Internal Control System – Evaluation Of NEPA

Internal Control System – Evaluation Of National Electric Power Authority, Enugu District

Internal Control System – Evaluation Of National Electric Power Authority, Enugu District

The statement on study auditing standards defined internal control as being not only internal check and internal audit, but the whole system of controls, financial or otherwise, of an establishment by management in order to secure, as far as possible, the accuracy and reliability of the records run the business in an orderly manner and safeguard the company’s assets, with its objective being the prevention or early detection of fraud and errors in the establishment.

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LITERATURE REVIEW

Internal control as an area of study in business has been treated from different perspectives in institution of higher learning.

In some institution it may be treated as part of auditing, while in other it may come under management accounting especially as part of the theory of control in accounting. Nevertheless emphasis is placed highly on internal control a the key factor that determines successes in business. This is why chinedu Nwokolo has to say that any enterprise whether government sponsored or privately sponsored which must succeed and make profit must have properly deigned installed and operated internal control system geared to profit planning indeed internal control may explain why some business enterprises succeed and other fail why the prices of the products of one enterprises are higher than those of a similar enterprise and to a larger why many public enterprises and parietals fail.

Definition Of Control And Internal Control

Control is defined by chambers twentieth century dictionary as, to check to retain authority, command and regulation. Ordinarily control means all that is done to check or regulate or authorize or even command activities in a system. Thus there are usually adequate rules to control or regulate between management and staff between various departments and there are equal rules guiding entry into and exist from a system or establishment. All these rules of regulations are those that pertain to persons function and personnel welfare. In like manner there are some form of control or restraint or to in civil service parlance as financial control or regulation or restraining rules which are aimed at entrancing accountability, maintaining and keeping accountability discharging accountability and such controls which include independent check by management of records and assets.

Internal Control

The fundamental of auditing by Osita Aguolu FCA defined internal control as the whole established by management in order to secure as far as possible the accuracy and reliability of the record run the business in an orderly manner and safeguard the prevention or early detection of fraud and errors,.

It may include internal auditing. It is necessary to highlight that internal control comprises the whole system of financial and other controls set up and operating within a business including internal audit, internal check and other from of control.

Examine the above definition in detail.

1. The whole system: Internal control can be seen as single procedures (for example a clerical officer of. Check the calculation done by a clerical office z) or as a whole system. The whole system should be more than the sum of the parts

Established by the management: Internal control systems are established by the management, either directly or by means of

2. external consultants, internal audit or accounting personnel. External auditors may be asked to advise on the establishment of system

3. Ensure adherence to management policies: Not all management have expressed policies. But taken budget as an example which is an express on of management policy and adherence to the budget can be achieved by procedures such as variance

4. Safeguard the asset: Usually assets may not be allowed to be broken lost or stolen. Broken lost or stolen. Procedures are always devised to safeguard them. Examples are locks and keys, the keeping of examples are locks and keys, the keeping of a plant register regular reviews of debtors balance etc. An aspect of this which is often overlooked is that payment where no benefit have been received as payment for piece work not done and embezzlement of goods by employees are examples of failure to safeguard assets.

5. Secure – completeness: It is essential that all transactions are recorded and processed. The procedures include checking that no goods leave the organization without a delivery note followed by regular comparison of invoices with delivery notes to see that no goods sold have failed to result in an invoice.

6. Accuracy of the records: Example of procedures to achieve this include checking of the work of one clerk by another or the use of control accounts, independent comparison of two set of record e.g. stock records and stock or piece work payment and good work put into store.

It is important to express that internal control related to the entire system of controls in an enterprise and is not limited to accounting information for example a situation whereby security men are at the entrance or at the ate of an enterprise premises searching all vehicles do not carry stolen goods from the enterprise premises.

This particular action by the security men may be part of internal control system of the enterprise, which may not be referred to as financial matter.

2.2 Types Of Internal Control
The types of internal control in some or combination which the internal or external auditor may seek to place some degree of reliance are as follows:

a. Organization

b. Segregation of duties

c. Authorization and approval

d. Supervision

e. Physical

f. Arithmetical and accounting

g. Personnel

h. Management

i. Budgeting

j. Acknowledgement of performance

Explanation of the above categories are as follows”

A. Organization A company should have a plan of business which should include clear definition and allocation of responsibilities. This shows that every function should be henelled by a specified person who may be referred to as the responsible official. Thus the keeping of petty cash should be assigned to a person who is then accountable for that function.

ii. Identify lines of reporting: this implies that he delegation of authority and responsibilities specified for a example a worker should be aware of the precise power delegated to him, the limit of this authority and to whom he should report. We can buttress this point by saying that the responsibility for the correct operation of internal control may be delegated by the board of directors to specific management personnel and to the internal audit unit.

B. Segregation of duties: No one person should be responsible for the recording and processing of a complete transaction.

ii. The involvement of many people reduce the risk of deliberate manipulation

C. Authorization and approved: An appropriate person should be required to authorize or approve all transaction. The extent of the authorizations should be clearly stated. For example

1. All overtime must be approved by the works manager

ii. All credit sales must be approved by the credit control department

iii. All un-dividend office stationery purchases may be authorized by the office manager up to certain amount

D Supervision:- All duties by all levels of workers should be supervised and monitored. The responsibility and authority for supervision should be clearly stated and made known to the staff being supervised

E. Physical: This relates to physical custody of assets and entails procedures outline to limit access to authorized staff only.

F. Arithmetical and accounting: These are the measure in the recording function which examiner that the transaction have been authorized that they are all include ad that they are correctly recorded and accurately processed.

Procedures include checking the arithmetical accuracy the records the maintenance and examination of total reconciliation control accounts trial balance accounting for documents preview that is before a vital decision concerning the organization assets is taken the people concerned should review the documentation available to see that all that should have been done has been done.

Example of arithmetical and accounting, clerk of examining the extensions of a sales invoice the extension having been carried out by clerk.

An accounting independent of the sales ledger function making a sales ledger control account. A staff in the accounting department independent of the cash book personnel making bank reconciliation.

iv. A clerk in the accounting department comparing the incoming purchases invoices with copy order forms and goods inwards notes.

v. A staff in the purchasing department checking purchases requisitions of ensure that they are correct complete and authorized before making out an order.

g. Personnel: A proper arrangement should be made to ensure that staff operating a system are competent and motivated to carry out work assigned to them as the proper functioning of a system depends upon the competence and integrity of the operating staff. Control involve appropriate remuneration and promotion and career development prospects selection of people with appropriate personal qualities and training and assignment to tasks.

h. Management: These are measure normally carried out by management which are outside and over and above the day to day routine of the system example.

i. Conspicuous failures of control stock thefts, excess stocking unnecessary overtime will becomes apparent and staff will be motivated to perform.

ii. Management accounts should be designed to summarize performance in clear detail.

iii. Budgeting and variance analysis is a management tool which should prevent or at least detect departure from management’s intended plans.

i. Budgeting: A common technique used in business is the use budgets which can be defined as quantitative plan of acting prepared in advance of the period to which it relates Budget having actual result and the variance investigated.

