. Source: field of study 2016.

TABLE D
Does effectiveness of internal control system test the system as required for further
possible weakness or strength of the internal control, relating it to respondent received
from the Admin and personnel department source findings of Nugget Hotel
departments, qualification and positions of workers?

DISTRIBUTION OF STAFF QUALIFICATION, POSITIONS AND

DEPARTMENTS
DEPARTMENTS MS GRD & NCE OND GCE OTHERS TOTAL %
& ABV
ABV
Admin & Account 1 1 3 3 - - 8 15
Personnel - 1 - - - 1 2 5
Front office 2 2 4 - - 8 15
F&B - 1 3 2 4 - 10 30
Facility &Mtce - 1 4 2 5 - 12 35
RESPONDENTS 1 6 12 11 9 1 40 100

From the view of this categorical table are respondents received from the admin and
personnel department painstakingly indicating a clear of number of employees on the pay
roll departmentally and staff positions and qualifications. Source: field of study 2016
Susan Nolen Hoeksema, [Phd] yale university; Data analysis source

28
THE THIRD CLASS OF LIST OF TABLES

Table 0 – Table 6

TABLE 0
Do you think the percentage distribution of respondent to questionnaire of
effectiveness of internal control system will helps your organization through
questionnaire returned or questionnaire not returned?

RESPONDENT RETURNED & NOT RETURNED

QUESTIONNARIE REPONSES PERCENTAGE%
Questionnaire Returned 40 60.5
Questionnaire Not Returned 20 39.5
TOTAL 60 100

The following data’s reveal clearly that the research study was successful with the
following number of 40 responses representing 60.5% questionnaire returned and 20
responses representing 39.5% not returned as gained from the research interviewees.
Source: field of study 2016.

TABLE 1
Do you think control environment will enhance effectiveness of internal control system
in the private sector as to the case study of your organization to evaluate the system of
control to know whether due diligences has been taken to maintain guidelines and
Policy followed as stated.
PERCENTAGE DISTRIBUTION OF RESPONDENTS FROM ADMIN
DEPARTMENT
QUESTIONNARIE RESPONSES PERCENTAGE%
YES 30 89.5
NO 10 10.5
TOTAL 40 100

The followings show that 30 respondents representing 89.5% feels that control
environment will enhance effectiveness of internal system in the private sector. While
10 respondents representing 10.5% feel otherwise. Information gathered from the
administrative department defined whether organisations policies have been fully
followed or not. Source: field of study 2016.

TABLE 2
Do you really observe that the test design of the entity’s risk assessment process
enhances effectiveness of internal control system in the private sector?

29
 PERCENTAGE DISTRIBUTION OF RESPONDENT FROM FACILITY AND
MAINTENANCE DEPARTMENT
QUESTIONNARIE RESPONSES PERCENTAGE%
YES 27 73.5
NO 13 26.5
TOTAL 40 100

The information received here shows, that 27 respondents representing 73.5% believed
that the existence of entity’s risk assessment process will enhances the effectiveness of
internal control system in the private sector. While 13 respondents representing 26.5%
believed otherwise. The facility and maintenance department strongly accept the
effectiveness of internal control system on entity’s risk assessment of private sector.
Source: field of study 2016.

TABLE 3
Effectiveness of internal control system as communication system of top to bottom line
of management in private sector support effective internal control?
PERCENTAGE DISTRIBUTION OF RESPONDENT FROM ACCOUNT &
AUDIT DEPARTMENT
QUESTIONNARIE RESPONSES PERCENTAGE%
YES 33 77.5
NO 7 22.5
TOTAL 40 100

The data analysed show, that 33 respondents representing 77.5% accept the
communication system of top to bottom line management in private sector support
effective internal control. While 7 respondents representing 22.5% flout. Responses
received from account and audit were also to see if a reliance of audit work may take
place if proper books of account has been kept. Source: field of study 2016.

