INTERNAL CONTROL SYSTEM NIGERIA DEPOSIT MONEY BANKS - PROSPECTS AND PROBLEM (A CASE STUDY OF UNION BANK PLC)
TABLE OF CONTENT
CHAPTER ONE
1.1 introduction
1.2 statement of the problems
1.3 research questions
1.4 objectives of the study
1.5 research hypothesis
1.6 significance / justification of the study
1.7 scope and limitation of the study
1.8 Definition of key terms.
1.9 Organization plan
CHAPTER TWO
2.1 LITERATURE REVIEW
2.2 Concept of internal control system
2.3 Classification of internal control system
2.4 Types of internal control
2.5 Reliance on internal control system
2.6 Axes on internal control system
2.7 Objectives of internal control system
2.8 Environment of internal control system
2.9 Requirements for effective internal control system
2.11 Application of internal control system
2.13 Limitation of internal control system
CHAPTER THREE
3.1 RESEARCH METHODOLOGY
3.2Historical of the case study
3.3 types of Data
3.4 research design
3.5 sample procedure
3.6 Method of Data Collection
CHAPTER FOUR
4.1 PRESENTATION ANALYSIS OF DATA
4.2 Data presentation
4.3 Data analysis
4. 4 Findings
CHAPTER FIVE
5.0 SUMMARY,CONCLUSION AND RECOMMENDATIONS
5.1 Summary
5.2 Conclusion
5.3 Recommendation
References
CHAPTER ONE
1.1 INTRODUCTION
Banks are very important in nation; they are the backbone of the nation’s economy. Functions of the bank according to ezeuiji (1997), including money creation, acceptance of deposit from the customers, provision of facilities for domestic and foreign remittance, help government in implementing monetary policies etc.
According to the operational standard (guideline). Internal control is defined as the whole system of controls,, financial and otherwise, established by the management in order 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 function of internal control system include, the detection or safeguarding of business asset but despite the fact a that all bank have internal control system, there have been a lot of problem in the banking sector. Ranging from bank liquidating to defrauding the banks, many banks have been liquidated example of such bank include savannah bank plc, national bank plc (although it is now being resuscitated) merchant bank Nigeria limited Nigeria internal bank limited mention few.
According to central bank of Nigeria (CBN) annual report over (N16 billion) sixteen billion naira was defrauded from the banking sector, also recently a bank was suspended from the clearing system by the central bank of Nigeria (CBN) because of mismanagement of banks resources expert have given reason as to what causes banks distress. According to ezeudiji (1997) one of the causes of bank distress is the internal control system problems include poor or lack of proper authorization of loan and contract, poor loan recovery, failure to collect proper collateral security, management override the control e.t.c.
According to koroye (1989), it bank internal (detective in any significant way) that audit should be decline outright opinion must be qualified as strictly as possible. It is because of two main reason.
1.2 STATEMENT OF PROBLEMS
Internal control system many organization, including bank is very important because it ensure orderliness, in the organization, advance to management polices, early detection of error and fraud, protection of assets e.t.c.
Internal control system problem have led to closure of many banks in Nigeria, ezudiji (1997) thereby making depositors customer to shareholder of such bank to loss his or her shares. It is inimical to nations economy because provide 90% of the capital employed in Nigeria. Due to the following problem it leads to the following question.
Does bank operation carried out in any orderly manner and follow the procedure laid down. Does transaction recorded accurately and correctly.
1.3 RESEARCH QUESTION
This project has been able to provide answers to the following research questions.
1. What is internal system?
2. How does banks operations can be carried out in internal control system?
3. What are the functions of the internal control system?
4. What are the benefits of internal control system to the government, public, students and researchers?
5. Does transactions recorded accurately and correctly?
6. What cause banks distress?
7. What are the problems facing by internal control system?
8. What are the aims and objectives of internal control system to banks?
9. What is a bank and functions of a bank?
10. What is a fraud?
11. How to control fraud in banking sector
1.4 OBJECTIVES OF THE STUDY
The objectives of the study are:
I. To find out if there is internal control in union bank plc.
II. To investigate the effectiveness of internal control system in union bank plc.
III. To find out factors that affects internal control system in union bank plc.
IV. To suggest way to improve internal control system effectiveness in union bank plc.
1.5 RESEARCH HYPOTHESIS
Ho: The internal control system is not significantly effective on deposit money bank
H1: The internal control system is significantly effective on deposit money bank.
1.6 SIGNIFICANCE /JUSTIFICATION OF THE STUDY
The study is very importance nowadays were federal government have hard to invest of in Nigeria. Since foreign investor will not invest in any country where there is no good banking sector. The study will be of immense benefit to banks determine the extent to which internal control system is effective. In addition the study would determine the factor problem militating against the to it. The study will be of immense help because most of the founds requires by Nigerian are provided by bank also that affect banking sector also affect many others sectors such as agriculture and economy sector of the nations.
