Accounting Project Topics

Internal Control as an Aid to Accountability in the Public Sector (A Study of AMAC Local Government, Abuja)

Internal Control as an Aid to Accountability in the Public Sector (A Study of AMAC Local Government, Abuja)

Internal Control as an Aid to Accountability in the Public Sector (A Study of AMAC Local Government, Abuja)

Chapter One

Objectives of the Study

The main objective of this study is to examine the effect of internal control system on accountability. However, the specific objectives of this study will are to:

  1. Ascertain the level of significance of internal control system on quick recovery of stolen cash in the Nigeria Public sector.
  2. Ascertain the efficiency of internal control system on credit control of the Nigeria Public sector.
  3. Analyze the effect of internal control system on the safety of non-current assets in the Nigeria Public sector.
  4. Examine the relationship between effective internal control system and accountability of working capital in the Nigeria Public sector, and
  5. Ascertain the effect internal control system has on manufacturing firms’ efficiency ratio in Nigeria.




This section examined related literature in this area of accounting. This section is subdivided into four sections. They include the conceptual framework, theoretical framework, empirical review as well as summary of literature review.

Conceptual Clarification

The Nature of Internal Control

The term internal control has largely replaced the term internal check (Bridge and Moss, 2013). Internal check referred to those methods and procedures used by the accounting and finance divisions of a business to minimize clerical errors and protect assets, especially cash against theft or loss. The change in terminology was the result of an expanding perception of the objectives and activities implied by internal control. In 1936, the American Institute of Certified Public Accountants (AICPA) defined internal control as those measures and methods adopted within the organization itself to safeguard the cash or other assets of the company and to check the clerical accuracy of the bookkeeping.

In 1949, the AICPA defined internal control as the plan of organization and all of the coordinate methods and measures adopted by a business to safeguard its assets, check the accuracy and reliability of its accounting data, promote operational efficiency and encourage adherence to prescribed managerial policies. However, in 1987, the Treadway Commission recommended that internal control structures be designed to prevent or detect fraudulent financial reporting (Bridge and Moss, 2013).

Every organization works at two levels within two systems. One is the operating system, which is designed to accomplish stated objectives, such as producing 100 items while meeting standards of cost, quality and schedule. The other is the control system, which is overlaid on the operating system. It is made up of the procedures, rules, and instructions that are designed to make sure that the operating system’s objectives will be met (Sawyer, 2016). The definitions of internal control are sufficiently exact to avoid misunderstanding and are also comprehensive enough to encompass most performance objectives that are applicable to all organizations, and to accommodate existing definitions.  

The Working Group established in terms of the Cadbury Report’s recommendations to investigate certain aspects of corporate governance, also used this definition in the United Kingdom. According to Puttick and van Esch (2018) internal control are those methods and procedures adopted by the management of an entity to assist in achieving management ‘s objective of ensuring that the business of the entity is properly conducted in an orderly and efficient manner.  Internal controls are the policies and procedures that enable management to know what is going on and to cause things to happen in accordance with their intentions (Swanson, 2019).

Internal control comprises the organizational plan and all of the coordinate methods and measures adopted within a business to safeguard its assets, check the accuracy and reliability of its accounting data, promote operational efficiency, and encourage adherence to prescribed managerial policies (Sawyer and Dittenhofer, 2016). According to Knechel (2001), internal control is defined as a process that is designed by management in order to provide reasonable assurance that the organization’s objectives are being met. Nair (2000) outlines internal control as a process that is put in place by management and stakeholders and is designed to provide reasonable assurances that the institution’s objectives are being achieved effectively and efficiently in compliance with applicable legal prescripts, and that there is reliable and accurate financial reporting and Venables and Impey (2001) described internal control as the regulation of activities in an organization through systems designed and implemented to facilitate the achievement of management objectives.  

 Historical Development of Internal Control

Historical development of internal control as individual enterprise system is not as broad as other management spheres in science directions. The definition of internal control was presented for the first time in 1949 by the American Institute of Certified Public Accountants (AICPA). It defined internal control as a plan and other coordinated means and ways by the enterprise to keep safe its assets, check the covertness and reliability of data, to increase its effectiveness and to ensure the settled management politics. However, the presented definition of control concept has been constantly improved, and nowadays there is quite an extensive set of conceptions that indicates the system of internal control as one of the means of leadership to ensure safety of enterprise assets and its regular development. In 1992, the COSO model appeared; its analysis distinguished the concepts of risk and internal control. Now, the concept of internal control involved not only accounting mistakes and implementing means of their prevention, but also a modern attitude that might identify the spheres of control management and processes, and also a motivated development of their detailed analysis.  