TABLE 4
The control activities of top management in private sector support effectiveness of
internal control system to give a true and fair view/ result at the end of the day as
control?
PERCENTAGE DISTRIBUTION OF RESPONDENT FROM FRONT OFFICE
DEPARTMENT
QUESTIONNARIE RESPONSES PERCENTAGE%
YES 32 64.5
NO 8 35.5
TOTAL 40 100

The following 32 respondents representing 64.5% decided that control activities of top
management in private sector support effectiveness of internal control system. While 8
respondent representing 35.5% were ignore. Responses received from front office

30
 department were to enable the researcher to know whether truthfully and fair view of
audit will be control in the private sector. Source: field of study 2016.

TABEL 5
The monitoring controls enhances effectiveness of internal control system in private
sector as staffs of the organization really thrive to work hard on the control measures
set to monitor and achieve the effectiveness and efficiency of the activities of the
organisation as designed routinely?
PERCENTAGE DISTRIBUTION OF RESPONDENT FROM FOOD AND
BEVERAGE DEPARTMENT
QUESTIONNARIE RESPONSES PERCENTAGE%
YES 36 87.3
NO 4 12.7
TOTAL 40 100

The 36 respondents representing 87.3% agree that the monitoring control enhances
effectiveness of internal control system in private sector. While 4 respondents
representing 12.7% disagree. Response gathered from food and beverage department
were to assist the researcher to know whether monitoring control in private sector
enhances management efficiency in it routinely activities. Source: field of study 2016.

TABLE 6
Can you observe that there is positive relation between internal control components
and effectiveness of internal control system?
PERCENTAGE DISTRIBUTION OF RESPONDENT FROM ACCOUNT
DEPARTMENT
QUESTIONNARIE RESPONSES PERCENTAGE%
YES 22 52.7
NO 18 47.3
TOTAL 40 100

From Table 6. It is obvious that there is a positive relationship between internal control
components and effectiveness of internal control system as 32 respondents
representing 52.7% agree that that effective and better result of internal control
components can lead to effectiveness of internal control system. While 18 respondents
representing 47.3% feel otherwise.
From the Table above, it is obvious that effective and adequate internal control
components is the best measure to be adopted not only to detect and prevent frauds and
weak performances of private sector but also because it has a positive relationship with
effectiveness of internal control system. Source: field of study 2016.

31
TESTING OF HYPOTHESES
Six [6] hypothetical statements which was used as guide in the study were tested.

Hypothesis 1
H0 – The control environment does not enhance effectiveness of internal control system in
the private sector
H1 – The control environment enhance effectiveness of internal control system in the
private sector

OPTION RESPONSES
YES 28
NO 12
TOTAL 40

The statistical tool chi-square [ x 2 ] is used thus;

x = ∑ ❑[0-E] 2
2

E
Where;
0 = observed frequencies
E = expected frequencies
Since, we are dealing with only one view variable, expected frequencies is calculated thus;
E = ∑ ❑F
N
Where;

ΕF = summation of responses
N = numbers of options

Therefore; E = 40/2 = 20
Then, x 2 = [30-20]2 + [10-20]2
20 20

= 1+1
=2

The critical value of x 2 at two degree of freedom and 99% confidence limit is given as
0.99
Decision
Since the cal. x 2 of 2 is greater than the tab. x 2 of 0.99. The null [H0] Hypothesis is
rejected and the alternative accepted
Therefore, it concludes that the control environment enhances effectiveness of internal
control system in the private sector. Source: field of study 2016.
32
Hypothesis 2
H0 – The entity’s risk assessment process cannot enhance effectiveness of internal control
system in the private sector
H2 – The entity’s risk assessment process enhances effectiveness of internal control
system in the private sector

OPTIONS RESPONSES

YES 27

NO 13

TOTAL 40

Then, x 2= [27-20]2 + [13-20]2

20 20
= 0.7 + 0.7
=1.4

The critical value of x 2 at two degree of freedom and 99% confidence limit is given as
0.99
Decision
Since the cal. x 2 of 1.4 is greater than the tab. x 2 of 0.99. The null [H0] Hypothesis is
rejected and the alternative accepted.
Therefore, it concludes that private sector with the entity’s risk assessment process can
enhances effectiveness of internal control system. Source: field of study 2016.