J. Acknowledgement of performance: staff carrying out data processing operations should acknowledge their activities by means of signatures initials rubber stamp etc. for example if invoice calculations have to be examined the person concerned should initial each invoice acknowledgement of performance not only allows blame to be apportioned but also has a powerful psychological effect.

2.3 Internal Control In Specific Areas Of A Commercial Enterprise

The major areas of activity usually found in a commercial enterprise. At the commencement of each area are outlined the objectives of internal control in the are and some measures then follow which will accomplish the set objectives

a. Internal control generally

Objectives:

To carry on the business in an orderly and efficient manner to ensure adherence to management policies safeguards its assets and secure the accuracy and reliability of records.

Measures:

i. An appropriate and integrated system of accounts and are cords

ii. Internal control over those accounts and records

iii. Financial supervision and control by management including budgetary control management accounting report and inter in accounts.

iv. Safeguarding and if necessary duplicating records

v. Training engaging allocating to specific duties personnel who are able to accomplish their responsibilities. Rotation of duties and cover of absences.

B. Payment into Bank:

Objectives:

i. To ensure that all cash and cheques receive are banked without unnecessary delay at prescribed intervals, preferably daily.

ii. To ensure that all cash and cheques received are banked intact

iii. To ensure that all cash and cheque received are accounted for ad recorded correctly.

Measures:

i. Cash and cheques should be banked without delay preferably daily

ii. Cash and cheques should be banked intact

iii. Banking should be made with security conscious example for large cash sums security guards should be used.

iv. The bank paying-in-ship should be prepared by an official with no access to cash collection points bought or sales ledger

There should be with collection records post lists andslaes ledger records

C. Cash Balance

Objectives:

1. To prevent misappropriation of cash balance

2. To prevent unauthorized cash payments measure

i. Establishment of cash floats of specified amounts and locations

ii. Recruitment of staff responsible for each cash balance

iii. Administration of security measure including use of safes and restriction of access.

iv. Adoption of impress with rules on reimbursement only against approved vouchers

v. Strict rules on the authorizing of ash payment

vi. Independent cash counts on a regular and a surprise basis

vii. Insurance arrangement e.g. for cash balance and fidelity guarantee

viii. Special rules for I.O.U preferably these should not be encouraged

D. Bank Balances

Objectives:

To prevent misappropriation of bank balances

To prevent teeming and lading

Measures:

i. Reconciliation should be prepared at stated interval

ii. They should be performed by independent staff

iii. Arrangement should be made for bank statement to be sent direct to the person responsible for the reconciliation

iv. Work on reconciliation should be included.

A Comparison of each debit and credit in the cash book with the corresponding entries in the bank statement. A comparison of returned cheques with the cash book entries noting dates payees and accounts. A test of the detailed paying in slips with the cash book. The dates of credits in the bank statement should be carefully compared with the cash book to detect any delays

E. Cash sales and collections

Objectives:

i. To ensure that cash to which the company is entitled is received

ii. To ensure that all such cash is properly accounted for and entered in the records

iii. To ensure that all such is promptly and intactly deposited

Measures:

i. Stating and clarifying the number of staff who are authorized to receive cash for example cashiers, sales assistants etc.

ii. Establishing a means of evidencing cash receipts e.g. cash register with sealed till rolls pre-numbered duplicate receipts forms. The duplicate receipt from book should be securely help and issue controlled.

iii. Selection of officials with responsibility for emptying cash registers at defined intervals and agreeing the amount present with till roll totals or internal register such collection should be evidenced in writing and be initialed by the assistant and the supervisor.

iv. Ensuring that customers are aware that they must receive a receipt form or ensuring that the amount rung up on the cash register is clearly visible to he customer

v. Investigation of shorts and over.

vi. Independent compassion of agreed till roll totals with subsequent banking records

vii. Immediate and intact banking payment out should be from funds drawn from the bank on an impress system.

viii. Collections by salesmen should be banked intact daily there should be independent comparison of the amounts banked with record e.g (Duplicate receipts books) of the salemen.

ix. Persons handling cash should not have access to other cahs funds or to bought or sales ledger records

x. Rotation of duties and cover for holidays and sickness.

F. Cheque payments:

Objectives:

i. To prevent unauthorized payments being made from banks accounts

Measures:

i. Checks over custody and issue of unused cheque books. A register should be kept if necessary.

ii. Appointment of a staff to be responsible for the preparation of cheques or trader credits

iii. Rules should be established for the presentation of supporting documents before cheques can be made out

iv. All such documents. Should be stamped paid by cheque no,… with date

v. No cheques should be made out to bearer except for the collection of wages or reimbursement of cash funds

vi. Establishment of who sign cheque. All cheques should be signed by at least two persons with no person being permitted to sign if he is a payee.

vii. Special safeguards where cheques are signed mechanically or have pre-printed signature. Such signings are often made for dividend payment, salary cheques and other reasons.

viii. The signing of blank cheques must be prohibited

ix. All cheques should be restrictively crossed

x. Separation of duties custody recording and initiation of cheque payment; cash records and other areas e.g. debtors and creditors

xi. Special rules for authorizing and checking direct debits and standing orders.

g. Wages and salaries

Objectives:

i. To ensure that wages and salaries are paid only to actual employees at authorized rates of pay

ii. To ensure that all wages and salaries are computed in accordance with records of work performed whether in respect of item output sales made or other criteria

iii. To ensure that payrolls deduction are correctly recorded in the books of account

iv. To ensure that payment are made only to the correct employees

v. To ensure that all transaction are correctly accounted for and paid over to the appropriate third parties.

Measures:

i. There should be separate records kept for each employee the records should contain such matters as date of engagement, age next of kin agreed deductions skill department and specimen signature. Probably these records should be maintained by a separate personnel department.

ii. Time records should be kept, preferably by means of supervised clock card recording. These should be approved and approved acknowledged. All overtime should be authorized.

iii. Procedures for and specified officials responsible for engagement retirement dismissals fixing and changing rates of pay procedure should be laid down for notification of these matters to the personnel and wage roll preparation departments

iv. The payroll should be prepared by staff unconnected with other wage duties special procedure should exist too dealing with advances holiday pay retrenchment luncheon vouchers new employees, employees leaving sickness and other absence and bonuses.

v. Output or piece work records should be properly controlled and authorized. Procedures should exist for reconciling output or piece work records with production records

vi. The payroll should be checked by separate personnel. All work on the preparation and checking of the payroll should be initialed. All such work should be supervised and the payroll scrutinized and approved by a senior staff.

vii. Wage envelopes should be made up by personnel independent of the wage roll preparation team.

viii. Specified times should be laid down for distribution of wage packets. These should be laid down for distribution of wage packets. These should either be acknowledged by the recipients or distribution should either be acknowledged by the recipients or distribution should be made in the presence of (but not by) supervisor or other capable of identifying employees.

ix. The net amount due to be paid out in cash should be drawn after a proper analysis. Tight security should be imposed on the security of cash, both on collection from the bank and at all times up to the receipts of pay envelopes by the work force. Surprise checks at pay out should be made at intervals by internal auditor by a senior staff

x. Unclaimed wages, safe custody of such pay packets a requirements for investigation subsequent pay out only after proof of entitlement breaking down and re-banking after a specified period of time.

xi. Payment by cheque and credit transfer should be subject to special procedures. These could include maintenance of a separate bank account with regular reconciliation

xii. Regular independent comparisons should be made between personnel records and wages records

xiii. Deduction such as PAYE national insurance pension contribution union dues should be subject to prompt payment over to the institutions concerned. Control totals subject to frequent review should be kept

xiv. Surprise investigation of wage records and procedures by internal audit or senior officials

xv. Regular independent comparisons of payrolls at different dates

xvi. An independent staff should be appointed to be responsible for settling overies.

