Internal control and organization

performance: Case of BG
COMPLEX, KUMBA

Written by: MAWA TCHINDA

LAETITIA MEGANE
 CERTIFICATION

This research project entitled Effect of internal control measures on

organizations performance by Mawa Tchinda Laetitia Megane meets the
requirements and regulations governing the award of a Master’s degree in
Accounting control and Audit at Institut superieure de Gestion, and is therefore
for its contribution to scientific knowledge.

Academic Supervisor

Dr. NDJAHA-NGANA GODLOVE signature

Date

Head of department

Mr. AYUK HILLARY signature

Date

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 DECLARATION

I hereby declare that this submission is my own work towards the attainment of
a PROFESSIONAL MASTERS DEGREE IN ACCOUNTING, AUDIT AND
CONTROL OPTION from the UNIVERSITY OF DSCHANG and to the best
of my knowledge, it contains no material previously published by another
person or any material which has been accepted for the award of any other
degree of the university, except where due acknowledgment has been made in
text.

This is also to declare that this end of final dissertation has been submitted for
examination with my approval as the university supervisor

Academic Supervisor

Dr. NDJAHA-NGANA GODLOVE signature

Date

(Senior lecturer of university of BAMENDA)

Professional Supervisor

MBU CHARLES signature

Date

(CEO OF BG COMPLEX)

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 DEDICATION

TO MY BELOVED MOTHER

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 ACKNOWLEDGEMENT

Nothing man can receive except it is given from above. I thank God for sparing

my life till today and being my helper in the times of need and for giving me the

strength and courage to complete this report. May his holy name be praised?

My heartfelt gratitude goes to my supervisor Dr. NGANA GODLOVE for his

support during the course of this project work.

My profound gratitude also goes to my mother late mum Mrs. MAGATCHOP

BEATRICE CLAIRE for her financial and moral support towards my education

and achievement.

Special thanks to head of department Mr. Ayuk Hillary for his encouragements

and for always putting me on track.

My thanks also goes to my Dad Tchinda Etienne and siblings Tchinda Cindy,

Tchinda Princess Nkomick Kendra and Pepabou Victoire, for support and

prayer towards the completion of this research work.

I am grateful to the management of BG COMPLEX for their great assistance

and cooperation in making this research work possible and also I wish to

acknowledge the various authors whose literature I have used such as Kloot,

Woolf.

Finally, my appreciation goes to all my colleagues and sister JOAN SANJO

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 ABSTRACT
The study was carried out to examine the effects of internal controls on

organization performance, a case study of BG COMPLEX Kumba. The study was

guided by the following objectives namely: to assess the level of internal control

system at BG COMPLEX, to assess the level of performance at BG COMPLEX

and to assess the relationship between internal controls and performance at BG

COMPLEX. The study used a cross-sectional study design comprising of

qualitative and quantitative methods of data collection. Data was collected using

questionnaires that examined the specific objectives of the study and ethical issues

were considered. Collected data was analyzed and presented in tables and figures.

According to the study findings, BG COMPLEX employs competent and qualified

staffs though there is a problem of indiscipline. Employing competent and

qualified staff, the organization ensures quality provision of services which attract

more clients to the organization, increasing revenue. In addition, the competent

staffs don’t easily adhere to the set internal controls used by the organization hence

increasing causes of fraud and losses accruing to staff. The study findings indicated

that there is a strong and positive relationship between internal controls and

organizational performance at BG COMPEX. The researcher therefore concludes

that BG COMPLEX doesn’t have good internal control systems set in place hence

the problem of petit theft and fraud.

Key words; organization performance, internal control, ‘qualitative method,

quantitative method

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 RESUME

Cette étude a été effectuée pour examiner l’effet du contrôle interne sur la

performance de l’organisation cas de BG COMPLEX à Kumba. Cette étude a

été guide par les objectives suivant ; pour déterminer le niveau du contrôle

interne sur La performance de BG COMPLEX, évaluer la relation entre les

contrôles internes et la performance au complexe BG l’étude a utilisé une

conception d’étude transversale comprenant des méthodes qualitatives et

quantitative de collecte de données. Les données ont été recueillies à l’aide de

questionnaires qui examinaient les objectifs spécifiques de l’étude et les

questions éthiques ont été prises en compte. Les données collectées ont été

analysées et présentées sous forme de tableaux et de figures. Selon les

conclusions de l’étude, le COMPLEX BG emploie du personnel compétent et

qualifie bien qu’il y ait un problème d’indiscipline. Employant un personnel

compétent et qualifie, l’organisation assure une prestation de services de qualité

qui attire plus de clients vers l’organisation, augmentant ainsi les revenus et

autre, le personnel compètent n’adhère pas facilement a l’ensemble des

contrôles internes utilises par l’organisation, ce qui augmente les causes de

fraude et les pertes subies par le personnel. Les résultats de l’étude ont indiqué

qu’il existe une relation forte et positive entre le contrôle interne et la

performance de l’organisation au complexe BG. Le chercheur conclut donc que

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BG Complex n’a pas mis en place de bons systèmes de contrôle interne, d’où

les problèmes de vol et de fraude

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 TABLE OF CONTENT
CERTIFICATION....................................................................................................................
DECLARATION......................................................................................................................
DEDICATION........................................................................................................................
ACKNOWLEDGEMENT......................................................................................................
ABSTRACT..............................................................................................................................
RESUME..................................................................................................................................
List of tables..............................................................................................................................
LIST OF FIGURES................................................................................................................
CHAPTER ONE: GENERAL INTRODUCTION...............................................................

1.1 Background of the study............................................................................................1

1.2 statement of problem and justification of the study...............................................5

1.3 Research questions.....................................................................................................7

1.4 Objectives....................................................................................................................7

1.5 Summary methodology..............................................................................................8

1.6 Plan of work................................................................................................................8

CHAPTER TWO: PRESENTATION OF BG COMPLEX AND INTERNSHIP
ACTIVITIES..........................................................................................................................

2.1 Presentation of the enterprise.................................................................................10

2.1.1 Historical evolution of BG complex.......................................................................10

2.1.2 The Activities carried out at BG COMPLEX.........................................................11

2.1.3 LOCATION............................................................................................................15

2.1.4 ORGANISATIONAL STRUCTURE AND DESCRIPTION OF DUTIES,

INTERNSHIP DUTIES.............................................................................................15

2.2 Chronogram of internship.......................................................................................17

2.2.1 INTERNSHIP ACTIVITIES..................................................................................17

2.2.2 Problems identified at BG COMPLEX during the internship................................18

CHAPTER THREE: LITERATURE REVIEW AND METHODOLOGY.....................

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 3.1 Conceptual Literature.............................................................................................19

3.1.1 DEFINITION OF KEY TERMINOLOGIES.........................................................19

3.1.2 Entity’s risk assessment process.............................................................................29

3.1.3 Information system relevant to financial reporting.................................................29

3.1.4 Monitoring of controls............................................................................................30

3.1.5. Control activities....................................................................................................31

3.1.6. Segregation of duties..............................................................................................31

3.1.7 TYPES OF INTERNAL CONTROL PROCEDURES...........................................33

3.2 Theoretical review....................................................................................................33

3.2.1 Agency theory.........................................................................................................33

3.2.2 Contingency Theory................................................................................................34

3.2.3 Stewardship Theory................................................................................................35

3.3 PROBLEM SOLVING METHODOLOGY..........................................................36

3.3.1. THE RESEARCH DESIGN..................................................................................36

3.3.2 Proposed methods to resolve the main problem identified.....................................39

CHAPTER FOUR: IMPLEMENTATION.........................................................................

4.1 conditions for implementation................................................................................41

4.1.1 Training of employees and the organization of little seminars.........................41

4.1.2 Restructuring employees working schedule and daily activities......................41

4.1.3 The purchasing and installation of a camera.....................................................41

4.2 contribution of the proposed method in the resolution of the main problem
identified..........................................................................................................................41
CHAPTER FIVE: CONCLUSION AND RECOMMENDATION...................................