Hypothesis 3
H0 – The communication system of top to bottom line of management in private sector
does not support effective internal control
H3 – The communication system of top to bottom line of management in private sector
support effective internal control

OPTIONS RESPONSES

YES 33

NO 7

TOTAL 40

Then, x 2 = [33-20]2 + [7-20]2

20 20
= 1.3 + 1.3
= 2.6

33
The critical value of x 2 at two degree of freedom and 99% confidence limit is given as
0.99
Decision
Since the cal. x 2 of 2.6 is greater than tab. x 2 of 0.99 the null [H0] Hypothesis is
rejected and alternative accepted.
Therefore, it concluded that the communication system of top to bottom line of
management in private sector support effective internal control. Source: field of study
2016.

Hypothesis 4
H0 – The control activities of top management in private sector does not support
effectiveness internal control system
H4 – The control activities of top management in private sector support effectiveness
internal control system

OPTIONS RESPONSES

YES 30

NO 8

TOTAL 40

Then, x 2 = [32-20]2 + [8-20]2

20 20
= 1.2 + 1.2
= 2.4

The critical value of x 2 at two degree of freedom and 99% of confidence is given as 0.99
Decision
Since the cal. x 2 of 2.4 is greater than tab. x 2 of 0.99 the null [H0] Hypothesis is
rejected and the alternative accepted.
Therefore, it is concluded that the control activities of top management in private
sector support effectiveness internal control system. Source: field of study 2016.

Hypothesis 5
H0 – The monitoring control does not enhances effectiveness of internal control system in
private sector
H5 – The monitoring control enhances effectiveness of internal control system in private
sector

OPTIONS RESPONSES

YES 36

NO 4

34
 TOTAL 40

Then, x 2 = [36-20]2 + [4-20]2

20 20

= 1.6 + 1.6
= 3.2

The critical value of x 2 at two degree of freedom and 99% confidence limit is given as
0.99
Decision
Since the cal. x 2 of 3.2 is greater than tab. x 2 of 0.99 the null [H0] Hypothesis is
rejected and alternative accepted.
Therefore, it concludes that the monitoring control enhances effectiveness internal
control system in private sector. Source: field of study 2016.

Hypothesis 6
H0 – There is negative relationship between internal control components and
effectiveness of internal control system
H6 – There is positive relationship between internal control components and
effectiveness of internal control system

OPTIONS REPONSES
YES 32

NO 8
TOTAL 40

Then, x 2=[32-20]2 + [8-20]2

20 20
= 1.2 + 1.2
= 2.4
The critical value of x 2 at two degree of freedom and 99% confidence limit is given as
0.99
Decision
Since the cal. x 2 of 2.4 is greater than tab. x 2 of 0.99 the null [H0] Hypothesis is
rejected and the alternative accepted
Therefore, it’s concluded that there is positive relationship between internal control
components and effectiveness of internal control system. Source: field of study 2016.
Susan Nolen Hoeksema, [Phd] yale university; Data analysis source.

4.1 FINDINGS OF THE STUDY

The point of findings, in my view, is to transcend just the facts and engage in the
research speculation. The study was carried out at different sources of data findings
and series of discussion to research the hallmark of the research work.

