Project Topic:

THE IMPACT OF INTERNAL CONTROL SYSTEM ON REVENUE GENERATION: (A CASE STUDY OF POWER HOLDING COMPANY OF NIGERIA (P.H.C.N) OKPARA AVENUE ENUGU)

Project Information:

 Format: MS WORD ::   Chapters: 1 - 5 ::   Pages: 75 ::   Attributes: Questionnaire, Data Analysis, Abstract  ::   3,667 people found this useful

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ACCOUNTING UNDERGRADUATE PROJECT TOPICS, RESEARCH WORKS AND MATERIALS

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ABSTRACT

The objective of this study was to evaluate the internal control system in operation at power holding company of Nigeria Plc in Enugu State with a view to knowing its impact on revenue generation in the state. A sample of 40 was selected for the study randomly. The questionnaires were used in gathering the primary data while secondary data were collected from the work of others in the form of literature review. The data collected were analyzed using the chi-square (x2) as the statistical tool to determine the valuation of the hypothesis. The findings concluded that weak internal control system encourages collusion fraud loss of revenue, embezzlement and computation. This have always impeded the company’s ability to effectively supply electricity to customers and there from generate revenue. Internal audit system ensures operations compliance with set policies, promoting accuracy and reliability of transactions recording. In addition, effective internal control system ensure effective recommends the remodeling of the company’s internal control system and strengthening of the investigating unit. The components sectors of the present corporate Power Holding Company of Nigeria PLC should be unbundled into separate distinct independent entities that handle generation, transmission, distribution and marketing. It further recommends that prepaid meters should be seen as an alternative to further accumulate debts.

TABLE OF CONTENTS

Title page                                                                         i      

Certification                                                                     ii

Dedication                                                                       iii

Acknowledgement                                                            iv    

List of figures                                                                   v

Abstract                                                                           vi

Table of contents                                                             vii

CHAPTER ONE:      INTRODUCTION     

1.0      Background Of The Study                                                1

1.1   Statement Of Problem                                              6

1.2      Objective Of The Study                                            8

1.3      Significance Of The Study                                                8

1.4      Scope and Limitation Of The Study                         9

1.5      Research Hypothesis                                                       10

1.6      Research Questions                                                 11

1.7      Historical Background of Power Holding Company of

Nigeria                                                                     12

1.8      Definition of Terms                                                  14

CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.1   What is Revenue?                                                    17

2.2      What is Internal Control System                              18

2.3      Objectives of Internal Control System                      20

2.4      Types of Internal Control System                             21

2.5      Components of Internal Control System                  23

2.6      Functions of Internal Control System                      56

2.7      Roles and Responsibilities.                                      58

2.8      Internal Control System And The Auditors              62

2.9      Operation Of Internal Control System At Power Holding Company Of Nigeria                                                     64

2.10  Limitation Of Internal Control System                     71

CHAPTER THREE

RESEARCH METHODOLOGY

1.1      Research Design                                                      73

1.2      Sources Of Data                                                       74

1.3      Population Of The Study                                          75

1.4      Sample Size                                                             75

1.5      Description Of Questionnaire                                  76

1.6      Method of Data Analysis                                          76

1.7      Statistical Test For Hypothesis                                77

CHAPTER FOUR     DATA PRESENTATION, ANALYSIS AND INTERPRTATION  

4.1      Data Analysis and Interpretation                             78

4.2      Test Of Hypothesis                                                   84

4.2.1Hypothesis One                                                       84

4.2.2Hypothesis Two                                                               86

CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION

5.1      Summary Of Findings                                              88

5.2      Conclusion                                                              89

5.3      Recommendation                                                     90

5.4      Suggestions For Further Investigation                     91

Bibliography                                                            92

Appendices                                                              96

CHAPTER ONE

INTRODUCTION

1.0.    BACKGROUND OF THE STUDY

Every organization has a purpose, which includes making some product and rendering some services at a price. For normal operations of the business organization, it is the product or services of the firm that cause cash receipts (revenue) to flow into the firm. Revenue is associated with products or service of a firm as source of expected cash receipts. Revenue is an event; an increase that applies definitely to value that is monetary. This increase occurs because the firm undertakes certain activities or there is any performance by the firm.

Revenue therefore refers to the monetary event of asset valves increasing in the firm due to the physical event of production or sales of the firms’ products or services.

In Kam (1987:237), Financial Accounting Standard Board(FASB) defines revenue as inflows or other enhancements of assets of an entity or settlements of its liabilities (or combination of both) during a period from delivery or producing goods, rendering service or other activities that constitutes the entity’s ongoing major or central operations. In addition, Hongreen et al (2002:568) described revenue as inflows of asset (almost always cash or accounts receivables) received for products or services provided to customers.

On the basis of the above, National Electric Power Authority now Power Holding Company of Nigeria is a government owned public utility establishment enjoying almost total monopoly in generating, transmitting and delivering electricity to all homes and businesses in Nigeria. According to the establishments customer service chartered (2004), her mission as a service industry is to satisfactorily meet customers electricity demand in the most cost effective manner using proven technology and well motivated customer friendly work force with adequate consideration for the environment.

