Effective use of internal control system

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CHAPTER ONE
1.0 INTRODUCTION
The coca-cola company is one of the biggest beverage companies in the world, Established in May 1886, coca-cola was invented by Doctor John Pemberton a pharmacist form Atlanta, Georgia. John Pemberton concocted the coca-cola formula in a three legged brass kettle in his backyard. The name was a suggestion given by John Pemberton’s bookkeeper Frank Robinson. Being a bookkeeper, Frank Robinson also had excellent penmanship; it was him who first scripted “coca-cola” into the following letters which has become the famous logo of today.
The soft drink was first sold to the public at the soda fountain in Jacob’s pharmacy in Atlanta on May 8, 1886. Sales for that first year added up to a total of about $50. The funny thing was that it cost John Pemberton over $70 in expenses, so the first year of sale was a loss.
Until 1905, the soft drink, marketed as a tonic, contained extracts of cocaine as well as the caffeine – rich kola nut.
In 1887, another Atlanta pharmacist and businessman, Asa Candler bought the formula for coca-cola from inventor John Pemberton for $2,300. By the
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year 1890’s coca-cola was one of America’s most popular fountain drinks, largely due to Candler’s aggressive marketing of the product. With sales over 4000% between 1890 and 1900.
Advertising was an important factor in John Pemberton and Asa Candler’s success and by the turn of the century, the drink was sold across the United States and Canada. Around the same time, the company began selling syrup to independent bottling companies licensed to sell the drink. Even today, the US soft drink industry is organized on this principle.
1.1 BACKGROUND OF THE STUDY
With the prevailing situation in the Nigeria economy, it is an established fact that embezzlement and mismanagement of resources is what the director of companies embarked upon, instead of adequate management of resources pulled together by the shareholders. Also these directors despite the stewardship they hold are not exhibiting accountability and transparent honesty, it is for these reasons the researcher deems it fit to examine how effective internal control system can serve as a means of preventing fraud in the public sector.
According to Oxford Advanced Learner Dictionary fraud can be defined as an Act of deceiving in order to make money or obtain goods, “Kirk Patrick” (1985) described a person who pretends to be something that he is not a fraud, deceptive, tricky, a cheat and a swindler”, furthermore fraud includes embezzlement, theft or nay attempt to steal unlawful possession of assets.
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From the above, it is understood that fraud involves the use of deceit and tricks. The action, it is understood that form of forgery, falsification, of document, authorized signature and outright theft.
However, it has been establish that majority of frauds in the public sector can be attributed to lack of sound or lapset in the internal sector and the existence of poor control region.
Internal control is the type of control exercised by the management within the organization. Internal control is not only internal check and internal audit but the whole system of controls, financial and otherwise, established to secure the asset and secure as far as possible the completeness and accuracy of the records.
It should be noted that the need to safeguard assets and keep proper records is an essential justification for internal control. All measures employed by an organization to:
 Safeguard assets from waste, fraud and inefficient use.  Promote accuracy and reliability in the accounting records and encourage compliance with company policies and evaluate the efficiency of operations.
1.2 STATEMENT OF PROBLEM
Organizations have failed in their occasional review and appraisals of the internal control system in operation or have totally ignored the operations of effective internal control system in the discharge of their duties and this has over the years been the bane of an effective service to the people.
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Also it is the use of internal control as a management tool. In the society; the work will also provide answers to the role of internal control in manufacturing organizations.
1.4 OBJECTIVE OF THE STUDY
The study will look into loopholes and weakness in the internal control system used in the organization and to make recommendation for any necessary improvement as a complete change of the system in operation.
The research work intends to study the organizational structure of the internal control department as the internal audit department. Problems being encountered by these two departments in their functioning and strategies to be used in solving these problems will be considered.
1.4.1 SCOPE OF STUDY
This research study is designed to find out if actually the non-operation of effective internal control system has been the cause of irregularities in electricity supply in the country.
The data used were gathered mainly from the accounting department, budget department and wages and salaries department of the coca-cola Nigeria bottling company.
However, the results are envisaged to bear relevance to other manufacturing industry with same internal control system.
1.4.2 RESEARCH QUESTIONS
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These are some questions that will be relevant to help carry out the research work such as follows:
 Does internal control affect manufacturing company?  What are the roles of internal control in an organization?  Is there a correlation between internal control and manufacturing company?
STATEMENT OF HYPOTHESIS
Hypothesis 1
Ho: Internal control does not affect manufacturing company performance
Hi: Internal control affect manufacturing company performance
Hypothesis II
Ho: There is no correlation between internal control and manufacturing performance
Hi: There is correlation between internal control and manufacturing performance
1.4.3LIMITATION OF THE STUDY
During the course of this study research, was some major limitations have been inescapably encountered. This includes: a. Inadequate time and logistic which as expected, constitute a constraint. b. The usual un-corporative attitude of some official secret has succeeded in impeding the depth or vastness of this work. To curtail this, secondary data released is released is relied upon in the execution of this work.
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c. Lack of proper record which have been identified by many reputable researchers as a major threat to the expansion of small scale enterprises. It is not surprising to realize that this also has unfavorable constraint to the research work.

1.5 DEFINITIONS OF TERMS
 Book-keeper: A person who records financial statement of company or an organization  Advertising: The activity or business of advertising things on television, radio etc or to tell the public about a product or service in order to persuade them to buy  Embezzlement: To steal money from the place where you work.  Mismanagement: If someone mismanages something they are in charge of, they deal with or manage it badly.  Shareholder: Someone who owns shares in a company or business.  Stewardship: Someone’s stewardship of something is the way that they control or protect it.  Fraud: The crime of deceiving people in order to gain something such as money or goods or someone or something that is not what it is claimed to be.  Internal control: Is a 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.
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