CHAPTER
ONE
INTODUCTION
1.1
Background to the study
A business whether
small or big simple or complex private or public is created to provide
competitive prices. In Nigeria has been classified as small, medium and large.
The government is turning to small and medium scale industries as a means of
economic development and solving problem presently in Nigeria. The concept of
internal control system in 1992 promote the concept and element of internal
control in it report.
Internal control refers
to the measure instituted by an organization so as to ensure attainment of the
entity objective goal and mission (mwinder, 2008). It is worth noting that
internal control only provide reasonable but not absolute assurance to an
entity management that the organization will be achieved and establish all
system of internal control to help them achieve performance and organizational
goal and prevent loss of resources, and ensure compliance with law and
regulation.
According to Lydia,
2011 small and medium enterprises have concentrated on the availability and
efficiency in the utilization of finance, little attention has been paid to the
great role played by the internal control system in the performance of small
and medium scale enterprises have operated in total disregarded of internal
control system leading to the mass failure of these business organization.
According to Saleh and
Ndubisi 2006 studies show that 90% of the business start up contribution
from SMEs to the economy is also very important they provide indirect support
or income to economic growth. SMEs also provide goods and services the same as
large companies in smaller quantities.
It has been shown that there is a high
correlation between the degree of poverty hunger, unemployment economic well
being (standard of living) if Nigeria were able to achieve an appreciable
success towards attaining the millennium development goal.
1.2
Statement of the problem
Small and medium scale
enterprises in Nigeria die shortly after their establishment and the
performance of the surviving few are far below expectation (osotimehin, 2012).
Generally the failure rate of SMEs in Africa is very high (Adelakun 2008). The
SMEs sub sector has neither effective enough to create substantial job
opportunities nor efficient enough to improve the standard of living of Nigeria
population, unemployment rate is very high and more than half of the population
is still living the poverty line (Abu & Abdullah, 2010).
According to
(Okpara,2000) one of the specific problem causes of SMEs poor performance and
failure in Nigeria, the fact is that they didn’t know that effective fund
management can enhance availability and accessibility of additional fund for
both working capital and expansion purpose. They can’t have access to quality
fund for their business activities because of poor fund management (Stigliz
& Weiss, 1981).
1.3
OBJECTIVE OF THE STUDY
The primary objective
of this study was to examine the relationship between internal control system
and their performance in small and medium business enterprises in Ilorin Kwara
state, of Nigeria.
I.
To examine the challenge of internal
control system in small and medium scale enterprises.
II.
To know the performance of internal
control system on small and medium scale enterprises.
III.
To establish the level of business
knowledge of an entrepreneur in internal
control system and its effect on performance of small and medium business
enterprises.
1.4
RESEARCH QUESTION
The following research questions
guide the study:
I.
What are the relationships between the
performance of internal control system in small and medium scale enterprises in
Nigeria?
II.
Will the level of business knowledge of
entrepreneur in internal control system affect the performance of small and
medium business enterprises?
III.
What are the challenges of internal control
system in small and medium scale enterprises?
1.5
RESEARCH HYPOTHESIS
The following
hypotheses were tested in the study:
Hypothesis
One
Null
hypothesis (HO): There is no relationship between
internal control system as performance of small and medium scale enterprises.
Alternative
hypothesis (HI): There is relationship between internal
control system as performance of small and mwdium scale enterprises.
Hypothesis
Two
Null
hypothesis (HO): internal control system will not improve
the knowledge of business in economic development in Ilorin Kwara state.
Alternative
hypothesis (HI): internal control system will improve the
knowledge of business in economic development in Ilorin Kwara state.
1.6
SIGNIFICANCE OF THE STUDY
These research which
seek to investigate the performance of internal control system on small and
medium enterprises in Ilorin, it will serve as a policy and decision making.
Also the result of these finding would be used as a guide by economic policy
into small and medium enterprises in Nigeria.
1.7
SCOPE OF THE STUDY
The study will focus on
Ilorin city with an equally appreciable influence for both small and medium
enterprises and performance of internal control system (ICS) specifically,
these study focus on small and medium scale enterprises in Ilorin.
1.8
DEFINITION OF TERMS
Small
scale business: A small business is a business that is
privately owned and operated with a small number of employees and relatively
low volume of sales.
Internal
control system: Is broadly defined as a process, effected
by an entities board of trustees, management and other personnel, designed to
provide reasonable assurance regarding the achievement of the objective in an
organization.