Her goals include:

    I.        To continuously improve her service to her customer.

  II.        To realize full payment for timely accurate and complete billing of electricity delivered.

III.        Institutionalise business and commercial orientation among the work force.

IV.        Gradually aiming at closing the gap between demand and supply by upgrading and expanding, generating, transmission and distribution of infrastructure.

  V.        To improve skills and motivation of staff. 

To achieve the above mission and goals, the management of the establishment must adopt measures to ensure that available resources are prudently used to obtain valve for money from resources allocated to them. Management in turn should generate operational data with which they evaluate the efficiency and effectiveness of their operation. It is fundament aspect of management stewardship responsibility to provide interested parties with reasonable assurance that their organisation is effectively controlled and that the accounting data it receives on a timely basis are accurate and dependable. Developing a strong system of internal control provides this assurance.

Thus internal control is defined as the whole system of control, financial and otherwise established by the management in order to carry on the business of the enterprise in an orderly and efficient manner to ensure adherence to management policies safeguard the assets and secure as far as possible the completeness and accuracy of the records. In addition the American institute of Certified Public Accountants in 1949 defined internal control as comprising the plan of organisation and all the coordinate methods and measures adopted within a business (or non profit making body) to safeguard its assets, check the accuracy and reliability of its accounting data promote operational efficiency and encourage adherence to prescribed managerial policies. A ‘system’ of internal control extends beyond those matters which relate directly to the functions of the accounting and financial department.

However, it is an established fact that all the business units and service centre of power holding company of Nigerian plc in Enugu state are often plagued by accounting and administrative control problems as it affect revenue generation and other assets. As a result the establishment revenue base has assumed a downward trend.

It has also been shown that despite considerable investment, public service delivery by the establishment is widely perceived to be unsatisfactory and deteriorating from bad to worse.

The complete dependence on capital grants allocation from government is also known. What is not known is the degree to which internal control weaknesses and reduced allocation from government contribute to the problem.

The incidence of internal control weaknesses unsatisfactory and deteriorating service delivery have the undesired effect of not only weakening the establishment’s ability to provide electricity supply effectively, but also encourages collusion, fraud, asset conversion, genuine and deliberate mistakes, corruption, lack of transparency and accountability for revenue collection and accountability for revenue collection and   other assets. For the enhancement of the attainment of the mission and goals, it is therefore necessary that these hindrances be removed. It is against the above background and evaluate that this research carried out to examine and evaluate the internal control system in operation at holding company of Nigeria in Enugu state.

1.1   STATEMENT OF PROBLEM

The incidence of internal control weaknesses, unsatisfactory and deteriorating service delivery have the undesired effect of not only weakening the company’s ability to effectively provide electricity supply but also encourages collusion, fraud, embezzlements, loss of cash (revenue), assets conversion genuine and deliberate mistakes, corruption, lack of transparency and accountability for revenue collection and other assets. Despite considerable investment, public service delivery is unsatisfactory and degenerating. The company is not able to break even and sustain itself from the revenue obtained there from. This impacts so negatively on the company’s existence.

For the enhancement of the attainment of the mission and goals of the company, it is therefore necessary that these hindrances be removed. The management of the company should familiarize themselves with internal control procedures that will ensure effective service delivery and the desired revenue generation.

Unfortunately, there has a dearth of adequate information in this regard. No determined effort has been made to investigate the problem of weak internal control over service delivery and revenue generation. Therefore the main motivating factor underlying this study is the desire to break new grounds with the intent of shedding more light on this problem and seeking avenues for solving it.

Thus, the purpose of this study is to examine and evaluate the internal control system in operation at power holding company of Nigeria in Enugu state with a view of knowing its impact on revenue generation in the state.

1.2       OBJECTIVES OF THE STUDY

The main objective of this study is to evaluate, the internal control system in operations at power holding company of Nigeria in Enugu state.

Other objectives of the study are:

I.                To examine the types and techniques of internal control system for revenue generation adopted by Power Holding Company of Nigeria in Enugu state.

II.                To determine the impact of internal control system on revenue generation.

III.                To identify the strengths and weaknesses of the system of internal control in all departments in power holding company of Nigeria in Enugu state.

1.3       SIGNIFICANCE OF THE STUDY

This study is significant for the following reasons:

i.                These studies will highlight the accounting and administrative control problems plaguing power holding company of Nigeria in Enugu state.

ii.                It will enable managers of services, organizations and government owned public utility establishments to bring the accounting and the internal control procedures inherent in them in conformity with internal accounting standards and practises.

iii.                It will help government owned establishments to assess then internal control measures and make amends where necessary.

iv.                The study could arouse further research into some other further research into some other functional areas in the company by students and accountants. It will also help to broaden (my) researchers’ knowledge.

1.4         SCOPE AND LIMITATION OF THE STUDY

Although the study was to evaluate the internal control system in operation at power holding company of Nigeria in Enugu state, to ensure accurate and reliable data collection it was limited to the study of the internal control measures at the Enugu district unit of power holding company of Nigeria plc. This covers internal control as it affects revenue generation (handling of cash) assets control administrative control and manpower control as well.

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