5.1 CONCLUSION OF THE STUDY..........................................................................43

5.1.1 Internal controls......................................................................................................43

5.1.2 The finding on how the organization monitors its performance.............................43

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 5.1.3 Factors affecting performance at BG COMPLEX..................................................44

5.1.4 Relationship between internal control systems and the organizations performance.
....................................................................................................................................44

5.2 CONCLUSIONS......................................................................................................44

5.3 RECOMMENDATIONS.........................................................................................45

5.4 AREAS FOR FURTHER STUDY (RESEARCH)................................................45

BIBLIOGRAPHY..................................................................................................................
QUESTIONNAIRE................................................................................................................
ORGANISATIONAL CHART; BG COMPLEX...............................................................

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 List of tables

Table 1: shows internship activities…………………………….......................17

Table 2: elements of control environment………………………….………... 28
Table 3: elements of control activities……….…………………….………… 31

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 LIST OF FIGURES

Figure 1 : conceptual framework.............................................................................

Figure 2; The coso pyramid.....................................................................................
Figure 3: Summary of the components of internal control systems........................

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 CHAPTER ONE: GENERAL

INTRODUCTION

1.1 Background of the study

Internal control as “Comprising the plan of an organization and all the co-
ordinate methods and measures adopted within a business to safeguard its
assets, check the accuracy and reliability of its accounting data, prorate
operational efficiency and adherence to prescribed managerial policies.” The
definition of internal control is divided into financial internal control and non-
financial (administrative) internal control .Financial internal control pertains to
financial activities and may be exemplified by controls over company’s cash
receipts and payments financing operations and company’s management of
receipts and payments. Non-financial internal control on the other hand deals
with activities that are indirectly financial in nature i.e. controls over company’s
personnel section and its operations, fixed assets controls and even controls over
laid down procedures (Reid and Ashel by, 2002).
A sound internal control system helps an organization to prevent frauds, errors
and minimize wastage .Custody of assets is strengthened; it provides assurance
to the management on the dependability of accounting data eliminates
unnecessary suspicion and helps in maintenance of adequate and reliable
accounting records .This study therefore attempts to establish the effectiveness
of internal control system on the performance of organizations in Cameroon.
Despite the fact that internal control system is expensive to install and maintain,
it gradually evolved over the years with the greatest development occurring at
the beginning of 1940‟s. Not only have the complexities of the business
techniques contributed to this development but also the increased size of
business units which have encouraged the adoption of methods which while
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increasing efficiency of business, acts as a safeguard against errors and frauds.
Mawanda (2008), states that “there is a general perception that institution and
enforcement of proper internal control systems will always lead to improved
financial performance”. It is also a general belief that properly instituted
systems of internal control improve the reporting process and also give rise to
reliable reports which enhances the accountability function of management of
an entity. Preparing reliable financial information is a key responsibility of the
management of every company. The ability to effectively manage the firm’s
business requires access to timely and accurate information.
Moreover, investors must be able to place confidence in a firm’s financial
reports if the firm wants to raise capital in the public securities markets.
Management’s ability to fulfill its financial reporting responsibilities depends in
part on the design and effectiveness of the processes and safeguards it has put in
place over accounting and financial reporting. Without such controls, it would
be extremely difficult for most business organizations especially those with
numerous locations, operations, and processes to prepare timely and reliable
financial reports for management, investors, lenders, and other users. While no
practical control system can absolutely assure that financial reports will never
contain material errors or misstatements, an effective system of internal control
over financial reporting can substantially reduce the risk of such misstatements
and inaccuracies in a company’s financial statements (Kaplan, 2008;
Cunningham, 2004; INTOSAI, 2004).
Cunningham (2004) states that internal control systems begin as internal
processes with the positive goal of helping an organization meet its set
objectives. Management primarily provides oversight activity; it sets the entity's
objectives and has overall responsibility over the ICS. Internal controls are an
integral part of any organization’s financial and business policies and
procedures. Internal controls consist of all the measures taken by the
organization for the purpose of; protecting its resources against waste, fraud and
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inefficiency; ensuring accuracy and reliability of accounting and operating data;
ensuring compliance with the policies of the organization; evaluating the level
of performance in all organizational units of the organization.
ICS are applicable to each organization in relation to key risks and are
embedded within the operations and not treated as a separate exercise. ICS
should be able to respond to changing risks within and outside the company and
they are a means to an end, not an end itself. Cunningham (2004), further states
that Internal controls are effected by people not merely policy manuals and
forms, but people functioning at every level of the institution. Internal control
only provides reasonable assurance to the firm’s leaders regarding achievement
of operational, financial reporting and compliance objectives; promoting
orderly, economical, efficient and effective operations; safeguarding resources
against loss due to waste, abuse, mismanagement, errors and fraud. Internal
controls lead to the promotion of adherence to laws, regulations, contracts and
management directives and the development and maintenance of reliable
financial and management data, and accurately present that data in timely
reports (Kaplan, 2008; Cunningham, 2004; INTOSAI, 2004).
Treba (2003) states that internal control is a tool for ensuring that a firm realizes
its mission and objectives. He further notes that much as internal controls
are often thought to be the domain of accountants and auditors; it is actually
management that has primary responsibility for
Proper controls. A critical element of any comprehensive Internal Control
Systems is regular monitoring of the effectiveness of internal controls to
determine whether they are well designed and functioning properly (Treba,
2003).
Treba (2003) explained that weaknesses in internal control systems (control
over the payroll, over expenditure commitments and over procurement
processes) lead to failure to ensure that resources are allocated to defined

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priorities and to guarantee that there is value for money will be attained in
public spending .The findings of the Tread way Commission Report of 1987 in
the United States (USA) confirmed that the absence of internal controls or the
presence of weak internal controls is the primary cause of many cases of
fraudulent company financial reporting. The widespread global corporate
accounting scandals in recent years inform this study.
Notable cases include Enron and WorldCom in the USA, Parmalat in Europe
and Chuo Aoyama in Asia. In South Africa, cases of accounting scandals have
been recorded in JCI and Randgold and Exploration companies. In Nigeria, the
managing director and chief financial officer of Cadbury Nigeria were
dismissed in 2006 for inflating the profits of the company for some years before
the company’s foreign partner acquired controlling interest. These scandals
emphasize the need to evaluate, scrutinize, and formulate systems of checks and
balances to guide corporate executives in decision-making. These executives
are legally and morally obliged to produce honest, reliable, accurate and
informative corporate financial reports periodically (Hayes et al, 2005).In the
study, internal controls shall be interpreted as “A process that guides an
organization towards achieving its objectives.” These objectives include
operational efficiency and effectiveness, reliability of financial reporting and
compliance with relevant laws and regulations.” Financial performance is
considered in terms of measures like profitability (using absolute and relative
measures), liquidity (using liquidity ratios like current ratio, acid test ratios), the
ease with which the entity settles its financial obligations and accountability.
Dixon et al (1990) found out that appropriate performance measures are those
which enable organizations to direct their actions towards achieving their
strategic objectives.
Stoner (2003) refers to performance as the ability to operate efficiently,
profitably, survive, grow and react to the environmental opportunities and
threats. In recent years the aspect of internal control system has achieved great
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importance since it is designed to safeguard the company’s assets against
misuse, ensure compliance with the company’s laid policies, ensure the
company’s personnel are efficiently utilized and the company runs in an orderly
and efficient manner.