Purchases and Trade creditors:

Objectives:

i. To ensure that good and services are only ordered in the quantity of the quantity and at the best terms available after appropriate requisition and approval

ii. To ensure that goods and services received are inspected and only acceptable item are accepted

iii. To ensure that all invoices are checked against authorized orders and receipts of the subject matter in good condition

iv. To ensure that will good and services invoiced are properly recorded in the books

Measures:

i. There should be procedure for the requisitioning of goods and services only be specified personnel on specified forms with space for acknowledgement of performance

ii. Order forms should be pre-numbered and kept in safe custody. Issue of blank order form books should be controlled and recorded.

iii. Order procedures shall include requirement for obtaining tenders estimates or competitive bids.

iv. All goods received should to recorded on goods received notes or in a special book.

v. All good should be inspected for condition and agreement with order and counted on receipt. The inspected should be acknowledged.

vi. At intervals a listing of unfulfilled orders should be made and investigated

vii. Invoices should be checked for arithmetical accuracy pricing correct treatment of VAT and trade discount and agreement with order and goods-in records.

viii. Invoices should have consecutive members put on them and batches should be pre-listed.

ix. Totals of entries in the invoice register or day book should be regular checked with the pre-listed.

x. Responsibility for purchase ledger entries should be vested in personnel separate from official responsible for ordering receipt of goods and the invoice register.

xi. Ledger account balance should be regularly compared with supplier’s statement of accounts.

xii. A proper coding system is required for purchases of goods and services so that the correct nominal accounts are debited.

Fixed assets

Objectives:

To ensure that fixed assets are only acquired with proper authority

To ensure that fixed assets are properly accounted for and recorded

Measures:

i. Capital expenditure should be subject to authorization procedures which in all cases should be evidenced capital investment appraised techniques should be applied to acquisisms. It may be desirable in such cases for proposed expenditure to be reviewed by a special committed and for board authority to be required.

ii. Allocation of expenditure between capital and revenue should be approved.

iii. All capital expenditure should be monitored by a senior staff e.g. (Chief accountant) with approval sought.

iv. Adequate recording of fixed assets should be made with detailed break down as necessary. In many cases (e.g for plant vehicles or buildings) Detailed register should be maintained.

v. Where register are maintained frequent and regular review of the record with actual assets should be made by senior independent personnel in all cases condition and use should be checked.

vi. Disposal whether by scrapping sale or trade in should be subject to authorization procedures.

vii. Depreciation policy should be laid down by the management and should also be in accordance with SAS staff should be appointed to compute and check the actual computation.

2.4 Objectives Of Internal Control

An early stage in an auditors work be will have to decide the extent to which he wisher to place reliance on these internal control of an organization. As the audit proceeds the decision will be kept under view and depending on the result of his examination he may decide to place more or less reliance on this control. The essence of adequate control in any organization control according to Mr. Cooper Chienedu are to ensure that.

a. All transaction are properly authorized so as to prevent improper transaction taking place resulting in assets being incurred. In example is loan from bad repayment.

b. The authority receives and enters in its accounting records all the invoices and revenue to which it is entitled.

c. All assets are properly recorded and provision is made for bad debts.

d. Recorded transaction are properly recorded and provision is made for bad debts.

e. Recorded transaction are properly valued. Even through all transaction are recorded they may be recorded at an incorrect amount for example arithmetical errors in quantities prices extension or addition of sales invoices or sales to be recorded.

f. Record transactions are properly classified and that transaction is recorded in the correct period.

g. The accounting records provide a reliable basis for the preparation of accounts.

To ensure the propriety of transactions and accuracy reliability and fairness of accounting information the above objective must be met for any given type of transaction.

2.5 Some Important Aspect Of Internal Control System

There should be procedures to ensure that personnel have capabilities commensurate with their responsibilities. Inevitably the proper functioning of any system depends on the competence and integrity of those operating it. The qualification selection and training as well as the innate personal characteristics of personnel involved are important features to be considered in setting up a system. Given this condition some of the other condition and procedures can be absent and reliable accounting information can still be produced. Honest and efficient people can perform well with little or no control. But where people are incompetent and dishonest no matter the strength of control the system is bound to be inefficient.

2.6 Segregation Of Power Of Duties

One of the primer means of control is the separation of these responsibilities or duties which would if combined enable one individual to record and process a complete transaction. The overall management and departmental structure should be clearly defined preferably by organizational charts and written job description showing authorities duties and line of responsibilities.

Segregation of duties reduces the risk of the intentional manipulation of error and increase the element of checking, The duties of individuals exercising these different function should be clearly defined and where practicable set out in writing together with the extent of their respective authorities. Four general types of segregation of duties for the prevention of both intentional and unintentional errors are of special significance in most organization.

a. Segregation of operational responsibility from financial record keeping responsibility.

b. Segregation of authorization of transactions from custody of related assets.

c. Segregation of custody of assets from accounting for these assets.

d. Segregation of duties within the accounting function in summary the function that should be separated include those of authorization execution custody and recording in the case of computer based accounting system development and daily operations adequate authorization procedure. If controls is to satisfactory every transaction must be properly authorized.

Authorization may be general, whereby management certain transaction to the processed with no other authorization example reconnecting a customer after defaulting (non-settlement of electricity bill). All transactions should require authorization or approval by an appropriate responsible person to put adequate meaning to it, the limit of such authority should be specified there should be established policy for determining which document may be destroyed when the may be destroyed and what authorization is require it is important here to distinguish authorization from approval the later being a recurrent that the control required by the authorization have been made and met.

Adequate and proper documentation of records and book-keeping. Document and record include such diverse items and invoice and other forms of accounting books time cards and EDP disc, tape and punches cards.

Documents which are of original and records in which transaction are entered must be adequate to identify and trace transaction. From initiation to completion and should provide evidence of controls performed during the processing of the transaction must be adopted of which all members of the organization must be aware.

Proper procedure must be adopted so that all document of transaction are not omitted. Accounts codes should normally be used and know to all those concerned. It is not enough that transaction are recorded in books, proper procedure for documenting transaction must be adopted and made known to members of the organization. If financial statement are to be present the result of transactions which have taken place. There must be procedures to ensure that all transaction are recorded.