The Worldwide known collapses of such companies as Enron, Worldcom, Ahold, Parmalat and others determined to issue in 2012 the Law of Sarbanes–Oxley in the USA, in which attention is focused on the effectiveness of the enterprise internal control system and its assessment. Such a significant law as that of Sarbanes–Oxley has dearly shows that not only the internal control system must be concretized and clearly defined, but also the means of implementing the internal control system and assessing their effectiveness must be covered.  

A comparative analysis of the introduced concepts of internal control shows that the usage of the concept of internal control is quite broad as it is supposed to involve the performance not only of the state, but also of the private sector. Although the conception of internal control is defined in different ways emphasizing its different aspects, the essential term still remains the same in all authors’ definitions: internal control is the inspection, observation, maintenance and regulation of the enterprise’s work.

It should also be mentioned that the system of internal control may be defined in different ways every time. Yeh and Yeh (2017) pay attention to the fact that usually such values as honesty, trust, respect, openness, skills, courage, economy, initiative, etc. are not pointed out, although they definitely can influence not only the understanding of the concept of internal control, but also its definition, because in different periods of time and in different situations it can obtain slightly different shades of meaning. Control and people, and values produced by people or their performance are tightly connected; consequently, internal control must be also oriented to the enterprise’s values, mission and vision; it does not matter how differently authors define the conception assessment limits: significant attention must be paid not to internal control itself, but to the identification of its functions and evaluation.  




Area of study

This is the study of internal control as an aid to accountability in the public sector. For the purpose of this research anything that is affected in the cause of carrying out this research is automatically a member of the area of the study. In this context, all the members of staff or rather the employees of local government area are members of the population. The study was carried out in Amac LGA, Abuja. The Abuja Municipal Area Council was created on October, 1984. It is located on the eastern wing of the Federal Capital Territory and comprise of Twelve Wards namely, City Centre, Garki, GUI, Gwagwa, Gwarimpa, Jiwa, Karshi, Kabusa, Karo, Nyanya, Orozo and Wuse. Each of these wards are represented by an Elected Councillor. The Councillors form the Legislative Arm of the Area Council. The Executive Arm comprise of an elected Chairman and a vice together with an appointed secretary and other supervisory councilors and special advisers. The bulk of Federal Institutions, Ministries, Departments and Agencies are located within the precint of the Area Council.

Research Design

This study is essentially investigative and explanatory in that it seeks to find the stakeholders perception on the relationship between effectiveness of internal control in the management of organizational resources. The structure of its process and procedure is therefore descriptive and this belongs to the generic family research design type called survey design. Hence the design adopted is both the survey and expost facto design. This enabled the researcher to maintain a detached and objective view, free from bias in the study.  

 Nature and Sources of Data

Both primary and secondary data was utilized in this study. Primary data was obtained through survey using oral interview and questionnaire. Secondary data used for this research was obtained from the annual statement of the public sector and Securities and Exchange Factbooks.

Population of the Study 

The population of this study is made up of the staff of the public sector in Amac, Abuja of Nigeria who are up to supervisory level. This included those who have responsibility for ensuring effective internal control in the organization as they get works done through others. The number however is infinite and an appropriate sample size was determined. However, for the secondary data, the total values of model proxies will be the aggregate data from manufacturing firms listed on the Nigerian Stock Exchange.




This chapter presents, analyses and test the hypotheses. This chapter is divided into three subsections, in subsection one, the responses from the respondents are presented as well as the secondary data used. In sub-section two, the hypotheses are tested while in subsection three, the implications of findings were discussed.   



 Summary of Findings

Based on the specific hypotheses tested, the following are the summary of findings. These are:

  1. Internal control system has significant effect on stolen cash recovery in the Nigeria Public sector (p-value = 0.00 < 0.05).
  2. Internal control system has significant effect on credit control of the Nigeria Public sector (p-value = 0.00 < 0.05).
  3. Internal control system has significant effect on the safety of non-current assets of the Nigeria Public sector (p-value = 0.00 < 0.05).
  4. There is a significant relationship between internal control system and accountability of working capital of the Nigeria Public sector (R = 0.935; p-value = 0.00 < 0.05) and
  1. Internal control system has significant effect on a firm’s efficiency ratios of the Nigeria Public sector (α = 0.19, t-value = 2.14, p-value = 0.033).  


Internal control is an integral part of an organization’s governance system and ability to manage risk, which is understood, effected, and actively monitored by the governing body, management, and other personnel is to take advantage of the opportunities and to counter the threats to achieving the organization’s objectives. Internal control is a crucial aspect of an organization’s governance system and ability to manage risk, and is fundamental to supporting the achievement of an organization’s objectives and creating, enhancing, and protecting stakeholder value. Highprofile organizational failures typically lead to the imposition of additional rules and requirements, as well as to subsequent time-consuming and costly compliance efforts.  