Most importantly it ensures the company’s reliable records which are a source
of information necessary for managerial decision making processes are
available when need be. It is therefore clear that the adoption of a sound internal
control system is not only helpful to the management, but also helps in avoiding
future company problems. However, it’s worth noting that internal controls
measures when properly implemented permits the company’s activities to run in
a smooth manner leaving very little or no room for theft or fraud. “The
likelihood of achievement is affected by limitations inherent in all systems of
internal control,” (Hayes et al, 2005).
1.2 statement of problem and justification of the study

the occurrence of prominent corporate disappointment and scandals have high

lightened grave shortcomings in corporate administrative structures exemplified
by misrepresentation of financial information, poor book keeping and
inadequate internal controls .this has given evidence supporting discernments
on the insufficient evaluating methods and procedures in observing pending
financial danger and control in enterprise for an appealing business
performance.
In recent years, majority of corporate collapses in Cameroon owes it cause to
frequent uncovered instances of serious fraud and or other malpractice
orchestrated by senior company officials, reckless financial and business
management practices and accounting blunders. And these horrible malpractices
have been traced to weak corporate governance systems.as a result, most of the
post Enron laws such as Sarbanes Oxley Act emphasizes the need for an
effective internal control system that can prevent the abuse of company assets or
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properties by corporate fraudsters. Beyanga (2011) argues that effective internal
control services can help reduce overhead, exposure to possible losses from
assets misappropriation, thus enhancing business performance. However, there
has been laxity in the implementation of internal control findings and
recommendations.
From the above view it can be concluded that the ability of businesses to
operate efficiently, profitably, survive, grow and react to the environmental
opportunities and threats is threatened by such factors which can be controlled
by effective internal control practices. But in most cases the role of auditing is
undermined.
If therefore the role of the internal control is essential for the success of an
entity, then it becomes necessary to investigate why companies still undergo
financial strife and collapse shortly after their financial records have been
audited like the case of Enron in 2002.
For the longest while in Cameroon business managers have faced difficulties in
analyzing the effectives of internal control measures exist because of lack of
frequent checks while others fail to even implement these measures of lack of
knowledge and counseling thus creating material loopholes in the organization
which in turn adversely affects the organization resulting to corporate failures.
The internal control measures play a very significant role in an entity. This
function is there to add value to the business by evaluating the efficiency and
effectiveness of company’s procedure through constructive criticism, raising the
reliability of internal control system, improving the process of risk management
and above all satisfying the need of internal control system, improving the
process of risk management and above all satisfying the need of internal users.
Internal auditors ought to be part of the top management team of companies
reporting directly to the Board of directors and the audit committee because
they have the ability to monitor, evaluate and assess risk in the company. But
unfortunately, internal auditors in most companies in Cameroon do not perform
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these functions or are not given the right to perform them. They are rather put at
the background performing other functions like controlling cost.
Also, with the growing complexity of the business world, the rate of
competition has progressively increased. The competitive spirit can only be
achieved if there if there is maximum efficiency, if employees are efficient and
management assesses and evaluate performance regularly.
Nowadays, implementing good internal control measures can be challenging
and in order to overcome this, this measures before decided upon to be
employed in the long run must be tested for some time and with the results then
they would decide to implement it permanently or they wouldn’t continue with
it.
It is against this realization that the current study aims to investigate the internal
control measures on the organizations performance of businesses in Cameroon.

1.3 Research questions

As the consequence of the above problems the following research questions

arise which will serve as a guide to the study.

What is the level of internal control system at BG COMPLEX?

What is the current level of performance at BG COMPLEX?

What is the relationship between the internal control systems and the

organizational performance?

1.4 Objectives

To evaluate the impacts of internal control measures on organizations

performance.

To assess the level of internal control system at BG COMPLEX

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To assess the level of performance at BG COMPLEX

To assess the relationship between internal controls and performance at BG

COMPLEX

1.5 Summary methodology

This section describes the research methodology of the study that was used to
achieve the objective of the study. Summary methodology is the procedural
plan that is adopted by the researcher to validly, objectively, economically and
accurately answer the research questions. It is a detailed explanation of the
procedures and techniques that shall be used while collecting, processing and
analyzing data. This section of the study therefore describes the research design,
target population and area, sampling frame, sample and sampling technique,
data collection instruments, procedures, analysis management and the ethical
considerations that the study shall use.

1.6 Plan of work

This report is divided into 5 chapters, each chapter is explained for

easy comprehension with the help of several headings.
Chapter one which is the General introduction is comprised of the background
study of the report, the problem statement, research questions, the objectives of
the study, the summary methodology and the plan of work.
Chapter two which is the presentation of BG COMPLEX comprises of its
historical evolution, activities, products, mission, location, organization
structure, internship activities carried out and the presentation of the problems
identified.
Chapter three which is the literature review and methodology comprises of the
conceptual and theoretical literature, the problem solving methodology, the

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current practices of BG COMPLEX and proposed methods to resolve the main
problem.
Chapter Four which is the implementation comprises of the various conditions
for implementation and the contribution of the proposed method in the
resolution of the main problem identified.
Chapter Five is finally made up with the conclusion and recommendation

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 CHAPTER TWO: PRESENTATION OF BG
COMPLEX AND INTERNSHIP ACTIVITIES

This chapter will permit us to know more about the company that includes its
activities, products, mission, location as well as the structure of the organization
and the various duties of employers

2.1 Presentation of the enterprise

BG Complex being a supermarket and bakery that came into existence on the 13
of January 2016 found a necessity to come into existence due to the demand of
the population. So far BG COMPLEX is involved with the production of
products such as casdent, cookies, croissant, boulangerie bread and Kumba
bread amongst others and it is today one of the leading suppliers in the town of
Kumba as it supplies to markets such as the Kumba main market and the Fiango
market, big and medium stores in neighborhoods, other supermarkets and small
business centers around Kumba. Since BG complex came into existence it has
reduced the rate of unemployment in Cameroon by employing young
Cameroonians. It is one of the top supermarkets with 37 Employees. This
supermarket is also known for producing good quality products as their
products are well appreciated and are also known for punctuality and timely
delivery of their products.

2.1.1 Historical evolution of BG complex

BG COMPLEX in the year 2016 began with just 8 employees and these
employees were multitasked at a low salary since they were just starting up.
And it started activities with just the bakery sector as the product that was
mostly supplied was bread and cakes.

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ALSO, BG COMPLEX had a very low sales outcome which came along with
critics from the few customers that they had but in recent years there have been
a great change especially in terms of turnover as BG COMPLEX was able to
come out strong and produce better quality products due to the critics they
received in the past.

More to that, due to the high demand of their bakery products they were able to
now produce in larger quantities and as thus needed more employees, the
number of employees now augmented from 8 to 15 employees in 2018
precisely.

Furthermore, BG COMPLEX found the need of opening a supermarket section

in the year 2019 because due to the crisis in the English regions especially for
the town of Kumba where most inhabitants didn’t want to take the risk of
travelling to other towns to get some basic necessities. BG COMPLEX decided
to take this risk and started bringing in stocks from Douala and also from
Nigeria to sell at their supermarket and to also supply to the town of KUMBA.

Due to the opening of this supermarket there was a need to employ more staffs
for the effective day to day running of the business and from the year 2018 till
this very day BG COMPLEX now counts 37 staffs and has been able to meet up
with their mission which is to provide quality products to the inhabitants of the
town.

2.1.2 The Activities carried out at BG COMPLEX

BG complex just like every other supermarket is here to satisfy and meet up
with the demand of the public. BG complex carries out the following activities

 Bakery

BG complex being not only a supermarket but also a bakery deals in the
production of bread such as the boulangerie bread and pastries such as croissant,

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cakes, casdent, cookies, beignet Choco, bout Sucre, sable aspiral, baguette
Choco and baguette Sucre.

 Supplying/ credit sales

BG supplies bread such as the hamburger bread, cookies, and other pastry
products within the town.
 Wholesale
BG complex has a team which in charge of going to DLA on monthly basis to
purchase goods to restock the goods in the supermarket and other products like
the supermont, other drinks from source du pays that are being supplied.
 Sales of products
This involves the selling of the various products both from the supermarket and
the bakery.
 Inventory management
Devising an efficient system of receiving and displaying various stocks
according to brand, sizes, color and materials. Stock counting at the end of
every month.
 Finance
Management of receipts and invoices from the supermarkets and the suppliers.
 Customer service
This department involves checking customers available for possible supplies.
 Sales promotion
This is done when some goods are almost attaining their expiring dates. These
products are sorted out for sales.
 Balance of cash
This is cash made from sales which is made balanced daily
 Verification of products produced and supplied
Products are being verified produced and supplied are being verified so as to
know what is left in stock and inventory taken down

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. PRODUCTS

They various products of BG COMPLEX are divided into 2 products from the
boulangerie and products from the supermarket.