2.7 Physical Control Over Asset And Records

The most important type of protective measure for safeguarding assets is the use of physical precautions such as the sue of store room and store keepers for inventory to insure orderly transfer of materials and to prevent misappropriations. The key feature of perpetual inventory on hand-keeping perpetual inventory records does not guarantee strong internal control. There are basic internal controls concepts as the sub-division of duties the control of documents by serial numbering and separation of the accounting function from the custody it assets are essential element with either the perpetual inventory or periodic inventory system. Adequate use of security personnel in granting access to the premises is equally a good means of protective measure.

2.8 Independent Checks On Performance

The last specific control procedure is the careful and continuous review of the other five conditions and procedure the need for system of independent check arises for the following reasons.

i. A system tends to change over time unless. There is a mechanism for frequent review. People may forget procedure become careless or intentionally is checked.

ii. Both fraudulent and intentional error are always possible regardless of the quality of the control.

iii. There is need to compare records with assets periodically in order to check the control for safeguarding the assets and to determine the existence of possible unrecorded or improperly records transactions.

These control conditions and procedures are complementary and should not be thought of as alternatives any one of the control may fulfill objectives not achieved by another. In effective accountives not system will utilize a mix of control designed to achieve the necessary objectives. But for an efficient internal control system all the six condition and procedures must be adopted any control designed to ensure the execution and recording transaction will be ineffective against the errors or irregularities perpetrated by management may normally overtime them.

iv. The effectiveness of a control system is ultimately dependent on t e people performing them. Over evaluation of internal control will necessitate making certain assumptions about the motivation of the people in the system touches rose in auditing manual suggests the following:

a. The threat of prompt exposure will determine an individual from committing fraud.

b. People will report irregularities which come to their attention.

c. The probability of collusion is how since people will be detected by the possible consequences of being rejected in an attempt to propose fraudulent activities.

d. Personal relationship with the organization will not influence or conflict with “Formal” relationship established by the organization.

e. The existence of documentary evidence that an action has taken place implies that the action in fact has been performed.

f. Employees have sufficient training experience time and motivation to perform their duties completely and conscientiously.

2.9 Limitation And Assumption On The Effectiveness Of Internal Control

All the internal control system of any organization no matters how elaborate they are made to be will not guarantee efficient administration and completeness and accuracy of the records nor can it be proof against fraudulent collusion especially on the part of the record nor can it be proof against fraudulent collusion especially on the part of those holding position of trust and authority. Two or more fraudulent and dishonest person working n collusion can circumvent the efficiency of the best possible control. Authorization controls can be abused by those vested with the authority management in most cases. Voerrides control set up by it. Pressure exerted from within and outside the enterprise can influence the integrity and competence of staff. Human errors due to errors of judgement and interpretation misunderstanding carelessness fatigue or distraction can undermine the effective operation of internal control should not be under estimated, it must be recognized that there will always be certain potential limitations on their effectiveness. Ross touch propounds the major limitations.

1. Controls usually provide reasonable result rather than absolute assurance that their objective will be accomplished. This is primary because the cost of an internal control should not exceed the benefits expect to be derived from it. Thus control will seldom exist which can “guarantee” that all errors will be prevented or detected and corrected.

ii. There is risk in controls because it may become inadequate because of change in conditions.

iii. Internal control tend to be channeled at routine transaction. The one-off or unusual transaction tends not to be the subject of internal control.

iv. Likely human error caused be stress of work load, alcohol, carelessness, distraction, mistakes of judgement and the misunderstanding of instruction.

v. A requirement that the cost of an internal control is not disproportionate to the potential loss which may result from its absence.

vi. The possibility of circumvention of control either alone or through collusion with parties outside or inside the enterprise.

vii. Management oversee of controls.

viii. Abuse of responsibility.

ix. Human cleverness – no matter how secure the computer code is designed to prevent access, there is always hack who gets in.

x. Changes in environment making control inadequate.

However the inherent limitation of internal control are the reasons why auditors are required to always perform some substantive test of material items as well as relying on internal controls.

3.0 Control Environmental And Control Procedures

SAS: defined the control environment as the overall attitude, awareness and action of directors and management regarding internal control and their important in the entity. The control environment encompasses the management style and corporate culture and values share by all employees factors reflected in this idea include:

i. The philosophy and operating style of the director and management.

ii. The entity’s organization structure and method of assigning authority and responsibility (including segregation of duties and supervisory controls).

iii. The director’s method of imposing control including the internal audit function the functions of the board of directors and personnel policies and procedures.

Control procedures; these are those policies and procedures in addition to the control environment which are established to achieve the entity’s specific objectives. They include in particulars procedures designed to prevent or detect and correct errors.

Specific control procedures include:

i. Approval and control of document leg custody and use of purchase orders.

ii. Checking the arithmetical accuracy of the records (e.g. checking sales invoice calculations).

iii. Control over computerized application and the information technology environment.

iv. Comparing the result of cash security and stock counts with accounting records.

v. Maintaining and reviewing control accounts and trial balances.

vi. Limiting direct physical access to assets and records leg lock ad keys.

vii. Comparing internal data with external sources of information leg bank statement, customers remittance advises, suppliers statement of account).

Auditor are expected to make an evaluation of the control; environment in client. A good control environment may well men that internal control is strong but nonetheless internal control may be weak at the level of control procedures.

3.1 Internal Control Questionnaire

The auditors as a professional accountant with a considerable practical knowledge knows the proper internal control measures to be expected in a functioning commercial enterprise the auditor appraise this by administering the internal control questionnaire.

A questions consists of a list of questions relating to the aims of the study and the hypotheses to be verified to which the respondent is required to answer by writing in his response. The auditor should develop question which relate directly to the object of his responsibility. The question should be enough to cover the scope of audit assignment adequately and yet not too many the level of language used in a questionnaire should be made appropriate to the general educational and intellectual background of the target personnel.

Internal control questionnaire (ICO) therefore, is that instrument used b background of the target personnel.

Internal control questionnaire (ICO) therefore, is that instrument used by auditors to appraise and evaluate internal control system of an enterprise.

The form of internal control questionnaire (ICQ) to be adopted in any commercial enterprise depends on the nature and circumstance of the enterprise.

3.2 Functions Of Internal Control Questionnaire

The function of internal control questionnaire (ICQ) are as follows:

i. It gives the auditor the chance to review and appraise to system.

ii. The auditor can ascertain the limit of test to be embarked on.

iii. It subjects all the characteristics of a system into enquiry especially as regards to the system strength and weakness.

iv. It brings to focus areas of weakness in the system.

v. After reading the questionnaire the auditor’s staff get acquainted with the system.

Confidential – international control questionnaire.

Client:

Instruction:

a. Answer should be entered in columns as ‘yes’No’ or not applicable (N/A) from assistants non tests and observation

b. A memorandum should be cross – retrenched to. This questionnaire to clarity the answer ‘No’ on each occasion that it appears. This cross reference should appear in the column captioned cross-red.

