In recent times, the issue of corporate dirts and deficiency of conformity to fiscal criterions twosomes with the turning demand for high – quality fiscal coverage around the universe have become affairs of societal and concern concern. An effort to run into such high demands and besides to forestall the misconducts, the regulators more particularly direction must set in topographic point mechanisms that will assist better the quality of fiscal coverage, conformity to ordinances and timely bringing of dependable fiscal statements and prevent possible corporate dirts. Internal control system an built-in constituent to corporate administration and hazard direction is one of the cardinal factors that have been identified.
Internal control systems are set of policies and steps adopted by an entity to guarantee that the entity ‘s day-to-day minutess are processed in the most appropriate mode so as to avoid waste or abuse of the entity ‘s resources, cabbaging and accurate and dependable presentation of fiscal statements. In consequence internal controls can be seen as procedures designed and effected by those responsible for administration, direction and other forces to supply a sensible confidence about the attainment of set aims with respect to ; dependability of the fiscal coverage, effectivity and efficiency of operations and purely following with applicable Torahs and ordinances as stated by Committee of Sponsoring Organizations of the Treadway Commission ( COSO in 1992 ) . It is nevertheless deserving saying that, internal control system itself merely provides sensible but non full confidence to direction and the other assorted stakeholders that, the entity ‘s ends can be attained. Hayes et al stated in their surveies that the likeliness of entity ‘s accomplishment is affected by the restrictions that are built-in in all systems of internal control such as flexibleness of directors to overrule the board ‘s determination due to bureau job, human mistakes and deficiency of the needful resources for full execution of control system. Again control system itself is a procedure or a agency to an terminal and non an terminal in itself and hence is merely geared towards attainment of set ends in one or more different ways but in overlapping classs. That is the internal control system addresses different demands and let a direct focal point in run intoing those separate demands as they surface in the class of transporting out and implementing the set policies and ordinances.
Though internal control system itself is non wholly an terminal to companies attainment to its set ends at the terminal of a peculiar period, its absence in an organisation makes that entity to be more vulnerable to possible fiscal hazards like improper recording and poster of fiscal minutess, embezzlement of financess, addition in unauthorised minutess and bankruptcy, which all affect the fiscal public presentation of an entity. In other to guarantee sweetening in entity ‘s public presentation, attainment of coveted ends and conformity with Torahs and ordinances, there is the demand for internal control mechanisms to be put in topographic point.
1.1.1 Problem Statement
The growing and endurance of companies in recent times mostly depend on how direction efficaciously and expeditiously manages the fiscal resources entrusted under their attention towards the attainment of the set ends of the company. COSO ‘s model hence concluded that nonsubjective scene is regarded as a stipulation to internal control because it helps directors in placing hazards of the company. However the effectivity of the internal control is measured by how the set ends of the company are attained and how efficaciously and expeditiously the hazard identified are controlled.
Internal controls are installed to guarantee that processes operate as designed and that hazard interventions in hazard direction are successfully implemented. Controls itself exists to maintain public presentation every bit good as province of personal businesss within the expected. In order to heighten the effectivity of internal control activities in Ghana, the Central Bank and the democracy have put in topographic point assorted statute law and among them include 1992 Fourth Republican fundamental law, the Financial Administration Act ( Act 654 ) , the Criminal Code of 1960 ( Act 29 ) , the Public Procurement Act ( Act 663 ) and eventually the
Internal Audit Agency Act ( Act 658 ) .
It is deserving observing that internal control itself merely provides a sensible confidence and non absolute confidence to directors that the set ends will be attained at the terminal of the period. This is due to the fact that people who operate the system might breakdown, happening of human mistakes and improper collusion among people who are supposed to move independently, all forestalling the internal control system to accomplish the set ends.
The Ghana Stock Exchange market besides in effort to do the internal control system works put steps in topographic point to guarantee that its listed members published a timely and dependable audited one-year fiscal statement at the terminal of its fiscal period. And this give much confident to investors to put more in most of its listed members thereby increase the capital base of the single company and the stock exchange in the long tally
Despite the exchange ‘s betterment in more than twenty old ages of operation, it still have the undermentioned jobs ; ( 1 ) information slowdown therefore a state of affairs where a company might let go of its one-year statement but nil will go on until three or four months by which clip things would hold changed, ( 2 ) increasing finding of monetary values by minority impulse investors ( 3 ) few listed companies on the market and ( 4 ) the exchange failure to ordain jurisprudence that will roll up its listed company to unwrap their internal control mechanisms in their one-year fiscal statement. The survey hence seek to analyze the hapless fiscal public presentation of companies listed in GSE in regard to internal controls which the exchange have non mandate the listed companies to include in their one-year fiscal study
1.2 Purpose and Significance of the survey
The chief intent of this survey is to set up the influence of internal control system and fiscal public presentation of listed companies in Ghana Stock Exchange market. The survey on the other manus may seek to:
Examine whether listed houses in Ghana stock exchange market study on their internal controls in their one-year fiscal statement.