35
4.2. DISCUSSION OF FINDINGS
Discussion on findings will base on main thrust of the findings which were obtained
from the results of the procedure for data collection, presentation and analysis of data
as contained in this research project. The discussions of findings are critically
identified in two phases of this research work by the researcher.
a. The first phase of the study found out that there is a positive correlation between
internal control components and the effectiveness of the internal control system. And
the association between the two variables shows a high performance result. The result
was dependable base on the analysis of the components and the undependable to the
effective and better result if not applicable. According to cohen [1988] cited in pallant
[2007] suggested strong correlating. A spearman’s Ranks order correlation was run to
determine the relationship between internal audit and internal control system.
b. The second phase of finding identified some limitation of information gathered from
the interviewee and responses to sufficient interviewed information accessed.

4.3 ENGLISH
The English used here, is purely clear and concise, unbiased and presented from the
derivative source of contexts and the contents books of British/American English
presentation and approachesto enhance the researcher for model of the research study.
Thegrammatical representation of words, sentences,paragraphs, spacing, statements,
calculations, tables, numbers, figures are effectivelycontrolled in this research work.

36
 CHAPTER FIVE

CONCLUSION AND RECOMMENDATIONS

5.0. SUMMARY OF FINDINGS
The first chapter gives the brief introduction on the history of auditing and
effectiveness of internal control the in private sector
The second chapter stretches the average person the general insight; literature review
of what effectiveness internal control system is all about
The chapter three expresses research methodology on the area of study and procedures
for sources of data collected and data analysis, that is, various methods employed by
the researcher for collecting data relating to the study as well as method of data
analysis.
Chapter four is the main body of the thesis the data collected sort presented and
analysed.
Chapter five springs out details findings and conclusion researched by the researcher
after having thorough investigation about effectiveness of internal control system in
Nugget Hotel Abuja.
Recommendation to improve the effectiveness and efficiency of internal control
system in private sector
The objectives of this study is to enlightened the people especially users of financial
system more about effectiveness of internal control system in private sector and to
identify whether the effectiveness of internal control system is necessary in the private
sector as well as to imply necessary control measures for effective and better results.
As the data was presented and analysed, it can be seen that the effectiveness of internal
control system in the private sector
i. Has help Nugget hotel limited to have adequate audit and control in the
hospitality services to enable them know their financial standard of the
business services.
ii. Invitation of external auditors in the sector has really helped Nugget hotel
limited to have adequate audit control in the management.
iii. Where the staff is sufficiently large, audit control can enable the whole of the
work to be subdivided, so that the duties of every member who has less part to
work hard may also contribute immensely in the actual part where great
performances is needed when we say that, where there is a duty there is
effectiveness of internal control system in force as required.
iv. The importance of effectiveness of internal control system in the organization
is to keep adequate record so as to ensure that all transactions are adequately
and correctly recorded, allocated and summarized. That the accounting
statement must be prepared from the original records received and should be in
agreement with such records and books-keeping entirely.
v. Detection of errors, another advantage arising from audit is the detection of
errors.
vi. Detection of fraud; in the case of first class of fraud, where accounting staff
are not subjected to any form of check, the chances of committing fraud are so

37
 frequent and method s necessary to cancelled it is simple. That is safe to say
that no business of any size could be carried out for so long without the risk of
fraud taking place.

5.1 CONCLUSIONS
Based on the data collated and summary of findings, the following conclusions
were reached. The issue relating to effectiveness of internal control system of
the private sector cannot be overemphasized since auditing is the life line or
wire of any establishments in the wide world.
The importance which the federal government and the business community
attach to the practice of auditing, Nigeria engendered the government to
recognised the institute of chartered accountants of Nigeria; by an act of
parliament has the onerous task of formulating standards fort the numbers of
the body in the practice of their profession.
The importance and usefulness of an auditor in a private sector cannot be
overemphasized. To put this title properly, it is equivalent to asking a question
that, what is the work of an auditor does in a private sector or organizations. It
should be stated here again that the main objectives of an auditor is to give a
report on the view presented by the accounts and statement prepared by the
client or his staff in accordance with terms of the appointment.
The original aim and objectives of an auditor is not to victimize those keeping
the accounts as many people construe auditing to be. An auditor is a watch dog
and not a blood-hound although of equal importance, the detection of fraud
and errors must be regarded as incidental or so to say, collateral to this main
objectives or reporting.
The presences of auditor in private sector serveas a moral check and as
deterrent on those staff who would have otherwise committed fraud. In the
mind of the general public and of many clients the discovery of fraud, to them
is the principal function of an auditor, but there can be bi-question that is of
great importance which is derived from audit. All organization needsan
internal control system best ICSs are those with high senior management
involvement both in their creation and on-going monitoring and high
awareness by all the people involved in the business.
To effectiveness of the internal control system is a combination of the ease
with which people can understand the risk analysis and the monitoring of the
time it takes to find and resolve incidents. Two factors together enable cost
effective modification to be made to the ICS in light of actual risk facing
organization.