3.3 Brief History Of Electricity Industry In Nigeria

Electric power development in Nigeria started towards the ends of the last century from 1998 when the first generating plant was installed in Lagos and until 1950 the pattern of electricity development was in the form of individual under keeping set up by the federal government (P.W.O) The government enacted the electricity co-operation of Nigeria ordinance number 15 of 1950 make the development of electricity more effective. The ordinance brought all the electricity undertakings, under the control of the native authority or municipal ownership and control. The electricity corporation of Nigeria usually referred to ECN than became the statutory body responsible for generation transmission, on distribution and sale of electricity to all distribution and sale of electricity to all consumers in Nigeria. Another organization. The Nigeria Dam Authority (NDA) which was responsible for the construction maintenance of Dams and other works/ on the river Nigeria and else where was established in 1962. The authority was hared with generating hydroelectric power improving navigation and promoting fisheries and irrigation. Construction of the Kanyi Dam began in March 1964 and was completed on schedule in December 1968.

3.4 National Electric Power Authority (Nepa)

The decision to merge the electricity corporation of Nigeria (ECN) with the Nigeria Dams Authority (NDA) into a single body was taken by the federal military government in September 1969. The federal military government appointed a Canadian firm of consultancy “ show month LTD” to carry out a survey in technical details of the merger.

The Canadian firm submitted the report on the Merger in 1971. The ECN and NDA were merged to become NEPA by Decree of June 27th 1972 but was effective from April 1st 1972. While this actual merger was completed on April 16the 1973 with the appointment of a general manager.

3.0 RESEARCH METHODOLOGY

The chapter is focused on the methods adopted by the researcher in conducting this research project. It also shows. The various sources of data and how. They were collected. In explaining this, mention was made in this chapter of the population of study and the sample design chosen.

3.1 POPULATION OF STUDY

The staff strength in NEPA Enugu district office is 200. This forms my study populating out of this numbers a study sample size of 40 staff was chosen representing 5% of the total population. This number was chosen as a result of time and financial constraints the 40 staff chosen were mainly from accounts administration and stores departments respectively these department are in better position to give accurate and detailed information needed for this research project since they are actively involve in the whole process they are actively invoice in the whole process of internal control system. The respondents to the questionnaire were stultified into these various address:

Management staff – 4 questionnaire

Senior staff – 15 questionnaire

Junior staff – 12 questionnaire

Total – 40

3.2 SAMPLE DESIGN

The research work was aimed at trying to see if internal control system exist in NEPA. It nature and effectiveness. As a result focus is on the entire staff of accounts. Administration and stores department from where sample size is chosen. Also it must be noted that the random sampling method was sued to arrive at the sample size of 40 which is representative of the different cadres of staff-the management, senior and junior cadres.

3.3 SOURCE OF DATA

Primary and secondary sources of data were utilized in eliciting relevant information for the purpose of this study.

PRIMARY SOURCE

Primary source are sources resorted to in the course of collecting primary data and piece of information generated usually at a first hand level” purposely and especially for the study on land. To generate enough of this data various instruments of research such as questionnaire, personal interview and observation were employed.

SECONDARY SOURCES

These are sources use in collecting secondary data used in the research work secondary data refers to data which has been previously published and which might have been existing before the need for the study on hand in the course of collecting the secondary data used in this work. The research resorted to the following:

i. Data from company’s profile

ii. Textbook, journals, magazines and newspapers to reach these data, various institution and libraries were visited and they include the followings.

a. Public relations officer’s office at district office NEPA ENUGU

b. Institute of management and technology library Enugu

c. National library Enugu

3.4 RESEARCH INSTRUMENT

Research instruments are the actual tools or instruments used in collecting of data. For the purpose of this study, only three instruments were found suitable and adequate, they are:

1. Questionnaire

2. Personal interview

3. Observations

Questionnaire: Internal control, Questionnaire were distributed to accounts administrations and stories departments of NEPA Enugu district office to obtain their opinion towards the adequacy of the internal control system in the organization. The questionnaire contained twenty five (25) loosed ended questions (see appendix) 1) covering all practical areas of control emphasized by the case study. In choosing this number and nature of questionnaire, the research took the following into consideration.

a. Experience has shown that the fewer the question in a questionnaires the more willing the respondents will be towards supplying the answers.

b. The closed ended nature of the questionnaire makes for easier classification because in the context of an open-ended questionnaire may be too wordy to be useful personal interviews the main of this method of data collection is to give the research on the spot assessment of the respondents and this serves as a compliment to the questionnaire method. The personal interviews comprise of structured and unstructured questions Eleven (11) structured questions (see appendix II) were directed to knowledgeable office in the organization with some unstructured question spontaneously asked to clarify of the structured questions and the question.

Observation and researched personally looked into the researchers study of the district officer, observations were made n the various activities managing from recording of transaction to activities on the issuing of material. The advantage of this form of a collection cannot be emphasized since it has got the chances of exclusion has and prostitution of data.

It is therefore, no over-statement to assert that the sources of data are reliable and adequate analysis.

3.5 METHOD OF DATA ANALYSIS

The data collected using the research instrument were annualized using the chi-squares method, percentages and descriptive methods.

Responses to questions were grouped and recorded so that frequencies and percentages could be computed. it was considered wise to us these methods so that the questionnaire could be properly employed to test the variable that led to computation and determination of the accepted hypothesis. The data presentation and analysis, and the hypothesis testing will be shown on the nest chapter. It should be noted, however that data collected from the account department were not treated but presented as published.

3.6 Problems Encountered In Data Collection Process

This research work suffered some problem due to the unwillingness to release information relevant for the work . as a matter of fact majority of the information as used in this work are got from secondary sources . some of the staff tends to conceal information not because the information sort for fall under company top secrets thereby making the work of the researcher a difficult one .

in view of the above mention problems much of the information which would have been buttressed by the assertions and findings of this study were not available several appointment with the responsibility officials failed in their own instances this made the researcher to repeat his visit again and again . This series of disappointment caused the researcher more money energy and a lot of time which should have been used for other studies.

4.0 DATA PRESENTATION AND ANALYSIS

In this chapter, the data collected in the course of this study are presented and analyzed. The data were generated through questionnaire administered and personal interview posed at the management senior and junior staff levels which formed the sampled size of the establishment. Some pieces of information generated through the questionnaire which have direct relevance to the hypothesis are presented for further analysis. Therefore, for purpose of brevity and prevision only that date have a significant relationship with the hypothesis are state.

4.1 QUESTIONNAIRE DISTRIBUTION AND RATE OF RETURN

Questionnaire were distributed to 40 employees of accounts administration and store department of the establishment senior and junior staff cadres respectively. The distribution and return are shown in table 4.1 below.