Study how control environment and hazard direction affect the company public presentation in the stock exchange
Establish the relation between the internal control and fiscal public presentation of listed companies in Ghana.
The survey when completed will hold the undermentioned significance:
It will assist the participants in the Ghana stock exchange market to set up the possible consequence of internal control on companies public presentation
It will besides lend to the wider scope of research inquiries sing influence of internal control on house ‘s public presentation in a non- internal control environment
It will besides offer the stock exchange a compulsory inclusion of internal control revelation in their Act under the revelation policy.
1.3 Research Contentss
The survey would be organized under five chapters and each chapter is develop to assist the research accomplished its purpose. It would nevertheless get down with title page that includes screen page, Signature page and Authorization page, abstract, list of tabular arraies. Chapter one will open the research by foregrounding on the background and statement of the job that necessitate the survey, part every bit good of the significance of the survey. Chapter will reexamine the literature for the whole survey. Chapter three will screen to develop the hypotheses of the survey that will be resolved in the ulterior chapter.
The informations collected from the exchange market will be presented and analyzed in chapter four. Finally the last chapter will reason the survey with the restrictions of the survey and possible hereafter researches.
1.4 Contributions
The fiscal crisis that hit the universe fiscal market, unfastened another door for concern research around the Earth into happening ways and agencies of set uping a strong fiscal system. The earlier research workers ‘ part was gear towards set uping an effectual internal control in concern organisations as the most effectual step of stabilising the fiscal systems. It was nevertheless seen that weak internal control system give rise to frauds, deceit of fiscal statements, bankruptcy hence fiscal crisis. Most of the emerging researches besides contribute on fiscal public presentation of listed companies more particularly in a regulative environment where companies are compiled by jurisprudence to do a full revelation of their internal control system in their one-year fiscal statement but small work have been done in developing state with a non-regulatory environment.
The survey will therefore seek to set up the relationship between internal control system and steadfast fiscal public presentation as measured by describing, liquidness and net income border in a non-regulatory internal control environment like Ghanaian Stock exchange market. This helps to add to the few surveies that have been conducted on the being of internal controls in a non-regulatory control environment.
3 HYPOTHESES DEVELOPMENT
3.1 Reporting
In an implemented concern scene, directions are required to describe on their internal control at the terminal of their fiscal twelvemonth. This is because the investors do value the cost they incur in monitoring direction when pricing their claims as supported by researched conducted by Jensen and Meckling 1976. Therefore the motivational thrusts for direction to describe on their internal control are higher when the other monitoring controls are weaker and hence the overall bureau job is higher. ( Leftwich et al. , 1981 ; Eng and Mak, 2003 ; Gul and Leung, 2004 ) . On history of the above, directions now have inducements to unwrap information on their internal control so as to take down monitoring costs of investors and at the same clip to inform them about the effectivity of the system.
Though corporate administration best pattern requires a full revelation of houses ‘ internal control, it does non detail what direction should unwrap doing it really flexible for most directors to utilize their ain discretion in make up one’s minding on the extent and the contents of their internal control in their one-year study. This lead the survey to the undermentioned hypothesis:
3.2 Control Environment and Financial Performance
Harmonizing to the surveies of Whittington and Pany ( 2001 ) , control environment as identify by COSO, set tone for the organisation by act uponing the control consciousness of people and hence it serve as a foundation for all other constituents of internal control. The findings of Goodwin-Stewart & A ; Kent ( 2006 ) , and Sarens & A ; De Beelde ( 2006 ) all advocator for direction ( command environment ) as the basis for an effectual internal control system. Sarens & A ; De Beelde in peculiar besides emphasizes the “ tone at the top, the degree of hazard and control consciousness ” every bit critical to the success of an internal control system.
In other related surveies control environment factors are identified. Dezoort et al. , 2002 ; Spira, 2002, place the audit commission and overall board of managers as some cardinal constituent of control environment because of their important influence on the entity ‘s public presentation. This was besides supported by Raghunandan et al. , 2001 ; Sarens et al. , 2009 ; Scarborough et al. , 1998 in their surveies which province that active audit commission could see the internal audit map as a necessary beginning of information to put to death its monitoring duties that is to state an effectual audit commission institute in a house may force for better staffed internal audit maps. It is nevertheless clear that strong and effectual installed control environment determines house ‘s survival hence influences its public presentation. This therefore set our first hypothesis:
H1 = there is a important relationship between the control environment factors, as step of internal control and company public presentation in Ghana stock exchange market.
3.3. Risk Management and Financial Performance
In an effort by directors to maintain their concern in operation, there has been afresh bend to guarantee that possible dainties are timely determine and possible action taken to forestall it from happening or cut downing its impact on the public presentation of the concern. Stoddard, J. , 2004 concluded his survey by saying that hazard direction is an overpowering undertaking for every organisation such that concerns that implement effectual hazard direction become successful while those that do non pattern this activity proved to be unsuccessful. With this averment we can therefore state hazard direction is an indispensable constituent that affects house ‘s fiscal public presentation. This averment leads to the development of the 2nd hypothesis that:
H2 = there is a important relationship between the hazard direction and company public presentation in Ghana stock exchange market.