5.2 RECOMMENDATION
Generally, effectiveness of internal control system in private sector is very essential in
it operation, therefore to know their adequate financial control of the system. In
response, various laws, regulation and listing standards were issued; one of such
example is the US sarbanse-oxley Act of 2002- commonly known as sox- in which
section 404 requires that companies registered with the US SEC report on their internal
control over financial reporting. The requirements are prescriptive, focusing on

38
compliance and accountability. At that time, there were concerns that this would
become the international ‘’standard’’ for internal control, particularly as all companies

in the US and elsewhere registered with the SECwere required to comply with section
404, albeit with varying implementation time tables, this heavy emphasis on sox, in
particular the need to comply with its reporting requirements, meant that the internal
control debate was being driven primarily from a compliance viewpoint.
In making recommendation therefore, the following could be suggested for the
purpose of this research work.
1. Internal control system helps the auditor to draw up their programme for
the purpose of commencing his audit.
2. Effectiveness of internal control system helps the auditor to see the duty of
each staff has being defined there by quickening his work as to who to ask
questions and on what to ask questions as the need arises.
3. Managerial supervision and reviews including internal audit
4. Document control and mechanical accounting machines involving the use
of documents with provision for employees to certify or sign for jobs and
safe keeping machines.
5. The division of duties incorporating internal checks so that the activities of
one employee act as a check on that of another, the object of the exercise
being the prevention or early detection of either errors or fraud.
6. It is because effectiveness of internal control system built by organization
that internal audit department is usually created to appraise the staff
compliance or non-compliance and to review the system from time to time
so as not only to increase efficiency of staff but also to discourage the
committing of fraud while carrying out their functions. Through the
internal control questionnaire [I.C.Q], the auditor will be able to know
where there exist weaknesses in the system and enable him to give the
management his professional advice on how to correct the weakness seen
in the system.
7. When the system of internal control is sound in principle and efficient in
practice then, not much extensive detailed checking is needed. However,
where the system is not sound or not properly practiced, then the nature of
shortcomings in the system must be of the detailed checking which should
be undertaken. Internal control system must therefore, be given primary
attention in audit work.
8. An auditor who fails to point out in his report of the deficiency found in
the internal control system of organization, he has committed what has
been said to be negligence of his duties and where such negligence causes
a financial loss to his client, he will be made to make good the loss. We see
therefore that no meaningful audit can take place without a good system of
effectiveness of internal control system.
9. The auditor’s work is to make a critical review of the internal control in
order to decide the extent of examination of the available evidence which
is necessary. Detailed checking must be reduce to the minimum consistent
with the system of internal control and the nature of evidence available,

39
 because of time and cost limitations. An organization plan with clear lines
of authority and responsibility.

