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Due to the rapid growth of modern technology and computerization, there is increase in computer usage in organizations this tends to increase fraudulent practices. This study therefore aims at the examination internal control in computerized accounting system and its effect on the profitability and efficiency of a company. In this study, the primary source of data which is the questionnaire was used and the chi-square (X2) hypothetical test instrument was employed to carry out the data analysis and to test the formulated hypothesis. From the analysis, it was found that an occasional evaluation and review of internal control system increases profitability and efficiency, enhances workers efficiency and also helps in reducing fraud. It was therefore concluded that as technique, internal control is a very important aspect of an organization and therefore recommends to the management whose duty is to ensure the smooth and effective operation of the organization to ensure an occasional evaluation of the internal control system, to establish an internal audit department and to ensure a sound and effective internal control system to enhance business operations.


Title Page                                                                         i

Declaration                                                                      ii

Certification                                                                     iii

Dedication                                                                       iv

Acknowledgements                                                          v

Table of Contents                                                            vi

Abstract                                                                           x


NTRODUCTION                                                                 1

1.1    Background to the Study                                                   1

1.2    Statement of the Problem                                                  4

1.3    Objective of the Study                                                                5

1.4    Research Questions                                                          6

1.5    Research Hypotheses                                                       6

1.6    Scope of the Study                                                            8

1.7    Significance of the Study                                                   9

1.8    Limitation of the Study                                                       10

1.9    Definition of Terms                                                            11

 1.10 Organization of the Study                                                  12

1.11 Summary                                                                           13

References                                                                                 15


REVIEW     OF LITERATURE                                             16

2.1    Conceptual Issues                                                             16

2.1.1          Concept of Internal Control.                                               16

2.1.2 Management of Internal Control                                        18

2.1.3 Installation of an Effective Accounting System                   20

2.1.4 Employees Code of Conduct                                                      21

2.1.5          Objectives of Internal Control                                            21

2.1.6 Essential Features Of Internal Control                               23

2.1.7 Internal Check and Internal Audit                                       28

2.1.8 Internal Audit as an Instrument of Effective Internal Control       33

2.1.9          Principles of Internal Control                                              34

2.1.10 Definition of a Computer                                                  38

2.1.11 Management Information System (MIS)                                    39

2.1.12 Executive Information System (EIS)                                 40

2.1.13 Internal Control in a Computerized Accounting Organization   40

2.1.14 System Development Control or Implementation Control        46

2.1.15 The Computer Software                                                   51

2.1.16 System Analysis                                                               53

2.1.17 Stages of System Analysis                                               54

2.1.18 A Computerized Organization                                          55

2.1.19 Information System Audit                                                 55

2.1.20 The Computer System                                                     57

2.1.21 Importance of internal Control                                         59

2.1.22 Limitations of Internal Control                                          61

2.2    Theoretical Issues                                                             63

2.2.1 Contingency Theory                                                          63

2.2.2 Management Theory                                                         64

2.3    Empirical Issues                                                                 64

2.4    Summary                                                                           69

References                                                                                 70


RESEARCH METHODOLOGY                                          72

3.1    Introduction                                                                        72

3.2    Research Design                                                                        73

3.3    Population and Sample Size                                              74

3.4    Sampling Technique                                                          77

3.5    Methods of Data Collection                                                78

3.5.1 Questionnaire Design                                                        79

3.5.2 Questionnaire Administration                                             80

3.5.3 Questionnaire Assumption                                                 80

3.6    Techniques of Data Analysis                                              81

3.7    Summary                                                                        81

References                                                                              82


DATA PRESENTATION AND ANALYSIS                           83

4.1    Introduction                                                                 83

4.2    Data Presentation                                                         83

4.2.1 Analysis of Other Research Data                                      85

4.3    Analysis of Data                                                                 90

4.4    Test of Hypotheses                                                            96

4.5    Summary                                                                           107

References                                                                                 108



5.1    Discussion of Findings                                                       109

5.2    Conclusion                                                                         111

5.3    Recommendation                                                               112

Bibliography                                                                       115