Employee class No of questionnaire distributed Returns made by each class Rate of return

Management cadre 4 3 7.5%

Senior staff cadre 15 13 32.5%

Junior staff cadre 21 20 50%

Total 40 36 90%

Out of a total number of forty (40) questionnaire distributed during the study thirty –six (36) questionnaire representing 90% of the total questionnaire distributed were properly completed and returned. The remaining four (4) questionnaires representing 10% of the total distributed were not returned. Therefore findings on based on 90% of the total questionnaire returned.

Table 4.1 (2) educational qualification of respondents.

Level of Education No of respondents percentages

Level of primary education 5 14%

Post primary education 56%

Higher institution 30%

Total 36 100%

The table above shows that 14% of respondent attended only primary school 56% attained post primary education while the remaining 30% acquired formal education in a territory institution. It is obvious from the table that reasonable percentage (86%) of the respondent read beyond primary education level.

Table 4.1 (3) official status of respondents

Official status No of respondents percentages

Management cadre 3 8%

Senior cadre 13 36%

Junior cadre 20 56%

Total 36 100%

From the above table it could be observed that 85 of respondents are top management cadre 36% of respondents fall within middle management level performing mostly supervisory function while 56% of respondents are the operation taking instructions from the mangers and supervisors.

4.2 ANALYSIS OF DATA

Show below is the analysis of evidence or data generated from the questionnaire. This will illuminate the basis of findings that led to the testing hypothesis.

RESEARCH QUESTIONS

Do you have organizational chart?

Responses Frequencies Percentage

Yes 36 100%

No – –

Total 36 100%

From the above responses the questionnaire revealed that there is comprehensive organization of national electric power authority in Enugu district office (see Appendix III).

It is observed above that in question 2 responses elicited show that the bulk of responsibilities are assigned by heads of departments which represents 72% of total responses. From this one can see that the immediate supervisors who indeed stand in a better position to assign duties and carry out supervisors who indeed stand in a better position to assign duties and carry out supervisory work are not allowed to do this most the time. This exposes an anomaly which cash be interpreted to mean that supervision of staff could be allowed to be on their own for a very long time thereby giving the opportunity for mistake that may not be corrected and in some cases even fraud that may go undetected. For question 3, all the respondents agreed that internal redeployment within the department are done only when the need arises thereby representing 100% response. This shows that there is no systematic or laid down rules guide this. In other words redeployment is left to the personal which of the head of department except in exceptional case where the district manager may direct on this as a results of pressure or petitions against a staff from the public. Again, these discovery shows that may be left too long on a particular schedule which may lead to;

a. Boredom.

b. Reluctance to work according to rules as a result of depression

c. Possibility of discovery of loopholes, or even creating them for

fraudulent tendencies. Responding to question 4 and 5, only 56% of the respondents have taken their annual leave through out the past five while 44% have gone some of the time or have not even gone at all through out the five years in question. It is equally observed that while 37.5% of the respondents were too busy to take their annual leaves 62.5% of the respondents said that although their leave was approved there was no body to relive them. From all these it can be observed that staff supervision is inadequate which is an indication of lax control and poor management.

Although responses to question 6,7 and 8 (that is 100). And 100%) respectively tends to show serious effort to observe and carry out internal control system carried out is inadequate and may be haphazardly carried out. The system leaves enough room forward through possible duplication or inflation of payments.

From the questionnaire received through 100% of the respondents to question agree that payment voucher may be paid without the approval of the internal audit unit. This is a sad commentary on whatever is the internal control process as well as the supposedly supervisory function of the internal audit unit. It is wrong for any payment voucher to be honoured without being checked and stamped by a responsible officer in internal audit unit as the stem is open to serious abuse.

A close study of responses to question 13, 14 and 15 goes further to indicate some level of internal control operating in NEPA Enugu district. While 100% respondents to question 13 agree that the district accountants keep all security documents the response to question 14 say that bank teller used fraud cash lodgment are continually checked 80% of the respondent to question 16 say that the district administration officer is the one who authorizes the supply of requisitions by the stores. However, greater respondents to question 15 agree that a number of fraud cases have taken place in NEPA Enugu district office, while 61% of the respondents say there have twelve cases of fraud and 17% say they are not aware of any reported case of fraud in the past five years. This is not surprising going by earlier observations especially in the are of supervision of staff, control of expenditure and revenue accounts. And general administration there is no strict supervision and control of payment voucher process by the internal audit and many anomalous payments made go indicated, while at the same time the realization that there is a strict applied process of carrying out internal checks would have been acting as a deterring instrument.

TESTING OF HYPOTHESIS

In testing the respective hypothesis the researcher used a statistical tool called chi-square this was because of the suitability of the tool in establishment observed and expected frequencies as presented in the frequency table, model adopted in this study.

ATTRIBUTES

a. Degree of freedom = V(R-1) (e-1_ where C column, r-row

b. Level of significance x = 0.05 while level of confidence = 0.95

Decision criteria

If x e2 x O2 – Xe2 accept Null hypothesis (Ho) but if Xe2 x xO2 – reject Null hypothesis (Ho) when Null hypothesis (Ho) is rejected alternative hypothesis (Hi) is accepted formula

1. Expected frequency Fe – Row total column total

2. Completed chi-square (xO2) should be read from the of critical values of the chi-square distribution hypothesis : question No 24 in the questionnaire. How would you classify the internal control design in the establishment in the following area? Specify in each area.

Class

Cash/ Bank Very attractive Effective but not adequate Ineffective Ineffective Total

Operation 3 5 1 0 9

Fixed assets 2 4 2 0 8

Sales activities 1 6 4 0 4

Pay roll 1 3 1 0

For detail calculation of the expected frequency (fe)

Calculation of degree of freedom -= row total – 1 x (column total – 1) (5-1) x (4-) = 12

Total value = 21.026

Computed 2.061

Xe2 = X02 = accept null hypothesis (Ho)

Which says that system of internal control exist but it is inadequate

Hypothesis II

Dues of questionnaire would you classify the operation of the internal control used in the establishment in the establishment in the following area? Specify in each area.

4.2.1 Personal (ORAL) interviews: may oral question were asked so as to elicit credible answer regarding the effectiveness or otherwise of internal control system in NEPA Enugu district office. In order to corporate manageability, consciousness and accuracy into this work attempts were made to group the oral question posed to ten respondents into the following list.

– Operation guidelines acting as internal check

– Function distribution to aid effectiveness

– Security measures in aid of internal control

– Regularity of checks

– Motivating factors

All these checks list, when considered from the point of view of responses collected from oral interview depict the extent the application of internal control measure and its level of effectiveness for instance out of 10 persons interviewed orally and of them agree that these are sufficient operation guidelines designed to act as internal check on the activities of the core department in NEPA there by representing 80% of the respondents specially the enriched rule that cash evacuation must be done not later than 24 hours after collection sand the regular stock-taking process all shows the in-built system of internal control. Furthermore 60% of the respondents noted that functional are properly distributed while 40% say that a records are kept but pare not quite sure of information on these records can easily be extracted one up to two years have elapsed. About regularity of checks, 70% of the respondents said that checks are regular in cash office but not quite so in some other area s stores expenditure and so on.

