EVALUATING THE INTERNAL CONTROL A PREDICTOR OF ORGANIZATIONAL SUSTAINABILITY IN CAMEROON

CHAPTER ONE

INTRODUCTION

Background of the study

The establishment of corporate sustainability is predicated upon a company's value system and adherence to ethical business practices. In a study conducted by Alsayegh et al. (2020), it was found that companies engage in sustainability initiatives and reporting with the aim of enhancing brand value, reputation, and legitimacy, demonstrating competitiveness, motivating employees, and facilitating process control. The recognition of such action as a crucial element in business sustainability is increasingly gaining widespread acceptance. DeSimone et al. (2021) assert that the significance of sustainability reporting is becoming evident in the global reporting practices of corporations.

Sustainable management and development are widely recognised as fundamental principles in contemporary business and society. Nevertheless, the expeditious advancement of science and technology, coupled with the global economy, has resulted in the depletion of natural resources that are essential for human sustenance. The idea of sustainable development was introduced by the World Commission on Environment and Development in 1987 with the aim of ensuring the long-term viability of human society. The concept of sustainable development has undergone a progressive evolution throughout its history. Governments across the globe have since implemented the notion of sustainable development, encompassing its economic, social, and environmental dimensions (Peterson, 2018). In order for organisations to effectively attain their sustainability objectives, it is imperative that they secure adequate financial resources to execute sustainable growth strategies that align with the demands of their investors. Internal control is to attain the long-term growth and success of the organisation. The enterprise's operating success and management performance are contingent upon the quality of its internal control. Effective company operations play a pivotal role in enabling organisations to attain their long-term growth objectives. Furthermore, the establishment of a harmonious internal environment through internal control mechanisms enables firms to effectively eliminate non-scientific tasks and non-rational expenditures, optimise their capital operations, and attain an optimal capital structure (Panti, 2019).

In recent times, a substantial body of study has been dedicated to investigating the economic implications of internal control quality and the determinants that impact the long-term sustainability of enterprises. This research has encompassed a diverse range of perspectives. Regarding the impact on enterprise sustainability, the primary determinants encompass enterprise attributes, managerial attributes, social duty, environmental responsibility, and external variables. The economic ramifications of internal control encompass several key variables, namely the quality of financial information, governance choices, profits manipulation, involvement of other stakeholders, costs associated with compliance, and expenses related to social response.

1.2 Statement of the problem

In the present age of globalisation, characterised by heightened rivalry and unpredictability, firms, particularly those in emerging countries, face a significant challenge in effectively managing risk through the implementation of good governance practices in order to attain sustainable growth. Numerous scholarly works have extensively examined the various aspects that contribute to a firm's sustainable growth, such as intellectual capital, financial capacities, technology, and social responsibility. However, there has been limited scholarly focus on the significance of internal control in relation to a firm's sustainable growth (Peterson, 2018).  

An organisation implements internal control as a procedure to furnish reasonable assurance concerning the accomplishment of its goals (COSO, 2013). The effects of internal control on accruals quality, insider trading, the value of cash holdings and capital expenditures, executive compensation, and stock price collapse risk have been the subject of prior research that examines the governance function of internal control (Kim, 2019). Effective internal control as a governance mechanism is hypothesised to contribute to the sustainable development of an organisation. 

It is postulated that the influence of internal control on the sustainable development of an organisation varies depending on the institutional setting. Institutional context influences the efficacy of internal controls at an organisation. A robust institutional framework is characterised by extensive investor protection and marketization (Peterson, 2018). Hence, in order to ensure that investor protection and performance are in line with the organization's mission and strategy, a company operating in a highly developed institutional environment is more inclined to rely on and enhance its internal control systems in order to foster long-term viability. On the contrary, a feeble institutional environment is characterised by extensive government intervention and limited marketization and investor protection. When institutional conditions are feeble, organisations are less likely to depend on internal control systems as a means to foster long-term growth. The governance function of internal control in sustainable growth, according to this study, is manifested in a well-developed institutional environment.

1.3 Objectives of the Study 

The aim of this study is to evaluate internal control a predictor of organizational sustainability in Cameroon. Specifically the study seeks:

To determine whether there is a relationship between internal control and organizational sustainability in Cameroon.

To find out the determinants of organizational sustainability in Cameroon.

To investigate the impact of internal control on organizational sustainability in Cameroon.

To find out the challenges of internal control on organizational sustainability in Cameroon.

1.4 Research Questions

The following research questions will be answered in this study:

Is there a relationship between internal control and organizational sustainability in Cameroon?

What are the determinants of organizational sustainability in Cameroon?

What are the impact of internal control on organizational sustainability in Cameroon?

What are the challenges of internal control on organizational sustainability in Cameroon?

1.5 Research Hypothesis

The following null hypothesis will validate this study:

Ho1: There is no relationship between internal control and organizational sustainability in Cameroon.

1.6 Significance of the study

This research is on attempt to survey the constructive parts, which internal auditing can play with reference to organizational sustainability in Cameroon.

A lot of problems are facing public organizations as not having an effective audit central system. One of these problems is the management seems to gloss over the operation of the corporate organizations, which are carried out in disorganized manner. This is so because an efficient control system will enable the management to monitor the performances of the executives and take necessary and adequate corrective actions to ensure high performances at all levels.

1.7 Scope of the study

The study aims to evaluate internal control a predictor of organizational sustainability in Cameroon. Empirically, this study will determine whether there is a relationship between internal control and organizational sustainability, find out the determinants of organizational sustainability, investigate the impact of internal control on organizational sustainability and find out the challenges of internal control on organizational sustainability.

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 internal control a predictor of organizational sustainability 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.