Internal control is often perceived and treated as a compliance requirement, rather than as an enabler of improved organizational performance. Effective internal control can help organizations improve their performance by enabling them to take on additional opportunities and challenges in a more controlled way. Therefore, there is a need to have a better understanding of how organizational performance relates to effective risk management and the role and effectiveness of internal control.

Organizations always face uncertainty in achieving their strategic, operational, and other objectives. However, they can decide the level of risk they wish to be exposed to in the pursuit of those objectives. Proper risk assessment and internal control assist organizations in making informed decisions about the level of risk that they want to take, and implementing the necessary controls, in pursuit of the organizations’ objectives. However, risks should not be taken without an explicit understanding of their potential consequences for achieving an organization’s objectives. Therefore, decision makers require relevant and reliable information, produced through the internal control system, to effectively implement and execute their strategic and operational plans. Therefore, this study concludes that effective internal control systems as observed from the findings of this study are necessary in the effective accountability not only in Nigeria but also all over the world.


Based on the objectives of this study and the results of hypotheses tested, the following are the specific recommendations of this study. These are:

  1. Internal control should be used to support the organization in achieving its objectives by managing its risks, while complying with rules, regulations, and organizational policies. The organization should therefore make internal control part of risk management and integrate both in its overall governance system.  Thus, this study recommends strict compliance with rules, regulations, and organizational policies to increase quick recovery of stolen cash in the Nigeria Public sector.
  2. This study also recommends that organization also should determine the various roles and responsibilities with respect to internal control, including the governing body, management at all levels, employees, and internal and external assurance providers, as well as coordinate the collaboration among participants. This will enhance effective credit control system of the Nigeria Public sector.
  3. The governing body and management should foster an organizational culture that motivates members of the organization to act in line with risk management strategy and policies on internal control set by the governing body to achieve the organization’s objectives. The tone and action at the top are critical in this respect to ensuring safety of non-current assets of the Nigeria Public sector.
  4. Also, there should be a link achievement of the organization’s internal control objectives to individual performance objectives. Each person within the organization should be held accountable for the achievement of assigned internal control objectives. This will increase the relationship between internal control system and accountability of working capital of the Nigeria Public sector.
  5. Lastly, this study recommends that organization’s governance system should be sufficiently competent to fulfill the internal control responsibilities associated with their roles. This will invariably ensure efficiency in the Nigeria Public sector.

 Contribution to Knowledge

This study is radically different from earlier works in this area of internal control and accountability thereby contributing significantly to literature by looking majorly efficiency ratio and profitability. Our attempt in this study is to contribute to the existing empirical literature on internal control systems and accountability through the operationalization of the models of the Nigeria Public sector.

Recommendation for Further Studies

The pursuit of knowledge is inexhaustible. This study recommends the following for further studies.  

  1. Similar study to be done on the same topic with different companies over an extended sample period of financial years.
  2. A study to be undertaken on the impact of internal control system on Short Term Assets and liabilities Management in manufacturing companies.  


  • Aguolu, O. (2019). Designing an Effective Internal Audit Group. Association of Accountancy Bodies in West Africa, 1(4), 60-76.  
  • Ahmad, N., Othman, R. & Jusoff, K. (2019). The Effectiveness of Internal Audit in Malaysian Public Sector. Journal of Modern Accounting and Auditing, 5(9), 784-790.  
  • Aikins, S. K. (2011). An examination of Government Internal Audits’ Role in Improving Financial Performance. Public Finance and Management, 11(4), 306-337.  
  • Alam, H.M et al. (2011). Impact of working capital management on profitability and market   valuation of pakistani firms. European Journal of Economics, Finance and   Administrative Sciences, 32(5)48- 54
  • Aldridge, R. & Colbert, J. (1994). Management’s Report on Internal Control, and the Accountant’s Response. Managerial Auditing Journal, 9(7), 21-28.  
  • Al-Twaijry, A. A.M., Brierley, J. A. & Gwilliam, D. R. (2013). The Development of Internal Audit in Saudi Arabia: An Institutional Theory perspective. Critical Perspective on Accounting, 14, 507-531.
  • Al-Twaijry, A. A. M., Brierley, J. A. & Gwilliam, D. R. (2014). An Examination of the Relationship between Internal and External Audit in the Saudi Arabian Corporate Sector. Managerial Auditing Journal, 19(7), 929 –944.  
WeCreativez WhatsApp Support
Our customer support team is here to answer your questions. Ask us anything!