Answering questions on security measure designed to ensure safety of cash equipment and assets 90% of the security measures but spoke on lack of working security gadgets and equipment as well as security personnel who were described as very old ex-service men who were very well beyond their prime and who or less sleep in the service rather than doing the actual security job. Responding to whether enhanced salaries and improved workers welfare in any way constitution a motivating factor in ensuring that workers adhere to internal control measure 80% of the respondent noted that the workers are general given to abiding or observing internal control rules and measures because of the fear of being published or sanctioned for failure to observed the roles.

Effectiveness

Now that responses from oral interview hence depicted the actual internal control measures being separated in NEPA, Enugu district office and the level of staff involvement, commitment and concern, one can now employ these responses to interpret the level of effectiveness of these measures. Consequently, although the operation guidelines starting checks on cash collection and income expenditure disbursement-checks that should be carried out on daily basis, it was discovered that rather than this, checks are carried out intermittently and there is no direct supervisory control over the officer to ensure this function is performed. Rather, it was discovered that divisional head (the accountant) some time makes direct survey without going through the chief cashier when he showed supervise and whose responsibility to make the survey. He doe this only doe this only when he is interested in knowing when cash is available in the expenditure account and or impress account for the purpose of paying setting one bill or the other.

Again, the discovery that there are no unannounced sporadic checks casts a share on whatever internal control system that is existing in NEPA this is because it is one system cash officers and their staff including those in the stores dread so much because it gives them no notice it has been found to careless and fraudulent officers coupled with the issue of security problems already mentioned, it is easily deduced that although there are efforts to engender and effect literal control measure in NEPA some of the measure are mottled with loopholes and one therefore not quite effective . the level of effectiveness of internal control measures in NEPA is still inadequate.

SUMMARY OF FINDINGS CONCLUSION AND RECOMMENDATIONS

5.1 SUMMARY OF FINDING

This study has to a large extent dealt with the evaluation of internal control system in NEPA Enugu.

Date relating to internal control system were collecting and analysed. Result of the analysis show many area of weakness in the establishment system area of strength.

There are some level of internal control operating in NEPA Enugu, the district accountant keep all security document which makes it difficult for the document to get into wrong hands the bank tellers used for cash lodgments are continually checked and lodgment of cash with the bank are done within 24 hours of the receipts of such cash. It is only the district administration officer that authorize the supply of requisition by the stores, therefore somebody cannot just authorize supply from the store-the-store-keeper does not post the store lodger instead he maintains stores bin card, while the accounts department keeps the stores lodger many respondents also agree that NEPA Enugu has a well founded procedure for authorization receipt and issue of stock and caries out physical stock taking a periodical basis area of weakness, it is obvious that absence of segregation of duties internal redeployment refusal and or denial of annual vacation have helped in no small measure to weaken the internal control system in NEPA Enugu District because when an officer is made to stay long in one schedule he may develop a system of exploiting loopholes in the system. In the are of security measure designed to ensure safety of cash equipment and assets there are lack of working security personnel who were described as very old ex-service men who have more or less sleep in the service rather than doing the actual security job responding to whether enhance salaries and improved worker generally abide or observe internal control rules not as a result of remuneration or motivation but because of fear of being finished for failure to observed the rules payment is made without proper authorization or the payment record incorrectly in general the study shows that the structural design there exist an internal control system in NEPA but not adequate the feed back system exists but are not functioning effectively. As pointed out by milli-change no internal control system is water-tight. Moreover, authority could be abused by those the are vested upon while control could be surmounted by collusion.

5.1 CONCLUSION

After testing the hypothesis formulated and the subsequent findings, one is led into the conclusion that.

1. System of internal control exist but not adequate this tested positive as my discrepancies are already mentioned: non existence of adequate security gadgets and personnel anomaly annual vacation observance lackadaisical supervisory control and so on. These are characteristics of inadequate internal control system.

2. The second application of he measuring instrument also accepted the hypothesis on the existence of the measuring also feed back system but does on to show that it does not function adequately as a result of he malfunctioning of the internal control system. For instance subordinates do not often report back to their supervisors neither do they completed the necessary assignment completion schedules to show who has done what and how.

This has made it very difficult to monitor the activities/performance of subordinate. This however leads to the conclusion that the internal control system in NEPA Enugu district is not adequate and should be properly reviewed furthermore as pointed out in the previous chapters and as emphasized by the American institute of cost and public Accountants, internal control is nothing other than the plan of organization all the coordinate methods and measures adopted within a business to safeguard its assets, check the accuracy an reliability of its accounting records promote operational efficiency and encourage adherence to management policies it is obvious that without purposely control organization are bound to lose bearing with their Objective should adopted a system of internal control that has the characteristics as discussed in chapter two of this research work.

It should also be pointed out that since the internal control system s designed by the management of an enterprise to reflect and suit the peculiar circumstances, it is to be given adequate consideration. Thus is because the circumstance determine the effectiveness of the control system notwithstanding, the adequacy of its design.

5.2 RECOMMENDATIONS:

I. If there is proper segregation of duties, where supervisors are allowed to perform their supervising functions, if officers are made to take their annual vacation as they fall due there may not be cases of fraud that will go undetected and there will be no opportunity for mistakes that will not be correct.

2. More efforts should be made for the safety of cash equipment and assets. For instance the services of the security forces should be provided, so that there will be 24 hours guard in the premise. Moreover able bodies young men should be employed as security

3. Furthermore measures should be introduced to enhance performance measurement with addition reward criteria. This will ensure motivation and commitment of the employees to work.

4. An internal audit staff should physically be present whenever stores monitor market perices periodically within estimated inflation range, make schedules of price and send them to the accountants office, which should in term use this information in preparing local purchase orders (LPO)

5. In payroll at least senior clerks should employed to check individuals computation of salaries and wages

6. There is little restriction to entry and exist in the authority’s premises

leading to loss of some moveable assets and destruction of permanently fixed ones. It is suggested therefore that all premises of NEPA Enugu district be fenced properly to quiet the incidence of that and destruction. If the foregoing suggestion are adopted surely it will enhance the internal control measures operational in NEPA Enugu there by ensuring better performance by the origination

APPENDIX II

(please tick (√) in the appropriate column)