 Bakery products
- Long baguette
- Short baguette
- Pain miel
- Pain au lait
- Venmois
- Croissant
- Beignet Choco
- Boule Sucre
- Rectangle Choco
- Swiss
- Cakes ( plain, trencher)
- Casdent
- Olives
- Cookies
- Sugar balls
- Soufflé
- Sable aspiral
- Baguette Choco
- Baguette Sucre
- Cake parfait
- Cupcakes( marine)
- Frottage
- Galette
 SUPERMARKET

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- Cornflakes
- Icing sugar
- Spaghetti
- Indomie
- Vegetable oil, olive oil
- Liquid pepper and seasoning cubes
- Sausage
- Corn meat
- Butter( margarine)
- Chocolate
- Mayonnaise
- Vinegar
- Thin Condensed milk
- Thin powder milk
- Sugar( granulated and cube )
- Cocoa powder
- Coffee powder such as cappuccino
- Honey
- Tea bags
- Custard
- Cereals
- Toothpaste
- Body lotions
- Hand cream
- Sprays and perfumes
- Antiseptic soaps
- Wines and Champaign
- Soft drinks
- biscuits

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 . MISSION

Selling best quality food products. Satisfying and delighting our customers.
Team member happiness and excellence. Creating wealth through growth and
profit

2.1.3 LOCATION
BG COMPLEX is located in the town of Kumba precisely in Buea road
opposite the ENEO OFFICE by the road side.

2.1.4 ORGANISATIONAL STRUCTURE AND DESCRIPTION OF

DUTIES, INTERNSHIP DUTIES

Company President
CEO
NTUMI CHARLES

Vice President Vice President HR

Accounts Kaba Alex

Finance Tax consultant

Assistant
Berinyuy Silas

Wholesale Management
Lenou Cyrille

Sales force
Boulangerie
Procurement Manager Account Manager
Bessem Thierry Nana Patrick

Assistant Procurement Bakery Sales

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Mimbia Emmaculate
Maintenance
Organigram of BG COMPLEX, SOURCE: supermarket document
 Company president

He is charge of leading the supermarket and making major decisions in regards

to the functioning of the supermarket

 Vice president Accounts

He is in charge of disbursing petty cash and records employees’ transaction in

the accounting spreadsheet. Promotes total customer satisfaction and also pays
employees on monthly basis.

 Vice president Human resource

He is in charge of providing leadership, supports, motivates, directs and retain

high caliber staff. Develop and implement ongoing staff performance and career
development programs.

 Finance assistant

She is in charge of the Boulangerie stock check and boulangerie cash check.
Also involved in the sales and supply of wholesale items. Ice cream check.
Handles wholesale petit cash

 Tax consultant

He is in charge of declaring monthly sales, filing of DSF and payment of

monthly taxes.

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 Wholesale manager

He is in charge of purchasing wholesale items, management of receipts and

invoices, sales and also supplies wholesale items, payment of creditors, stock
inventory.

 Procurement manager

He is in charge of meeting the needs of the perishable departments by ensuring

proper purchasing, rotation, and maintaining inventory of a wide variety of
goods to meet the customers’ expectations

 Assistant procurement manager

He assist the procurement manager to purchase goods for the supermarket

 Bakery sales force

They are in charge of selling bakery products

 Supermarket sales force

They are in charge of selling supermarket products and giving back feedback on
customer’s reaction to various products

 Maintenance and Repair

They are in charge of maintaining and repairing electrical appliances such as the
AC and the oven as well.

2.2 Chronogram of internship

2.2.1 INTERNSHIP ACTIVITIES

Table 1; internship activities
WEEKS DUTIES
MONTH 1 Filling in details of financial
transactions from activities such as
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 accounts receivables from the
supermarket
MONTH 2 Carrying out day to day control of
accounts from the suppliers of bread
and other products
MONTH 2 Constant check of the supply return
and making sure it is equal to the
products that went out for supply
MONTH 3 Petit cash for supermarket and bakery
products

2.2.2 Problems identified at BG COMPLEX during the internship

 The absence of source documents for financial transactions.
 The presence of petit theft and fraud.
 The presence of cash in books and absent in the organizations account.
 Undisciplined employees.
 Lack of ability to track performance against budgets, forecasts and
schedules.

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 CHAPTER THREE: LITERATURE REVIEW
AND METHODOLOGY
In this chapter we shall know more about the conceptual literature, the
theoretical literature, the problem-solving methodology, the current practices in
the enterprise and the proposed method in the resolution of the main problems.

3.1 Conceptual Literature

The conceptual literature actually takes into consideration the key concepts of
internal control and performance evaluation as well as all related theories

3.1.1 DEFINITION OF KEY TERMINOLOGIES

For this topic to be fully understood there are internal control terms that need to
be properly examined before the topic is analyzed. This is to ease the
comprehension process.

According to Mugenda & Mugenda (2003) conceptual framework is an

analytical instrument with numerous differences and perspectives that is used to
make theoretical differences and establish philosophies. Figure 2.1 shows the
conceptual framework of the study that suggests sequence between internal
controls and financial performance. This study suggests that internal controls
may have a connection with financial performance of tea processing firms. The
conceptualized relationship between the variables is shown in Figure 1

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Internal Audit
Functions
 Reporting
 Fraud
detection and
prevention
 Monitoring and
Segregation of duties
 Authorization
duties Organization
 Approving duties performance
 Earnings per share
Monitoring controls  Return on equity
 Net profit
Process

checks and
evaluations
 Implementati
on of
internal
controls
Budgeting
 Proper planning
 Budgetary systems

Independent variable dependent

variable

Figure 1: conceptual framework

 Efficiency
Efficiency signifies a level of performance that describes a process that uses the
lowest amount of input to create the greatest amount of output. its defined as the
measure of the extent to which input is well used for an intended task or
function(output).
 Internal check

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This is defined as the allocation of authority and work in such a manner as to
afford checks on the routine transactions of day to day work by means of the
work of one person being checked or controlled individually by another.

 Internal control
It’s the process designed and implemented by those charged with governance,
management, and other personnel, designed to provide reasonable assurance
about the achievement of the organizations objectives with regard to reliability
of financial reporting, effectiveness and efficiency of operations and with
compliance with applicable laws and regulations.
Also, internal control can be defined as a process, effected by an entity’s board
of directors, management, and other personnel, designed to provide reasonable
assurance regarding the achievement of objectives in the following categories:
effectiveness and efficiency of operations; reliability of financial reporting; and
compliance with applicable laws and regulations.
 Internal audit
This is defined as an independent appraisal activity within an organization for
review of accounting, financial and other operations as a basis for service to
management. It is a management control function which measures the
efficiency and effectiveness of other control.
According to the institute of internal Auditors (IIA), internal audit is the
independent appraisal function established within an organization to examine
and evaluate its activities and services.
 System
This is defined as an organized or a complex whole. It is a set of complex
related or arranged essential principles or facts arranged in a rational
dependence or collection forming a coherent whole.
 Control activities

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Control activities are policies and procedures the organization uses to ensure
that necessary activities are taken to minimize risk association with achieving
its objectives.
 Inspection of tangible assets
Inspection of tangible assets that are recorded in the accounting records
confirms existence, but does not necessarily confirm rights and obligations or
valuation. Confirmation that assets seen are recorded in accounting records
gives evidence of completeness.
 Inspection of documentation or records
This is the examination of documents and records, both internal and external, in
paper, electronic or other forms. This procedure provides evidence of varying
reliability, depending on the nature, source and effectiveness of controls over
production (if internal). Inspection can provide evidence of existence (for
example, a document constituting a financial instrument), but not necessarily
about ownership or value.
 Observation
This involves watching a procedure or process being performed (for example,
post opening). It is of limited use, as it only confirms the procedure took place
when the auditor was watching, and because the act of being observed could
affect how the procedure or process was performed.