10. Implicit and explicit is the essential characteristic of a satisfactory and

effective internal controls system with some of the following features;
i. Reliable and efficient staff
ii. Delegation of commensurate authority
iii. Effective supervision at all time
iv. An internal audit department with effectiveness of internal control
system
v. The provision of physical safeguards like safes watchmen and other
security systems
vi. The rotation of duties and taking of annual leave
vii. Immediate and complete recording of all transactions
viii. The preparation of periodic and interim or continuous audit and
statement in accordance with the I.C.A.E & W. statement U.4 as;
A review of operations and records sometime continuous, undertaking
within a business by specially assigned staff.
On accounting matters, the main objectives of an internal audit is to assure
management that the internal check and control of the accounting system
are effectively in design directions and in operations.
Where an internal audit department exists, the external auditor will
familiarize himself with the programme of the department in order to
decide to what extent he can rely on the work of the internal auditors to
enable him to plan his own audit work.
Factors which would be taken into account in arriving at such a decision
will include;
i. The degree of independence of the internal auditor from those
responsibilities he is receiving.
ii. The number of suitably qualified and experience staff employed in
the internal audit functions
iii. The scope extent, direction and timings of the internal test made by
the internal control auditor.
iv. The extent which management takes action based upon the reports
of the internal control and audit functions.
v. The evidence available of the work done by the internal auditor and
the reviews of control of the work procedures maintained.
The auditor’s objective in evaluating and reviewing the effectiveness of internal control
system is to determine the degree of relative which he may place as the information.
The research is prepared by B. A. NOR, 2016; the objective of the study is to determine
the interest of effectiveness of internal control system on the overall management of
private sectors. Nugget Hotel Limited, Abuja selected as sample of the study and
descriptive and inferential statistical method used to analyse the gathered data. Six
hypotheses were tested to determine the correlation between internal control components
and effectiveness of internal control system and it was concluded that management of
private sector should establish and practice the effectivenessof sound internal control

40
system to avoid the frauds and weak performances of private companies. It also
recommended functioning adequate internal control system of effective internal audit
department, proper attention for cash, attractive pay packages, good management
formulation of good personnel and recruitment policies.

5.3 PROPOSAL FOR FURTHER STUDIES

The researcher focused especially on the contribution of internal control components in
relation to the effectiveness of internal control system in the private sector. The
research only focused on the components of internal control and their contribution of
the financial performance of the private sector since it advised that there other areas for
farther study in the perspective such as follows;

a. The Control Of ICT On The Effectiveness On Internal Control System

b. The Effect Of Cultural And Behavioural Factors On The Performance Of The
Financial Performance
c. The Contribution of the Internal Auditor to Performance of the Entity.
d. Effects Of Internal Controls On Revenue Collection A Case
Effects of Internal Controls on Revenue Collection This Research Proposal Is My
Review While Carrying Out Other Research onthe Impact of Internal Control
e. Case Studies For Implementing Coso’s Internal Control
Requestfor Proposal- Research Page 2 of 4 Topic Information Priority Topic Title
Case Studies for Implementing Coso’s Updated Internal Control Framework
f. The Practice Of Internal Controls
The Practice of Internal Controls In Addition To This Guide We Have Also
Published A Second Internal Control Guide Entitled Management
i. Internal Audit Internal Control And Research Repository
Internal audit internal control and organisation culture proposal that the internal audit
be structured as the main research in the area of culture within.
J. Internal Proposal Review Form University ofConnecticut
InternalProposal Review Form Conduct or Reporting Research or Education Activities
Human Stem Cells Yes No Subject To Export Control Laws Yes No
k. A Conceptual Framework for Online Internal Controls
Conceptual framework for online internal controls journal of information technology
management volume Xv numbers 34 2004 24 internal controls and coso

41
 BIBLIOGRAPHY

H. MILLICHAMP AUDITING; An instructional manual for accountingstudent ELBS

edition publishers ltd. Fourth edition 1987

J.U.T.OKOLO; The concept and practice of accounting. Evans Brothers [Nigerian

publishers limited]. First published 1987

NWEKE M. M. EKUEME C. M & OKOYE P. V. C. MODERN AUDITING; first

published 1997 by SNAPP PRESS LTD.

