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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Safeguard: to protect something from harm or damage.
Organizationalstructure: It consists of activities such as task allocation,
coordination and supervision, which are directed towards the
achievement of organizational aims. It can be considered as the viewing
glass or perspective through which individuals see their organization and
its environment.
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