 Inquiry
This involves seeking information from client staff or external sources. Strength
of evidence depends on the knowledge and integrity of source of information.
Inquiry alone does not provide sufficient audit evidence to detect a material
misstatement at assertion level nor is it sufficient to test the operating
effectiveness of controls.
 Confirmation

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This is the process of obtaining a representation of information or of an existing
condition directly from a third party for example, confirmation from bank of
bank balances
 Recalculation
This consists of checking the mathematical accuracy of documents or records
and can be performed through the use of information technology
 Re-performance
This is the auditor’s independent execution of procedures or controls that were
originally performed as part of the entity’s internal control
 Analytical procedures
Evaluating and comparing financial and/or non-financial data for plausible
relationships. Also include the investigation of identified fluctuations and
relationships that are inconsistent with other relevant information or deviate
significantly from predicted amounts.
 Errors.
SAS 16 defines errors as unintentional mistakes in the financial statements, in
the underlying records and accounting data from which financial statements
were prepared, mistakes in the application of accounting principles or
misinterpretation of facts that existed at the time the financial statements were
prepared.
 Internal audit function and financial performance
Internal audit objective is to support members of the firms to effectively
discharge of their duties. Internal audit is established in firms to appraise the
efficiency, effectiveness and economy of organizations controls (Subramaniam,
2006). The objective of internal audit is to provide management of firms’ with
adequate re-assurance of operating adequately (Reid & Ashelby, 2002). The
Internal audit function is a component of internal control that is set up by
management of an organization/firm in order to evaluate, examine and report on

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the operations of accounting and controls.
The quality and effectiveness of internal audit procedures in practice are
necessary since internal auditors cover a wide variety of assignments, not all of
which will relate to accounting areas in which the external auditor is interested.
Emasu (2007) establishment of internal audit function in organizations helps
them to do a continuous evaluation of the effectiveness of risk management,
control, and governance processes by providing independent, unbiased
assessment of the operations of the organization.
Internal audit departments are adequately facilitated. In regard to the size of the
internal audit function, Gerrit and Mohammad (2010) give evidence in support
of monitoring role of the internal audit function. They specifically found
evidence that management ownership is positively related to the relative size of
the Internal Audit Function, which is inconsistent with traditional agency theory
arguments that predict a negative relationship, but more in line with recent
studies on earnings management. This finding suggests that increased
management ownership may influence the board of directors to support larger
internal audit functions to allow them to closely monitor managers‟
performance. Effectiveness of internal audit procedures is a measure of the
ability of the program to produce a desired effect or a result that can be
qualitatively measured (Harvey, Leinicke, Rexroad & Ostrosky, 2004). Rezaee
& Zabihollah (2002) argue that there should be effective internal audit
procedures to ensure reliability of financial statements, operational reports,
safeguarding corporate assets and effective organizational controls.
Ejoh & Ejom (2014) conducted a research on Internal Control Activities on
Financial Performance of Tertiary Institutions in Nigeria. The purpose of this
study was to establish the relationship between internal control activities and
financial performance in Tertiary Institutions in Nigeria. It was established that
management of every organization has the line responsibility for designing,
implementing and monitoring their internal controls system. The study revealed
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that there is regular review of financial transaction by management, strict
adherence to budget provisions, and adequate segregation of duties, but that
staff are not adequately trained to implement the accounting and financial
system.
Ngugi (2011) conducted a survey of internal control systems among the listed
private companies and the public sector companies in Kenya. The study showed
that it is the only control environment component that the public sector scored
strongly compared to private sector. However this has been circumvented
collusion among staff in the public sector. On Information communication both
public and private sector performs poorly in this component. Lastly the public
sector and private sector have almost the same level of monitoring in the
organizations.
Matata (2014) did a study on the effects of internal controls on financial
performance of water companies. The study established that there exist a
positive relationship between internal controls and the performance of water
companies in Kenya. This entails that for any organization to diversify
effectively and increase its market share investment in product innovation is
critical. The study further concludes that the Companies meets the statutory
deadlines in submitting its financial reports, they prepare annual budgets and
meets budget allocations which in return has a positive relationship in the
internal controls and performance of the water companies in Kenya.
 Segregation of duties and financial performance
Ferrailo et al., (1992) noted that “although more of a policy than a mechanism,
segregation of related duties is used in deterring fraud within financial systems.
Such duties can include authorizing, approving and recording transactions,
issuing or receiving assets, and making payments. Segregation of related duties
refers to the situation where different users are given distinct, but often
interrelated tasks such that a failure of one user to perform as expected will be
detected by another. For segregation of related duties to be effective, computer
Page | 25
capabilities must be partitioned. These capabilities must be accessible only to
users or processes associated with specific tasks”.
Research into internal controls and external auditors’ judgments has indicated
that the assessment of segregation of duties is a dominating factor in an
auditor’s evaluation of an internal control structure (Ashton, 1974; Ashton and
Brown, 1980; Hamilton and Wright, 1982). Clark and Wilson (1987) examined
commercial and military security models and found that separation of duties in
performing transactions in commercial security models was an important aspect
of maintaining data integrity.
Srinidhi (1994) performed a study of the importance of segregation of duties as
an internal control by means of a survey of auditors. The findings indicated that
auditors place significantly lower reliance on internal control systems without
adequate segregation of duties. The functions identified as being incompatible
were: assigning the responsibilities for both authorizing and executing a
transaction to the same person and Combining the responsibilities for the
authorisation of a transaction and the custody of the asset(s) involved in the
transaction
Arens & Loebbecke (2000) prescribe four general guidelines for the segregation
of duties that are designed to prevent both fraud and error they include:
Separation of the custody of assets from accounting, separation of the
authorization of transactions from the custody of related assets, separation of
operational responsibility from record‐keeping responsibility and separation of
information technology (IT) duties from duties of key users outside it.

The extent to which duties may be segregated depends on the size of the
organization. Often, the apparent lack of adequate separation of duties in
smaller organizations can be compensated for through the active involvement
of the owner/manager. In ERP environments with hundreds or even thousands
of users accessing the system on‐line, the only way to separate duties within the
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computer system is to assign authorizations and profiles to users which prevent
them from performing incompatible functions. A set of principles extending
beyond those above are required to govern the development and assignment of
these access rights.
 Monitoring control and financial performance
COSO (2013) framework on direction of monitoring internal controls proposed
to give an in depth contribution in application of the monitoring constituent of
the original COSO background. The parties involved with internal controls
require the importance of how monitoring framework and base can expand the
efficiency of business developments.
Figure 2; The coso pyramid

Control
environmen
t
Risk Assessment

Control Activities

Information & Communication

Monitoring Activities

Source: CROWE (January 2019), Coso Internal Control Integrated Framework.

 Control Environment
The control environment is the framework within which controls operate. According
to the institute of internal auditors (IIA), the control environment is very much
determined by the management of a business and includes the governance and
management functions and the attitudes, awareness and actions of those charged with
governance and management concerning the entity’s internal control and its

Page | 27
importance in the entity.
A strong control environment does not by itself ensure the effectiveness of the overall
internal control system but can be a positive factor when assessing the risks of
material misstatement. A weak control environment can undermine the effectiveness
of controls. So, aspects of the control environment such as the management attitudes
towards control will nevertheless be a significant factor in determining how controls
operate. The table below illustrates the elements of the control environment that may
be relevant when obtaining an understanding of the control environment.
Communic Essential elements which influence the
ation and effectiveness of the design, administration and
enforcemen monitoring of controls
t of
integrity
and ethical
values
Commitme Management’s consideration of the competence
nt to levels for particular jobs and how those levels
competenc translate into requisite skills and knowledge
e
Participatio  Independence from management
n by those
 Experience and stature
charged
with  Extent of involvement and security of activities
governance
 Appropriateness of actions and interaction with
internal and external auditors

Manageme  Approach to taking and managing business risks

nt’s
 Attitudes and actions towards financial reporting
philosophy

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 and  Attitudes towards information processing and
operating accounting functions and personnel
style
Organizatio The framework within which an entity’s
nal activities for achieving its objectives are planned,
structure executed, controlled and reviewed
Assignmen How authority and responsibility for operating
t of activities are assigned and how reporting
authority relationships and authorization hierarchies are
and established
responsibili
ty
Human Recruitment, orientation, training, evaluating,
resource counseling, promoting, compensation and
policies remedial actions.
and
practices

Source: ACCA; Audit and Assurance, 2016 edition, Kaplan, 500pages

The auditor shall assess whether these elements of the control environment
have been implemented using a combination of inquiries of management
and observation and inspection.
3.1.2 Entity’s risk assessment process
ISA 315 says the auditor shall obtain an understanding of whether the entity
has it process for;
 Identifying business risks relevant to financial reporting activities
 Estimating the significance of the risks
 Assessing the likelihood of their occurrence