1.7 SCOPE AND LIMITATION OF THE STUDY
This study is limited to union bank plc Muritala Muhammed way branch Ilorin due to financial constraint and other problem. The study can only be generated to union bank plc branch all over the country.
⦁ FINANCE:- due to limitation funds at students disposal, the researcher has no accessibility of some area dues to cost of getting to every part of research areas.
⦁ TIME CONSTRAIN:- considering the time limit, the researcher do not have enough time to research and elaborate more on the work. Another factor worthy of mention was the difficult encounter in getting the right to do the research work at the right time place.
⦁ INSYFFICIENY OF DATA INFORMATION:- most of the information available to the researcher have out dated and the current ones are not easily obtained, therefore the researcher sees it as a constrain to this project work.
⦁ PROBLEN OF SOURING:- some of the respondents regard some questions are secret such as the main target of a fraudster which they regard as confidential and feel reluctant to disclose.
1.8 DEFINITION OF KEY TERM.
i. BANK:- is a financial institution where money and other valuable items are been kept for safety purpose.
ii. INTERNAL: it is the affairs and activities within a country.
iii. CONTROL: is the power to direct influence or limit something e.g. fraud, error, and to safeguard business
iv. SYSTEM: it is a set of things working together as a mechanism or network, the prevailing political or social order.
v. INTERNAL CONTROL SYSTEM: This whole of control, financial and otherwise established by the government in order to carry on business of the enterprises in an orderly manner, ensures stick firmly to management policies the completeness and accuracy of accounting records.
vi. MONEY: it is anything which is generally acceptable for making payments or in the settlement of debt.
vii. DATA: - is a term used to describe basic “FACT” based on measurement and recording something knows or assumed as facts and made on basic reasoning or calculations. It can be said to be unprocessed information or raw facts.
viii. FRAUD: - is the act of deceiving somebody in order to get money or goods illegally or the use of deception to obtain unjust or illegal financial advantage.
1.9 ORGANISATION PLAN
This research work is divided into five (5) main chapters and each chapter has the following content:
Chapter one is the introduction consisting of the statement of problems, research question, objective of the study, research hypothesis, significance justification of the study, scope and limitation of the study, definition of key terms, and organization plan of the study.
Chapter two is the literature review consisting of the historical of the case study, concept of internal control system, classification of internal control system, reliance control, types of internal control system, objective of internal control system, environment of internal system, requirement for effective internal control system, application of internal control system.
Chapter three is research methodology consisting of the types of data, research design, sample procedure and method of data collection.
Chapter four is data presentation and data analysis and finding.
Chapter five is summary, conclusion, recommendation and references.
CHAPTER TWO
2.1. LITERATURE REVIEW
The introduction of corporate form of business organization forced the separation of the investors from management. This divorced of investor from management together with the demand of creditors, leads to the development of various form of internal control on which internal auditing is part.
The management of the large corporation has likewise been force to adopt means of overcoming adequate personal knowledge of Business Corporation, thus internal control came into being.
The subject of internal control including internal audits jointly forms the framework from which to operate. There are two different concept of internal control; the narrower the two concepts appears in the definition of the term in some auditing textbook, JOURNALS. A typical example is that of Banner and Curtey (1981) which gives the definition as follows; the method and management with a company that are set5 to safeguard cash, merchandise and other asset, to provide check on accuracy of the record and to promote efficiency and compliance with company policies.
In definition of Accountant, Eric Kohler (1983) described internal control as the general methodology by which management is carried on which is an organization, also any of the numerous devices for supervising and directly on operation or operations generally.
However, the commonly adopt definition of internal control is the definition guideline 3.204 given in the institute of Chartered Accountant which is not only internal check and internal control but whole system of control financial and otherwise, established by the management in order to carry out on the business of the enterprise in an orderly and efficient manner ensure adherence to management policies, safeguarding “the asset and ensure as for as possible the completeness and accuracy of the accountancy recording. The individual component of internal control system is known as control or internal controls.
If the definition are considered or studied in detail the following will be understand:-
The word :Financial means the use of control account which may include physical asset restriction to computer terminals.
a. Asset to be broken or stolen is always unacceptable to many establishments and procedures are always devised to safeguard.
b. The procedure to achieve accuracy of record includes the checking of the work of one clerk by another or the use of control account, independence comparison of this two sets of record e.g stock record and stock.
c. The whole system means that internal control can be seen as a single procedure or as a whole system and the whole system should be more than the sum of the parts.
d. The phrase established by the management means that the internal control system are established by the management directly or by the means of external consultants internal audit or accounting personnel, external auditor may be asked to advice on the setting up of the system.
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