1. What is your sex female male

2. Marital status married single

3. What is your age bracket?

a. 15-30 years

b. 31-45 years

c. 46-55

d. 56 and above

4. What is your level of education

a. Primary education

b. Secondary education

c. Higher education

5. How many years of working experience do you have

a. 0-5 years

b. 5-10 years

c. 11-15 years

d. 16-30 years

6. Do you have an organizational chart

Yes No

7. Who s responsible for sharing of duties?

a. Administrative officer

b. District manager

c. The supervisor of the particular staff

d. The head of department/section

e. Others specify

8. How often are duties re-scheduled?

Monthly years

As the need arise

9. How many times have you gone on your annual vacation in the past five years?

Never

Four times

Twice

Once

10. If yours answer to 9 above is anything below five why?

a. Applied but it was not approved

b. I was too busy to apply

c. It was approved but later cancelled

d. I have only worked for year/months

e. It was approved but nobody to relieve me

11. Who authorize payments of different amounts

a. The district manager

b. The accountant

c. Sectional head

d. Other specify

12. What are the limits which theses categories of staff cannot exceed in term of authorization for expenditure

a. The district manager

b. The accountant

c. The sector head

d. The project/research

e. Others specify

13. How often is bank reconciliation statement prepared?

a. Monthly

b. Bi- annually

c. Annually

d. When required the auditor

e. No idea

14. Are payment voucher serially numbered

Yes No

15. Is it possible for one person to prepared and also pay vouchers?

Yes No

16. Are invoice passed for payment?

Yes No

17. Do you have an internal audit department

Yes No

18. Is it possible for voucher to be paid without the approval of the internal audit department

Yes No

19. Who keeps custody of unused cheque (books and receipts books and cheque stamp

a. The accountant

b. The chief cashier

c. A and A above

20. How many case of fraud and misappropriation of fraud have been reported in NEPA for the past 20 years?

21. Are bank teller checked by a responsible officer after lodgment to ensure that he beer bank stamps of acknowledgement of receipt

Yes No

22. How do you distribute LPO?

a. Original to

b. Duplicate

c. Triplicate

d. Quadruplicate

23. Who authorize issue of items from stores to the requisition department?

Title___________________________________________

24. How would you classify the internal control system in the establishment in the following are specify in each area

a. Cash / Bank operation

b. Very effective

c. Effective but nod adequate

d. Ineffective

e. Very ineffective

B. Sale activity

1. Very effective

2. Effective

3. Ineffective

4. Very ineffective

C Pay all

1. Very effective

2. Effective

3. Ineffective

4. Very ineffective

APPENDIX III

Person inter view questionnaire

1. How often cash survey performed?

2. Who does the cash survey?

3. What is the maximum number of day’s cash is held before lodgment with bank?

4. How keeps the keys to the store?

5. How often is the stock-keeping done and by whom?

6. What security measures are adopted in NEPA in order to ensure to safety of equipment and assets

7. Does the stores-keeper also post the store ledger?

8. What are the main functions of internal auditor department/

9. Do workers adhere strictly to the dictate of their officials responsible

10. If yes t is because

i. The are adequately remunerate and motivated

ii. They are afraid of the strict disciplinary and dictates of the offices?

APPENDIX I

ORGANIZATIONAL AND GENERAL MATERS YES,NO N/A CROSS REF SPECIAL COMMENT

A Is the business operated in an efficient and profitable manager with adequate protection from significant error or fraud?

i Are duties and responsibilities of officials at various levels clearly stated?

ii. Has the enterprise an internal audit unit? If so, to whom is he accountable?

iii. Are accounting systems laid down? How are they implemented?

iv. Is an up-to-date organizational chart regular maintained?

v. Are actual results regularly compared with standards and variance analyzed?

vi. Are there adequate provision to cover staff sickness or absenteeism?

B Can the statutory records be improperly manipulated?

i. Are the company’s registers maintained on a regular basis as required by law?

ii. Is the company’s seal properly kept and its use adequately monitored?

iii Are all securities and security documents including share certificates share holders and debenture registers dividend and internal warrants minutes of important meting etc. kept under adequate security arrangement.

C Can fixed assets be acquired or disposed of without proper approval?

i. Is disposal of fixed assets

ii. Subject to approved by a specially assigned senior official?

iii. Is capital expenditure over certain limits subjects to approval by management?

iv Is fixed assets register maintained and checked on a regular basis with physical assets?

v. Are records kept for fixed assets disposal/scrapping?

vi. Is the register of fixed assets continuously reconciled to the nominal ledger?

vii. Is there a clearly defined method of depreciation of the company’s assets?

viii Are documents on title adequately protected?

ix Are gains on fixed assets dsposal separated?

D Purchases ledger: can liabilities be inflated or omitted in the ledger?

i. Are purchase ledger balance regularly reconciled with suppliers statements and outstanding item verified?

ii. Does the system ensure that all invoices received and approved are recorded through the accounting system?

iii. Are debit items-discount received, returns outwards and balances in the purchases ledger continuously reviewed?

iv Is a purchases ledger control account properly maintained?

v Is the purchases ledger control account frequently compared with the sum of the individual purchases ledger balances by a person other them the ledger check?

E SALES AND TRADE DEBTORS

i. Are customers orders given approval before being acknowledge department?

ii. What record is kept of sales orders received, including those received by post?

iii To what extent are customers credit limits verified before orders are accepted?

Iv Are records of goods dispatched maintainer of the sales department?

V Are goods dispatched records continuously reviewed for items for which no invoices have been issued?

Vi Are invoices prepared by a personnel independent of staff whose duties are to accept orders?

-control and dispatch goods?

-cash receipts?

vii Are invoices compared with sales orders good dispatch notes receipts advice noted?

Viii Are sales ledger officials independent of cash receipts functions?

ix Are statements verified before dispatch by officials independent of the sales ledger staff? – cash receipt functions?

F WAGES/PAYROLL: can one not employed by paid

i. Do people undergo stipulated procedures before they are employed – applying short-listing interviewing and issuing of appointment paper and acceptance letter from the new employee?

ii. On recruitment are proper and adequate records maintained in the accounting and personal department?

iii Is attendance register or any other device maintained to record time of arrival and leaving of workers?

Iv Are piece work sheets maintained to evidence the work performed by each person

V Are time records piece work sheets verified, computed and approved by the authorized official before dispatch to the accounts department for preparation of salaries or wages sheet? Unclaimed wages

i When salaries and wages are not collected by supposed recipients are cash meant for such payment paid back to bank or cashier on the authority of an appropriate senior official

Can pay roll be inflated?

1 At payroll/accounts section are records cross-checked with personal involvement data card for rates payable or promotion increase tax deductible or pension dues etc. before inclusion in the wages sheets?

ii. Are payrolls checked.

– with clock cards attendance register on other relevant time records

– for proper and accurate rate applicable

– for correct computation?

iii Are payrolls and payroll summaries approved and signed by an authorized personnel?

iv Are payrolls regularly checked against the independence individual records kept in the personnel department by an independent person (probably the internal auditor)?

v Are salaries and wages compared with ledgers to investigate and analyze essential variances?

vi Are staff salaries and wages paid with cheques? Where it is unavoidable to pay cash does a person quite different from cashier given a cheque with a security to cash at the bank

vii Are ovetime worked and authorized before inclusion in the pay sheet?

viii Is he internal auditor or any other authorised senior official directed by the board to observe the pay line up to see if there are ghost workers?

ix Can salaries or wages be signed and collected by a person different from the owner without authority of the person in writing?

x Is the staff who cashed the cheque different from the staff inserting into the pay envelopes or paying the workers

Internal Control System – Evaluation Of National Electric Power Authority, Enugu District

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  1. jaseem lal says:

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