AN EVALUATION OF THE EFFECTIVENESS OF INTERNAL CONTROL AS A MANAGERIAL FUNCTION IN ORGANIZATIONS IN CAMEROON

CHAPTER ONE

INTRODUCTION

Background of the study

Every organisation, regardless of profit or non-profit status, possesses a predetermined collection of objectives and goals that it endeavours to achieve. Non-profit organisations are primarily devoted to addressing the social requirements of the general public. Regularly, oversight plays a critical role in this advancement. The executors have encountered difficulties on occasion in exercising direct and personal oversight over operations due to the scale and scope of these institutions. In this context, the implementation of internal control is initiated by management. Certain prerequisites must be fulfilled for an organisation to carry out its activities. These prerequisites consist of financial resources, operational materials, apparatus, and equipment (Anyanwu, 2019).

Any organisation must incorporate internal controls into its financial and operational policies and procedures. Organisations with strong internal control systems performed better in competitive markets, were subject to stricter government regulations, were more prudent, demonstrated greater competence, maintained high levels of liquidity and profitability, and had more effective management controls, according to research conducted by experts in Europe and North America (Ozor, 2019). There have been a collective of four principal theories posited with respect to internal control: the agency theory, the systems theory, and the stakeholder theory.

The successful operation of the organisation is contingent upon the effective coordination of these components. The components that are employed by the administration of an organisation are as follows. Organisation is essential for the existence of management; the two are inextricably linked. By ensuring the integrity of the accounting information used in the organization's decision-making, the internal control system provides assurance to management (Peterson, 2018).

Internal control systems serve as a strategic reflection of the hierarchical policies, penalties, and internal processes that institutions have developed to furnish management with critical objectives for ensuring the effective execution of the organization's mandate (Patrick, 2021). Patrick argues further that the development of any institution, whether public or private, is contingent on its adherence to rigorous and robust audit and accounting principles in the absence of human intervention.

It is commonly held that a company's operations ought to be methodical and in accordance with the stipulations established by the government, its proprietors, and its investors. Prior to incorporating the internal control system into the company's management process, management must recognise that this is a temporal necessity rather than a legal one.

In the event that shareholders and proprietors of the organisation desire a more comprehensive account of the internal control system's operation, including internal control, the company's management should accommodate their requests. The parameters of economic development are predetermined by reality and must be operationally considered by all business entities if they are to implement effective measures. Every business's operational efficacy has an effect on the general welfare of the nation. Further disclosure of the organization's operations facilitates the identification of prospective investors and purchasers, thereby enhancing the competitiveness of the company's products (Price, 2019).

Internal control operates within the operational framework of an institution, encompassing tasks, resources, systems, processes, structure, and organisational culture; its purpose is to support the establishment of predetermined objectives.

1.2 Statement of the problem

Internal control refers to a collection of mechanisms that are created by management and put into action by managers at any level to assess performance. According to Ozor (2019), the implementation of devices is necessary in order to ensure the attainment of organisational objectives.

The objective of designing and implementing an internal control system is to distribute control activities among the leaders of the organization's functional structures. Consequently, every leader, at their respective level, bears the responsibility of establishing and executing internal controls that are essential and suitable for the operation and accomplishment of the operations they oversee. Through this approach, the management is able to get autonomy in order to accomplish objectives, while also ensuring transparency and accountability in the collection of revenue, as well as efficiency and effectiveness in the management of finances. Establishing an internal control system that aligns with international standards and best practices in the sector is crucial for managing the organization's culture (Price, 2019).

The objective is to maintain coherence in internal control objectives, ascertain crucial determinants of success, and promptly provide real-time information regarding performance and prospects to organisational leaders. Regardless of the organization's type or size, the endeavour to establish an effective internal control system is contingent upon the application of internal control principles and procedures across all levels.

1.3 Objectives of the Study 

The aim of this study is to evaluate the effectiveness of internal control as a managerial function in organizations in Cameroon. Specifically the study seeks:

To determine whether internal control used as a managerial function in organizations in Cameroon is effective.

To assess ways internal control can be used as a managerial function in organizations in Cameroon.

To examine the challenges of internal control as a managerial function in organizations in Cameroon.

1.4 Research Questions

The following research questions will be answered in this study:

Is internal control used as a managerial function in organizations in Cameroon is effective?

What are the ways internal control can be used as a managerial function in organizations in Cameroon?

What are the challenges of internal control as a managerial function in organizations in Cameroon?

1.5 Research Hypothesis

The following null hypothesis will validate this study:

Ho1: Internal control used as a managerial function in organizations in Cameroon is not effective.

1.6 Significance of the study

The fact that this research has been conducted on internal control systems is not debatable; nevertheless, considerable attention has been devoted to the influence of an effective internal control system on the financial administration of businesses. This research will significantly assist an organisation in identifying the consequences of internal control weaknesses and proposing corrective measures. 

It will also shed light on the issues that arise from inadequate internal control systems and benefit students, scholars, lecturers, and other interested parties by introducing novel research areas while simultaneously posing challenges to future researchers.

Additionally, practitioners and students enrolled in financial management courses will find the study's results useful; they will serve as a reference (secondary data) for those attempting to conduct research on the same subject.

1.7 Scope of the study

The study aims to critically evaluate the effectiveness of Internal control as a managerial function in organizations in Cameroon. Empirically, this study will determine whether internal control used as a managerial function in organizations is effective, assess ways internal control can be used as a managerial function in organizations and examine the challenges of internal control as a managerial function in organizations.

This study will be carried out in Cameroon.

1.8 Limitation of the study

The researchers encountered slight constraints while carrying out the study. The significant constraint was the scanty literature on the subject owing that effectiveness of Internal control as a managerial function in organizations in Cameroon discourse is vast thus the researcher incurred more financial expenses and much time was required in sourcing for the relevant materials, literature, or information and in the process of data collection, which is why the researcher resorted to a limited choice of sample size covering only residents of Cameroon. Thus findings of this study cannot be used for generalization for other regions within Cameroon. Additionally, the researcher will simultaneously engage in this study with other academic work will impede maximum devotion to the research. Howbeit, despite the constraint encountered during the research, all factors were downplayed in other to give the best and make the research successful.

1.9 Definition of terms

Internal Control: Internal control, as defined by accounting and auditing, is a process for assuring of an organization's objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies.

Internal Control System: Is a formalized system intended to provide reasonable assurance that the objectives of a program as a whole are met, e.g. financial control, quality control or process control.

Management: It is defined as the process of planning, organizing co-ordinating and controlling the activities of an organization. It is seen as a group of people who monitor and control the organization activities towards the achievement of the organization objectives.