Implication of Accounting as an Internal Control Mechanism in the Government Ministries


According to Osita Aguola “Internal control is defined as the whole system of controls, financial or otherwise, established by management in order to secure as far as possible, the accuracy and reliability of the records, run the business in an orderly manner and safeguard the prevention or early detection of fraud and errors”.

He explained his definition in bits and explained all the phases since each is essential for the true meaning of internal control.  System of control, financial or otherwise.  It is wrong to assume that internal control is merely an accounting concept and hence ha to do with only the accounting records kept by the organization.  Obviously financial or accounting control is a key element of the system of controls.  However internal control is not only concerned with keeping accounting records but will include all the other non-financial controls which will include.

  • the method of authorizing / approving transaction.
  • The method of designating positions and allocating responsibilities and delegating authority.
  • The method of physically controlling assets.
  • The method of recognising assets and accepting liabilities

Hence internal controls include the whole system of controls no matter the form it takes.

  • Established by management:

It is important to appreciate that for any procedure to qualify as part of the system of internal control, it must be established or at least approved by management.

Hence it is not part of the duty of the auditors to establish the system of internal control.  Whenever the auditor is involved in the establishment of internal control, he acts only on advisory capacity.

  • to secure the accuracy and reliability of the records. For any system of internal controls to be worth the name, it must be capable of ensuring the accuracy and hence the reliability of the records.  Records, in this sense has been for both the accounting and non accounting records.  Most management decisions are based on information from the records of the organisation.  The more accurate and reliable these records are, the better the decisions made by managements.  To be reliable, these records must ensure the completeness, accuracy and validity of the transactions recorded there-in.
  • To run the business in an orderly manner.

The first condition for the success of any business organization I orderliness. This will involve.

  • Having a defined procedure for carrying out every aspect of the transactions.
  • Assigning specific power and responsibility to designated personnel.
  • Having standard stationery for recording the transaction clearly defining the lines of business in which the company may get involved.
  • Reviewing the work done by the staff hence controlling sanction if accessory.
  • To safeguard the assets

It is an essential aspect of internal control to safeguard the assets of the company against loss or damage.  The loss of company assets may be as a result of pilferage, exposure to bad weather, rough handling, wastage or incorrect recording.

Hence whatever procedure management may adopt to ensure that the assets of the company are not loss for whatever reason, or to mitigate such a loss when it does not occur, is part of the system of internal control.

  • The prevention or early detection of fraud and errors.

Internal control has the primary objective of preventing fraud or errors.  This objective may be impossible to achieve since fraud and errors are known to have occurred even in the best system of internal control.  However, a good system of internal control ensue space of time.  It is therefore expected that the effect of a good system of internal control is to reduce the incidence of fraud and errors.

Stettler defined the topic of internal control in this form, “Internal control consist the plan of organisation and of co-ordination methods and measures adopted within a business to safeguard its assets, check the accuracy and reliability of its accounting data, promote operational adherence as prescribed.

This statement has three main features which should be emphasized.

  1. Good internal control should safeguard the company’s assets
  2. The responsibility of the establishment and working of internal controls lies with the management and not with the external auditor of the company.
  • Good internal control system should make accounting records and therefore the financial statement prepared from them so accurate that management can safety rely on them in making their business decision.

Santock also defined the term internal control (1976 : 12 thus)        “Internal control can be taken as umbrella beneath which included financial controls, internal check and non-financial controls.  He said that internal control system is composed of techniques, procedures, policies, physical devices, documentations and people.  The components interact to ensure the achievement”.


The cardinal principles of internal control may be stated as follows.

  1. Responsibility for the performance of each duty must be filed without the proper change of responsibility the quality of the control will be inefficient.
  2. Accounting and financial operations must be separated. An employed should not be in a position in which he has control of the operating giving rise to entries in the records.  For example, the person in charge of the general ledger should not have access to the cash or to the records of cash sales.
  3. All available proofs of accuracy should be utilized. In order to ensure correctness of operation and accounting for example, sales for a day should be totaled, and proved against the sum of released merchandise tags, if a retail system of inventory is used.
  4. Do one person should be in complete charge of a business transaction. Any person will purposely or inadvertently commit errors, but the probability is that an error will be discovered if the handling of a transaction is separated between persons.
  5. Employees must be carefully selected and trained careful. Training results in better performance, reduced cost and mere alert employees.
  6. Employees should be bonded. Bonding is a protection to the employer and it serves as a psychological deterrent to a tempted employee.
  7. Employee should be rotated on a job, if possible, vacations for those in position of trust should be enforced. Rotation reduces the opportunity of fraud, points to the adaptability of an employee, and often results in new ideas for the organisation.
  8. Operating instructions for each position should be reduced to writing. Manuals of procedure promote efficiency and prevent misunderstanding.
  9. The protective advantages of a double-entry system of accounting should not be exaggerated. A double entry system is not a substitute for internal control.  Errors are made on double entry; and the system alone will not prove omission, incorrect entry or dishonesty.
  10. Controlling accounts should be used as extensively as possible. Controlling account serve as proof of accuracy between account balance duty, segregated employees.
  11. Mechanical equipment should be used, if feasible although errors and manipulation may be watched even when mechanical equipment is used, with it the operating procedures are facilitated, the division of labour is promoted and internal control may be strengthened.

Internal controls are very essential in any organization whether business or otherwise and the responsibility for internal control rests with the management.

Anderson enumerated a lot of things that could be achieved by establishing on efficient and effective system of internal control.  One of his objective for internal control is the safeguard of assets.  It is of no use maximizing future gains but leaving the proceeds of the past ones at the mercy of fraudulent employees or customers that pilfer goods.  Asset such as cash, inventories, marketable securities, need protection from such internal errors, such as customer pilferage order to over-state commission business or under billing of customers, over payment of suppliers or physical loss or destruction of the assets themselves.

Aguolu in his own view, says that the system of internal control is intended not only to maintain an adequate method of processing accounting data, but also to safeguard the company against possible financial loss due to fraud or errors.  There is also the overriding need on the part of management to run the business in an ordesly  manner.  Most management decision are based on financial, quantitative and qualitative information obtained from the records of the business for best decision, therefore the information should be relevant, timely and accurate.  The more accurate the information the better the decisions.


Primary data –      primary data collection through oral interview was not used in this work.

Secondary data-   The secondary data used include certain internal control journals and a request was also made by the researcher to be allowed to see some accounting documents such as receipt voucher, cash book, store receipt voucher etc.

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