MAYO BPP ICAN; practice & Revision kit.Published by Mayo Associates limited and
BPP publishing ltd.First edition 1989.

ACCA LEVEL 1.Numerical Analysis and Data processing.Published by BPP ltd.First

edition 1981.

Companies and Allied Matters Decree 1, 1990 Official Gazette No. 2 Volume 77, Lagos
9th January, 1990. Printed and published by the federal government printers, Lagos,
Nigeria.

MESSIER, W.F. Jr. [2000].Auditing & assurance services. A systematic Approach,[2 nd

Ed.]. USA; MCGRAW Hill co. Inc.

Millichamp, A.H. [1996].Auditing[7th Ed]. London; Letts Educational

LABARAN, S. A. [2006]. Auditing, investigation & assurance services Jos; seye prints
INTERNAL CONTROL – Integrated framework [1992], committee of sponsoring
organization of the Treadway commission, US
INTERNAL CONTROL – Guidance for directors on the combined code [1999], institute
of Chartered Accountant of England and Wales, UK
GUIDANCE ON CONTROL [1995], Canadian institute of chartered Accountants,
Canada.
DR DAVID BREWER, German Secure system LTD Effectiveness of Internal control
system
Chartered Institute England & Wales, Providing Assurance on the Effectiveness of Internal
Control Published in July, 2001

WOOLF, E. [1997]. Auditing Today [6th Ed.]. Hockey. Essex, Great Britain; 4 Edge
Limited

Ekwere, A. b. [1994].Contemporary Auditing. Jos; Fab Anieh [Nigeria] limited

KELL, Walter G; et al [1986].Modern Auditing [3rd Ed.].New York; John Wiley & sons.

42
Damagun, Y. M. [2005]. Auditing Theory & practice, [2 nd Ed.]. Zaria Nigeria; Ahmadu
Bello University press Limited.

Pary. Kurt & Whittington, O. [1994]. Auditing Boston Richard D. Irwin Inc.

Salier, Earl A. [Ed.]. [1923].Accountant’s Handbook, New York. The Ronald press
company.
The 1999 Constitution of the Federal Republic of Nigeria.
G. H Hofstede 1968. The game of budget control [London tailstock publication]
Richard L. Daft & Norman.Machintosh [1994].The nature & use of formal control system
for management control & strategy implementation; NBM PUBLISHING LTD.
FIRST EDITION [1994].
ISA, [2012], Hand book of international quality control Auditing review other assurance
and related services pronouncement editorial & formatting changes 2010
Whittington. R &pany. K. [2004], principles of Auditing & other Assurance
committee of sponsoring organisation of the treadway commission control engineering
control system 545
audit, auditing committee of sponsoring organisation of the treadway commission
The institute of internal Auditors [2004], international standard for the professional
practice of internal Auditing, retrived in Jan 2012.
Simmons, R [1995]. control in an age of empowerment, harvad business review
ACCA [2009]-[2010] Advanced Audit and assurance, Kaplan publishing
ACCA Audit and Assurance services text book
Agella, Amundo&Eno.L Inanga, [2009] Evaluation of internal control systems. Internal
research journal of finance and Economics [ vol 29, pp 128-130]

43
 APPENDICES

School Of Management Science

Department of Accounting,
National open university of Nigeria,
Central Area, Abuja
1st March, 2016

Dear Sir/Madam,

LETTER OF INTRODUCTION

My Name is NOR BENEDICT currently a final year, Bachelor Science Degree student of
the school of management science Department of Accounting, National Open University
of NigeriaCentral Area,Abuja Study centre. I am undertaking a research work on
‘’effectiveness of internal control system in private sector’’ and I am using your
organization as a case study.
I therefore solicit your co-operation in completing this questionnaire to enable me carry on
the research work successfully.
I pledge that the information gather will not be used in any other way and willkeep strictly
confidential.
Thanks