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 Deciding upon actions to address those risks
If the institution has established such a process, the auditor shall obtain an
understanding of it. If there is not a process, the auditor shall discuss with
management whether relevant business risks have been identified and how they have
been addressed.
3.1.3 Information system relevant to financial reporting
It is a component of internal control that includes the financial reporting system and
consists of the procedures and records established to initiate, record, process and
report institution’s transactions and to maintain accountability for the related assets,
liabilities and equity.
The auditor shall obtain an understanding of this information system relevant to
financial reporting objectives, including the following areas;
 The classes of transactions in the institution’s operations that are relevant to
the financial statements
 The procedures within both it and manual systems by which those transactions
are initiated, recorded, processed, corrected, transferred to the general ledger and
reported in the financial statements
 The related accounting records, supporting information and specific accounts
in the financial statements in respect of initiating, recording, processing and reporting
transactions.
 Controls surrounding journal entries, including non-standard journal entries
used to record non-recurring, unusual transactions or adjustments
The auditor therefore shall obtain an understanding of how the institution
communicates financial reporting roles and responsibilities and significant matters
relating to financial reporting.
3.1.4 Monitoring of controls
It is a process to assess the effectiveness of internal control performance over time. It
includes assessing the design and operation of controls on a timely basis and taking

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necessary corrective actions modified for changes in conditions. COSO frame work
(1992) suggested that internal control systems need to be monitored in order to
evaluates the value of the system's presentation over time
The auditor shall obtain an understanding of the major activities that the entity uses to
monitor internal control over financial reporting, including those related to those
control activities relevant to the audit and how the entity initiates corrective actions to
deficiencies in its controls.
If the institution has an internal audit function, the auditor shall obtain an
understanding of the nature of the responsibilities and how it fits in the organizational
structure and the activities performed/to be performed. The auditor shall also obtain
an understanding of the sources of the information used in the monitoring activities
and the basis on which management considers is reliable.
3.1.5. Control activities
- Approval and control of Transactions should be approved
documents by an appropriate person. For
example, overtime should be
approved by departmental
managers
- Controls over computerized computer controls
applications

- Checking the arithmetical For example, checking to see if

accuracy of records
- Maintaining and reviewing
control accounts and trial
balances
individual invoices have been
added up correctly
Control accounts bring together
transactions in individual ledgers.
Trial balances bring in together
unusual transactions for the
organization as a whole. Preparing

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 this could highlight unusual
transactions
- Limiting physical access to Only authorized personnel should
assets and records have access to certain assets
(particularly valuable or portable
ones). For example, ensuring that
the inventory stores locked are
unless store personnel.
These are policies and procedures that ensure management directives are obtained

Source: ACCA; Audit and Assurance, 2016 edition, Kaplan, 500pages

3.1.6. Segregation of duties

It implies a number of people being involved in the accounting process. This makes it
more difficult for fraudulent transactions to be processed (since a number of people
would have to collude in the fraud), and it is also more difficult for accidental errors
to be processed (since the more people are involved, the more checking there can be).
Segregation should take place in various ways;
 Segregation of function. The key functions that should be segregated are the
carrying out of a transaction, recording that transaction in the accounting records and
maintaining custody of assets that arise from the transaction.
 The various steps in carrying out the transaction should also be segregated.
 The carrying out of various accounting operations should be segregated. For
example, the same staff should not record transactions and carry out the
reconciliations at the same time

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Figure 3: Summary of the components of internal control systems

Source: CROWE (January 2019), Coso Internal Control

Intergrated Framework

3.1.7 TYPES OF INTERNAL CONTROL PROCEDURES

There are three types of internal control systems namely: the preventive control,
the detective control and the corrective control.
 Preventive control:

This is a control system that predicts potential problems before they occur and
adjustments made. They also prevent errors, omission or malicious act from
occurring.
In other words, it is a type of controls instituted to guess and avert errors,
omissions and intentional act of operational and input. It comprises errors,
omissions or hateful act from occurring except of such control will include
appropriate separation of responsibilities access to physical facilities (George
Spafford, 2005). Examples of preventive control includes ; using well designed

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documents to prevent errors, establishing suitable procedures for authorization
of transactions, employ qualified personnel, segregation of duties.
 Detective control;

This control is designed to detect and report the occurrence of an omission, an

error, or a malicious act. Examples of such control includes duplicating,
checking of calculations, periodic performance reporting with variance error
message.
 Corrective control;

This control help to minimize the impact of a threat identify the cause of a
problem. They also correct problems discovered by detective control and
modify the processing system to minimize future occurrence of the problem. An
example of corrective control includes contingency planning back up
procedures.
3.2 Theoretical review

3.2.1 Agency theory

Agency theory proposes that a firm’s main goal is to maximize the shareholders
wealth. According to agency theory, a firm consists of a link of agreements
between the owners of economic resources (principals) and managers (agents)
who are charged with using and controlling those resources, (Jensen &
Meckling, 2009). This study will use the agency theory to determine the
influence of internal controls on the organizational performance of BG
COMPLEX.
Sarens & Abdolmohammadi (2011) state that according to the agency theory, a
company consists of a set of linked contracts between the owners of economic
resources (the principals) and managers (the agents) who are charged with using
and controlling these resources. A significant body of work has been undertaken
in this area within the context of the principal-agent framework. Jensen and

Page | 34
Mecklin (1976) work in identifying the agency relationship where one party, the
principal, delegates work to another party, the agent.
3.2.2 Contingency Theory
Contingency theory was developed from the sociological functionalist theories
of organization structure such as the structural approaches to organizational
studies by Woods (2009). According to Fielder (1964), contingency theory is
an organizational theory that claims that there is no best way to organize a
corporation, to lead a company, or to make decisions. Instead, the optimal
course of action is contingent (dependent) upon the internal and external
situation. Contingency theory is an approach to the study of organizational
behavior in which it explains how contingent factors like technology, culture
and the external environment influence the functioning of organization. The
assumption with contingency theory is that no organizational structure is
equally applicable to all organizations. Instead organizational effectiveness is
dependent on match between the technological type, size of the organization,
environmental volatility, the features of the organizational structure and its
information system.
Contingency theory describes the relationship between the context and structure
of accounting control tool effectiveness and organizational performance,
especially reliability of financial reporting. The reliability of financial
statements can be enhanced by choosing the right accounting tools. According
to Cadez & Guilding (2008), internal auditors who are specialized and higher in
internal audit ability will achieve internal control effectiveness analysis and that
the firm will benefit from the organizational effectiveness via internal control
mechanism efficiency. They identified some factors that impact management
control systems these are technology, external environment, structu.re and size,
strategy and national culture.
3.2.3 Stewardship Theory
Coined by Donaldson and Davis (1991 & 1993), the theory is a new perspective
Page | 35
to understand the existing relationships between ownership and management of
the company. This theory arises as an important counterweight to Agency
Theory. The theory stresses on the role of top management being as agents,
incorporating their objectives as part of the organization. The stewardship
perspective suggests that stewards are satisfied and motivated when
organizational success is attained. Argyris (1973) argues that while agency
theory looks at an employee or people as an economic being, which suppresses
an individual’s own aspirations, on the other hand Donaldson and Davis (1991)
argue that stewardship theory recognizes the importance of structures that
empower the steward and offers maximum autonomy built on trust. It stresses
on the position of employees or executives to act more autonomously so that the
shareholders ‟returns” are maximized. Indeed, Fama (1980) contend that
executives and directors are also managing their careers in order to be seen as
effective stewards of their organization, whilst, Shleifer, Andlei and Vishny
(1997) claims that managers return finance to investors to establish a good
reputation so that they can re-enter the market for future finance.
Meckling and Jensen (1994) further state the cost incurred to curb agency
problems is less when owners directly participate in the management of the firm
as there is a natural alignment of owner managers’ interest with growth
opportunities and risk. It follows from the above that stewardship theory unlike
agency theory is a complete contrast and doesn’t emphasize on the need to incur
monitoring or agency cost which includes establishing an internal audit
function. Nevertheless Donaldson and Davis (1991) further note that returns are
improved by having both of these theories combined rather than separated
which implies that management must strike a balance. In our study the steward
theory is supported by the fact that managers of quoted companies act as
stewards of shareholders, suppliers, creditors, consumers and employees of the
quoted companies.
3.3 PROBLEM SOLVING METHODOLOGY
Page | 36
3.3.1. THE RESEARCH DESIGN
This study looked into effectiveness of internal control systems at BG
COMPLEX. A BG complex document was employed in the study. This was
because the study attempts to give a clear picture of how effective the
control systems were in the organization. We chose it because it helps to
describe the actual condition of a situation at a particular point in time.
The theory basically serves as a foundation to conduct the research. The
research is conducted by using different methods, techniques and guidelines.
However the most appropriate method of conducting a research at BG
COMPLEX is the quantitative approach.
Quantitative approach According to Svensson (2003) the quantitative research
approach is best to investigate the perceptions and problem of the study and to
discover the hidden values, feelings attitudes and motivations. It uses deductive
approach; the focus is on testing the theories related to the topic by analyzing
and collecting the data Bryman and Bell (2007).
Since our topic talks on internal control and the organization performance, we
are going to list the different types of performance
Types of performance evaluation

 1 – Self-assessment.
 2 – Team assessment.
 3 – Graphic rating scale.
 4 – 360 degree rating.
 5 – Forced Choice.
 6 – Skill Evaluation.
 7 – Goals and Results.
 8 – Leader Assessment.

