The Impact of Internal Control Mechanism on the Operational Efficiency of Small and Medium Scale Enterprises in Nigeria

Abstract

It is pertinent to understand the impact of Internal Control Mechanism on the Operational Efficiency of Small and Medium Scale Enterprises of any Country. The Internal Control Mechanism refers to all the policies and procedures adopted by the management of an entity to assist in achieving management objectives as much as practicable, the orderly and efficient conduct of its businesses including adherence to its own rules and regulations and policies. In other words, Internal control system implies that all expenditures are properly authorized; ensure that all incomes and revenues to which the company is entitled are properly documented. Small and Medium Scale Enterprises is defined by the Nigerian Central Bank as those whose capital investment does not exceed N 5 million including land and working capital or whose turnover are not more than N 25 million annually.Data were collected and analyzed using the Chi Square Analysis. The result of the study shows that if the Internal Control Mechanism of Small and Medium Scale Industries functions effectively it must have great impact on the operations and growth of Small and Medium Scale Industries. And it also shows that management of Small and Medium Sized Industries should have various measures in place of improving and strengthening their internal control system.On the strength of these evidences, this paper recommends that Small and Medium sized enterprises should endeavor to send its workers on training so as to improve the workers skill and broaden their knowledge thereby improving their internal control system. Also, access to assets should be limited to only authorized persons and the company should try as much as possible to always reconcile its bank statements promptly so that any error can be rectified immediately.