Faithfully yours,

BENEDICT A. NOR

44
 QUESTIONNAIRE

The question will ask in this section will be used for classification purpose only. The
information gather will not be used in any other and will be kept strictly trusted.
Please put a tick ( √ ) in the appropriate box.

a. What is your gender

Male [ ] &Female [ ]

b. What position do you currently occupy in Nugget Hotel

Limited………………………………..

c. Which of the following categories described you age below

20years [ ] 20-40years [ ]
41-60years [ ] Above 60 years [ ]

d. Which of the following categories described your level of education

Diploma [ ] Advance Diploma [ ]

Postgraduate [ ] Master [ ]

Other specify……………………………………….

e. Field of study
IT & Computer [ ] Auditor [ ]

Accounting & Finance [ ] Social Science [ ]

Human resources [ ]

The second section of the questionexamined directly on the topic of the

researcher, research work

1. Do your organizations carried out an internal control system?

YES [ ] NO [ ]

2. Do your staffs accept the internal control system as a process of monitoring and
taking thorough checks of accounting books and records of the organization and it
unit activities?
YES [ ] NO [ ]

3. How strong your organisations carry out the effectiveness of internal control
system?
YES [ ] NO [ ]

45
 4. Do you think with the effectiveness of internal control system be of any important
to your organization?
YES [ ] NO [ ]

5. Do you approve the process of using effectiveness of internal control system as a

main guide for auditors work reviews?
YES [ ] NO [ ]

6. Do you think effectiveness of internal control system will helps auditors to draw up
their audit work for the commencing audit?
YES [ ] NO [ ]

7. With effectiveness of internal control system in your organization, do you have an

assurance that issues of committing fraud, misappropriation, errors, mistakes,
embezzlement, cheating, syphoning, will definitely be wipe out?.
YES [ ] NO [ ]

8. In carrying out this audit through effectiveness of internal control system, are you
accepted with the systematic code and conduct of the audit process?
YES [ ]NO [ ]

9. Do you have any full assurance that effectiveness of internal control system has a
measure way of protecting and avoiding lapses and vices that may affects the
organization?
YES [ ] NO [ ]

10. The effectiveness of internal control system enables full maintenance and total
reviews of organization routine work, day to day activities from loss and damages,
are you assure of this take?
YES [ ]NO [ ]

11. Do auditors performance of audit through reliance and reviews of effectiveness of

internal control system in an organization like your own will be of any reasonable
nature to curtail lingering issues affecting the organization?
YES [ ] NO [ ]

12. Can the concentrations of an auditor through effectiveness of internal control

system enable him/her to tackle areas of audit where they find some loopholes?
YES [ ]NO [ ]

46
 13. Do you think there is no organization where effectiveness of internal control
system does not exist no matter how small or poorly it operated?
YES [ ] NO [ ]

14. Do you care if effectiveness of the internal control system will proffers new
dimensions and directives that will help the organization operate successfully?
YES [ ] NO [ ]

15. Knowing what auditing through effectiveness of internal control system is all
about, can you as the management of the organization be able to sustain this as a
task and work procedures to your organization?
YES [ ] NO [ ]

16. Would I say effectiveness of internal control system is the best and easy tools and
a measure or vibrant methods of controlling and keeping the organization at the
very best, are you accepted with this scenario?
YES [ ] NO [ ]

17. Taking an evaluation of organizations performances through it financial strength

and functions, can effectiveness of internal control system be of any viable
interest or support?
YES [ ] NO [ ]

18. Going round on audit system, do you know how effective your organization can
do well if adopt the process effectiveness of internal control system in it?
YES [ ] NO [ ]

19. Who is an auditor to you and in what way do you have an assurance that an
auditor audits his/her work well as assigned?
YES [ ] NO [ ]

20. At the end of auditing, do you think the auditors normally give true or fair views
of their reports?
YES [ ] NO [ ]

47