We are going to concentrate on goals and results type of performance because

our main objective as a supermarket and a bakery is to maximize sales. Now the
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question goes thus, how do we measure performance evaluation at BG
COMPLEX?

DATA ANALYSIS

Analysis of data allowed the study to judge and assess out comes to attain
lawful, significant and important decision. The retrieved questionnaires were
critically read through to check for consistency in responses. Statistical tools
such as statistics table and percentages were used to present the data. Tables
and figures were used to present the responses. However, some responses
were only discussed without tables. The frequency table provided the synopsis
of the data for easy understanding and comparison. The percentages addressed
the relative frequencies of the data, and the table and figures were used to show
diagrammatic representation of the responses.

Data collection instrument

The questionnaires were our main source of data collection The five (5)
components defining the effectiveness of internal control systems include:
control environment with five items; Risk assessment with five (5) items;
Control activity with six (6) defining items; Information and Communication
Systems with five (5) defining items and Monitoring with six (6) defining items
as the last construct.

Data collection and interpretation

Data obtained from the supermarket was analyzed using the Statistical Package
for the social Sciences (SPSS) software program. The result was presented
using statistical tools such tables. Descriptive statistics were used to analyze
the data. So to obtain our data, we had to collect sales of previous years as this

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will help us to effectively see the continuous effect of internal control on the
organizations performance.

3.3.1 The current practices at BG COMPLEX

Some current practices at BG COMPLEX includes;

 Inventory supermarket management

Inventory is an important asset sitting on the shelves of the supermarket. It plays
an instrumental role in the fate of the supermarket. Balanced inventory turnover
and healthy current ratios are beneficial for the supermarkets success and
financial health.
 Attracting customers with promotions and offers
One of BG COMPLEX strategies to attract customers is by offering promotion,
exciting discounts and giving offers on their products. This is mostly done with
products that will soon reach their expiration dates as it also avoids the risk of
spoilage.
However, during such discounts and offers, BG COMPLEX keeps track of their
re-order levels and inventory in stock and also set a meeting with their suppliers
ahead of time to coordinate the supply. This discounts are done with proper
planning, keeping in mind the occasion. For example, BG COMPLEX offers
discounts on cakes and dry fruits during Christmas.
 Keeping pace with the advancement in Technology and software
As challenging as it can be to keep customers happy and at the same time,
ensure efficient operations of the supermarket. There comes technology at the
rescue. As they also offer the option grabbing an item without paying
physically. Their bill gets deducted from their credit card or their mobile money
accounts.
 Caring for our customers inside and outside the supermarket
The overall shopping experience at the supermarket is paramount. We take it as

Page | 39
an obligation to always keep the vicinity of the supermarket welcoming and
clean and the shelves well stocked, floor and check-out counter spotless clean.
For we believe customers are more likely to buy in the first place by seeing
them on the shelf and how well they are placed.
More so, building a strong and good reputation outside matters a lot, hence time
is taken to email our clients or call to thank them and also to know how their
shopping experience was at BG COMPLEX and how we can ameliorate our
services.
3.3.2 Proposed methods to resolve the main problem identified
The main problem of this topic being the problem of inadequate internal control
measures for the smooth running of the organization here are some measures
that can be put in place to solve this problem;
3.3.2.1 The issuance of receipts for every monetary transaction
The physical counting of goods and making sure that for those that have been
sold receipts have been issued, thus these receipts should be collected daily and
crosschecked and stored for future reference.
3.3.2.2 The installation of proper internal control measures against petit
theft
This petit theft and fraud is mostly discovered at the level of the supermarket
and deliveries carried out. At the level of supermarket physical counting must
be done making sure all items sold have receipts and sanctions imposed on
items sold without receipts.
At the level of delivery made the book in which delivery men come and fill the
amounts obtained from delivery must be controlled by the same person who will
also be in charge of crosschecking the quantity of products taken for delivery to
make sure the amount been deposited must be equal to the quantity of product
taken and if it happens that they didn’t supply all the products for the day, the
remaining products must be equal to the balance of the money deposited.
3.3.2.3 Cash at hand must be counted and be equal to the cash on source
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``documents in other to avoid the presence of cash in books but absence of cash
in the company’s bank account for example if money is to be deposited every
after two days the money deposited must be equal to the amount on source
documents for the past two days that’s making sure that money to be deposited
is equal to money in the book. A reconciliation must be made before any
deposit.
3.3.2.4 The installation of proper internal control policies for employees
For example a log book must be put in place so as to know when an employee
comes to work, when they take their break and they live for work and sanctions
put in place for employees who go against the policy to avoid the system of
laisser faire.
3.3.2.5 The inability to carry out forecast and track performance against
budget this is so because the amount of sales isn’t accurate as well as the profit
as it is based on speculation and incomplete information due to the absence of
source documents all caused by the absence of proper control. With the problem
of source documents solved in 3.3.2.1 then the organization will be able to have
accurate information and carry out its forecasting.
To conclude, in this chapter we saw the conceptual literature, the theoretical
literature, the problem solving methodology, the current practices of BG

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 CHAPTER FOUR: IMPLEMENTATION

In this chapter we are going to talk about the conditions for implementation and
the contribution of the proposed method in the resolution of the main problem.
4.1 conditions for implementation
Making changes in an organization nor matter how big or small the organization
is, is actually a crucial stage which must be done carefully, slowly and gradually
to avoid making mistakes which might lead to financial losses. It is always
efficient to take it slowly will monitoring the progress of the organization.
4.1.1 Training of employees and the organization of little seminars

The employees of an organization are those people without which the

organization wont function properly, hence it is of utmost importance that there
be little seminars to educate them more on the various internal control measures
to be implemented and later carry out a training session with them so that they
could adapt and this will permit the organization to function smoothly.
4.1.2 Restructuring employees working schedule and daily activities

Employees need to be now put at check with every little activity that they carry
out, so that the management will be able to detect easily in case of any
fraudulent activity or in case of petit theft. This will also permit to implement
internal control procedures with less difficulties,
4.1.3 The purchasing and installation of a camera

Although this will go a long way for security but it will also stand as a check to
make sure all implemented internal control measures are respected to the latter.
4.2 contribution of the proposed method in the resolution of the main

problem identified.

The main problem at BG COMPLEX is that of the absence of cash at hand but
the presence of cash in financial records all this is caused by the absence of
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internal control in the following areas; vouching of payments. Authorization of
payments by approved personnel’s, periodic bank reconciliation and regular
internal audit.
The following methods can be put into practice to resolve the main issue at
hand, they are as follows:
 At the level of the organization a book or punch card is supposed to be
placed at the disposal of employees to permit the organization to know the exact
time that each employee comes to work
 Also, an auditor is supposed to be employed to prevent the issues of fraud
and theft
 More so, there should be separation of duties
 In addition, there should be an approval authority that is before any
amount of money is being deposited at the bank account it must be verified and
approved by management.
 Cash registers create receipt tapes of the transactions that occurred during
each shift.
 Warehouses maintain copies of receiving documents and transfer to store
shelves
 An internal auditor should be employed for auditing purposes and to
prevent any sorts of fraud or material misstatement.
Conclusively, in this chapter we saw the conditions for implementation and the
proposed method in the resolution of the main problem identified,

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 CHAPTER FIVE: CONCLUSION AND

RECOMMENDATION

This chapter presents the summary of major findings of the research,

conclusions, recommendations and finally areas that could be researched
further.

5.1 CONCLUSION OF THE STUDY.

5.1.1 Internal controls.
From the findings, the study established that the major control procedures such
as vouching of all payments, authorization of payments by approving personnel,
periodic bank reconciliation and regular internal audit to mention but a few are
not in existence at BG COMPLEX..