1.1    Background to the Study

Internal Control is defined as a system of policies and procedures a firm employs to safeguard the firm assets, ensure accurate and reliable accounting records and information, promote efficiency and measure in compliance with established policies (Ronteltap, 2007). Horngren and Foster (1990 also defined internal control as “the set of accounting and administrative controls and practice that helps to ensure that approved and appropriate decisions are made in an organization. They further stated that internal controls include both accounting control and administrative controls and explain them thus: Accounting control comprises the methods and procedures that are mainly concerned with the authorization of transactions, the safeguarding of assets and the accuracy of the accounting records. Good accounting controls help increase efficiency; they help decrease waste, unintentional errors and fraud while administrative controls comprise the  plan of organization and all methods and procedures that help management planning and control of operations.

It also manages and assures that organizations resources both tangible and intangible are systematically directs, monitored and measured (Foster, McClain, 2010). Also, according to the British Auditing Guidelines, Internal Control is defined as the whole system of controls, financial and otherwise, established by the management in order to carry on the business of the enterprise in an orderly and efficient manner, ensure adherence to management policies, safeguard the assets and secure as far as possible the completeness and accuracy of the records.

From the above definition, internal control extends beyond financial and accounting matters and the custody of company’s assets. It includes the means designed to promote, govern and check upon various activities for the purpose of ensuring that the enterprise objectives are met. Companies need internal control to co-ordinate and monitor the affairs of the organization to ensure that the objectives are met. Internal control is established in a computerized accounting system whenever the client adopts computer-based accounting system for financial accounting and reporting purpose. The possibility of error and frauds in a computerized accounting system is much larger than the manual system, and the likelihood of discovering such errors is minimal.

Therefore, there is need for a well designed internal control system to be instituted in an organization to monitor the daily operations of the organization. This responsibility of establishing such an adequate system of internal control in a computerized accounting system lies with the management of the organization. The essence of internal control is to prevent and detect errors and irregularities in order to conduct business in a proper and efficient manner.

The effectiveness and efficiency of internal control in a computerized accounting system can enhance profitability through the following essential elements: The logical plan of the organization, a well designed accounting structure, an internal audit function, segregation of duties of staffs and competent well trained technical personnel; recording and custody that ensure that the funds and properties of the organization are kept and handled properly. Managerial supervision is also an important feature for internal control system. They must understand their own role in the internal control system as well as how individual activities relate to the work of others. They must have a means of communicating significant information upstream. There also needs to be effective communication with external parties such as customer, supplier, regulators and shareholders (Au and Kumar, 2011). The directors should review the company’s financial operation at regular intervals and this requires segregation of duties and the introduction of internal check. Internal control is so overwhelming that it determines either the success or failure of an organization.

The profitability and efficiency of a computerized accounting system can be achieved when there is a consistent check on the activities and transactions taking place in the organization to ensure that the systems is being properly and effectively operated on by competent staffs.

1.2    Statement of the Problem

Effectiveness of internal control techniques on a company using a computerized accounting system should be considered most important in every organization, because the task of internal control techniques is to prevent and detect fraud in the organization. For this purpose organizations give much importance to the internal audit which is generally a feature of large companies, it is a function provided either by employees of the entity or sourced from an external organization to assist management in achieving corporate objective. Internal audit can play a key role in assessing and monitoring internal control techniques and procedures. Therefore, internal control is needed to achieve efficiency and effectiveness of operations in a company. Thus, this study aims to find out the extent of the perception of internal control, internal control techniques, a computerized accounting system and how it can reduce fraud in a company using computerized accounting system.

1.3    Objective of the Study

1.      To determine if an occasional evaluation and review of the internal control system will lead to an increase in efficiency and profitability of an organization using a computerized accounting system.

2.      To deter the effective application of internal control in a computerized accounting system and the efficiency of workers.

3.      To determine if the internal control strategy put in Place will reduce computer fraud and occurrence of computer fraud.

1.4    Research Questions