The study also revealed that controls are not effective such as monthly bank
reconciliations in the entire organization as revealed by most employees.

However, the researcher also learnt that there are some controls that are not
quite effective such as prompt payments made and are properly recorded in the
appropriate books, division of duties to discourage individual’s recording and
processing of a complete transaction. This is so because the handling of
sensitive duties like cash recording is not handled by one individual as revealed
by the employees.

5.1.2 The finding on how the organization monitors its performance.

Basing on the findings made in chapter four, the researcher discovered that BG
COMPLEX doesn’t have accurate information as regards to sales and profits so
performance isn’t tracked easily because the amount of sales and profit are
mostly speculated. Hence there is a need for it to be done periodically and
regularly over the years.

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5.1.3 Factors affecting performance at BG COMPLEX.
The study showed that performance is influenced by several factors which if not
looked at critically, can divert the objectives of organization. The study revealed
that the lack of appropriate control measures that create a big problem of
insufficiency at the level of our profit and this needs to be adjusted by
management to avoid further losses.

5.1.4 Relationship between internal control systems and the organizations

performance.
The study established that there is a significant positive relationship between
internal control systems and performance of organizations in Cameroon, a case
study of BG COMPLEX. This implies that if more efforts are put towards a
stronger internal control system, there will be a better performance of BG
COMPLEX

The researcher also proved that the costs of operation are reduced by internal
control systems that enable it to gain more profits hence there is a positive
relationship.

Basing on the findings, it indicated that internal control systems would improve
employees’ performance leading to organizational performance hence there is a
positive relationship.

5.2 CONCLUSIONS.
The researcher therefore concludes that there is a significantly positive
relationship between internal control systems and organizational performance.
In this, internal control systems are relatively efficient and do have much effect
on the performance of organizations since all internal control systems are to
some extent ever elaborated and this can help to guarantee administration,
completeness and accuracy of records as well, it can be a proof against
fraudulent, collusion especially on the part of those holding authority or trust.

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Internal control systems must be effective enough for proper performance in
any organization.

5.3 RECOMMENDATIONS
Having carried out the study, the following recommendations are forwarded.

Management should always practice proper recording of transactions and each

and every other transaction should always be recorded and kept for references.

Management should maintain regular internal audits of their accounts systems.

Management should always carryout regular bank reconciliations.

Management should improve on some internal control systems such as

documentation of transactions that can best suit the organization’s operations.

Approval of transactions should always be done every time the transaction is

carried out by a reasonable personnel.

Segregation of cash duties should always be done so that no one carries out a
transaction right from the recording to the balancing of a transaction.

There should always be strong tools in authorization of responsible personnel to

access the organization’s assets.

Generally internal control systems put in place should be strengthened to yield

profits to the organization hence the performance.

5.4 AREAS FOR FURTHER STUDY (RESEARCH).

 The impact of internal controls and employee performance.
 The impact of internal controls and cash management.
 The impact of internal controls and organizational profitability
 How the Integrated Financial Management Systems can improve on
internal controls.
 The impact of internal controls and cost management.

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 BIBLIOGRAPHY

 ACCA; Audit And Assurance, 2016 edition, Kaplan, 500pages

 COLE G.(2004); Management Theory And Practice; 2nd Edition

 CROWE (January 2019), Coso Internal Control Integrated Framework

 Davis J.H.F.D and Donaldson (1997); Stewardship Theory Oragency.

 Internal control Checklist Manual (2012) 3rd Edition

 KAPAN, (2009); Financial Reporting. 2nd Edition

 KOONTZ H, DONNELL O’ (1968), 4th Edition. Principles of management: an

analysis of managerial functions .mcgraw-hill, new york.

 Oxford Dictionary For Accounting (2005), 2nd Edition.

 SALIFU SHAIBU (2015), Assessment of internal control systems

 UDs (2018). Projet de Programme de formation

 ACADEMIA

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 QUESTIONNAIRE

Dear respondent, I am a Masters 2 student of Institut superieur de Gestion

Douala, Cameroon pursuing a Diploma in accounting control and audit,

carrying out a study on the effects of internal controls on organizational

performance, A case study of BG COMPLEX. Your responses will be treated

with at most confidentiality for it is only through your response that the work

can be completed well. Therefore I humbly request you to spare some time for

me and answer the following questions addressed to you.

Please feel free and answer all questions truthfully.

SECTION A (BIO DATA)

PERSONAL CHARACTERS

1. Respondents gender

(a) Male (b) Female

2. What is your age?

(a) 18-25 (b) 26-35 (c) 36-45

(d) Above 46

3. What is your marital status?

(a) Married (b) Single (c) Divorced

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4. What is your education level?

(a)Primary (b) Secondary Level (c) Diploma Level (d) Degree

Level

5. For how long have you worked at BG COMPLEX

(a) Below 2 years (b) 2-4 years (c) over 7 years

6. Which department do you work?

(a) Sales & Marketing (b) Human Resource (c) Finance

(d) Spare Parts

(e) Departmental Manager (f) Service (Mechanics) (g)

Delivery

SECTION B

INTERNAL CONTROL SYSTEMS EMPLOYED IN THE

ORGANIZATION

Tick the appropriate answer regarding the statements below.

1. Does the organization carry out authorization and approval of transactions?

(a) Always (b) sometimes (c) Not at all (d) I

don’t know

2. Does your organization carry out proper recording of transactions?

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 (a) Always (b) sometimes (c) I do not know

(d) False

3. Is there segregation of duties on cash handling and cash recording in your

organization?

(a) Always (b) sometimes (c) I do not know (d)

False

4. Is there restriction of authorized personnel to organization assets and

recording of them?

(a) Always (b) Sometimes (c) Not at all

5. Responsible people in the management of the organization examine and

approve payment vouchers?

(a) Always (b) sometimes (c) Not at all

6. Does the organization carry out internal audit regularly?

(a) Always (b) sometimes (c) I do not know

7. Does your organization reconcile physical cash with cash book balances?

(a) Always (b) sometimes (c) False

SECTION C

MONITORING OF THE PERFORMANCE OF THE ORGANIZATION

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1. What are the various internal control system tools used in your organization?

……………………………………………………………………………………

……………………………………………………………………………………

……………………………………………………………………………………

………………………………………………………

2. Does your organization use profit and loss account generated to monitor and

communicate its sales revenue and profits?

(a) True (b) No (c) sometimes

3. What performance level does BG COMPLEX experience?

(a) High (b) moderate (c) low

4. What motivates you to increase performance constantly?

(a) When wages are paid on time

(b) When work is properly distributed

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 SECTION D

RELATIONSHIP BETWEEN INTERNAL CONTROL SYSTEMS AND

PERFORMANCE OF AN ORGANIZATION

1. Has there been a difference in performance when internal control systems

are put in place?

(a) Yes (b) sometimes (c) Not at all (d) I do not

know

2. Internal control systems increase employees’ performance.

(a) True (b) Sometimes (c) Not at all

3. Do internal control systems decrease the cost of operations?

(a) True (b) Sometimes (c) I do not know

5. Do internal control systems increase the overhead costs?

(a) yes (b) sometimes Not at all I do not know

6. In your own view what is the relationship between internal control

systems and performance in your organization?

......................................................................................................................

......................................................................................................................

......................................................................................................................

..............................................................................

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 7. Do you think internal control systems help in improving the performance

of an organization?

……………………………………………………………………………

……………………………………………………………………………

……………………………………………………………………………

………………………………………………………

8. What problems do you face as regards to performance?

……………………………………………………………………………

……………………………………………………………………………

……………………………………………………………………………

………………………………………………………

9. Do you have any suggestion to overcome the problems above?

……………………………………………………………………………

……………………………………………………………………………

……………………………………………………………………………

………………………………………………………

THANK YOU

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 ORGANISATIONAL CHART; BG COMPLEX

SOURCE; COMPANY DOCUMENT

Company President
CEO
NTUMI CHARLES

Vice President Vice President HR

Accounts Kaba Alex

Finance Tax consultant

Assistant
Berinyuy Silas

Wholesale Management
Lenou Cyrille

Sales force
Boulangerie
Procurement Manager Account Manager
Bessem Thierry Nana Patrick

Assistant Procurement Bakery Sales

Manager Force
Mimbia Emmaculate
Maintenance

Supermarket
Sales Force

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