3.4. Internal control and fiscal public presentation
The ultimate purpose of internal control system is to safeguard the involvement of investors as corporate administration mechanism ( Becht, Bolton, and Roell, 2005 ) . This premise give rise to what internal control must represent. COSO ( 1992 ) clearly outline the cardinal constituent of an effectual internal control to be sound control environment ; sound hazard appraisal procedure ; sound operational control activities ; effectual information and communicating system and eventually ; effectual monitoring and rating system.
Another ground for sound internal control mechanisms installing in an organisation lies in bureau theory and hazard direction. Harmonizing to Jensen and Meckling ( 1976 ) the demand for internal control is chiefly derives from happening of bureau costs. It therefore clear that internal control has an influencing consequence on the public presentation of a house.
With respect to the mentioned affairs about the research job, significance and the related surveies in the literature and the theoretical footing, there are possible relationship between the internal control and company public presentation. From the above the staying hypotheses are set as follows:
H3 = there is a important relationship between the monitoring and the company public presentation
H4 = there is a positive relationship between internal controls and company public presentation.
4 Empirical Analysis
4.1 Sample Selection
The information for the survey was obtained from audited fiscal statements of 30 listed companies on the stock exchange market based on the one-year study available between 2000 and 2010. The research worker therefore used purposive sampling technique to choose the sample size. Aim trying technique was used because the survey was aiming companies who have been listed in the Ghana stock exchange for at least ten old ages since its constitution. And more besides this technique ensures that relevant people with utile information for a survey are merely captured and studied. A sum of 30 companies from across all the industries were eventually used as sample for the survey.
Nine different internal control indexes were examined and topographic point under four different internal control factors recommended by COSO.
4.2 Data Management
The informations collected from the sample size was fed into Statistical Package for Social Scientist for easy analysis and reading of consequences. The relationship that exists between the internal control and fiscal public presentation of the houses was assessed utilizing correlativity. Multiple arrested developments and ordinary least square ( OLS ) were besides used in the appraisal and reading of the informations.
4.3 Arrested development
The survey adopted the economic theoretical account that was in line with most of the surveies conducted in the same field and it is stated as:
Y = I?0 + I?Fit + eit
Where Y is the dependent variables used in the survey, I?0 is changeless and I?0 is the coefficient of the explanatory variable whereas the eit is the error term. From the above the below equation was evolve for the survey.
Performance = I?0 + I?1CONTENV + I?2RISKMGT + I?3MONT. + I?4CODE + eit
The thought was to find now the internal control measured by the independent variable have consequence on the company ‘s public presentation.
4.4 Descriptive Statisticss
Tables 1 and 2 below show the variables and their descriptions as used in the survey
Table 1a: Dependent variable description
Variable
Measurement
REP= Reporting
Reporting variable is set to 1 if steadfast discloses its internal control in their
LIQ = Liquidity i.e Current Ratio
Current Assetss
Current Liabilitiess
PM = Profit Margin
Net Net income after revenue enhancement
Employee turnover
Table 1b: Mugwump variable description
Variable
Measurements
Control environment
Control environment variable set to 1 if reported in the one-year fiscal statement, 0 otherwise.
Hazard direction
If the company reports on the hazard direction activities, one ( 1 ) and zero for otherwise
Monitoring
Monitoring variable besides set to 2 if there is study on external independent hearer and every bit good describe on the responsibilities of internal audit commission and 0 if otherwise.
International codification
Mention to any international internal control codification gives the house one ( 1 ) and zero if non
The tabular array 2 below shows the descriptive statistics of all the variables used in this survey
Table 2: Descriptive Statisticss
Rep
LIQ
Autopsy
CONENV
RISKMGT
MONT
Code
Mean
0.4692
1.4106
0.0469
2.9619
0.5191
1.3402
0.1114
Std. Dev
0.0500
1.1458
2.3371
1.1863
0.5004
0.4745
0.3151
Discrepancy
0.2498
1.3128
5.46224
1.4074
0.2504
0.2251
0.0993
Lopsidedness
0.1234
5.2551
-8.2150
-0.6038
-0.0763
0.6747
2.4696
Kurtosis
1.0152
42.827
104.872
1.7732
1.0058
1.4552
7.0991
Scope
1
12.7945
39.76
3
1
1
1
Minimum
0
0.0794
-29.2
1
0
1
0
Maximum
1
12.8739
10.56
4
1
2
1
N Valid
341
341
341
341
341
341
341
Missing
0
0
0
0
0
0
0
The mean of REP of the entire sampled houses is approximately 46 % , that of LIQ is 1: 1.4 and the mean of PM is 4.7 % . The consequence clearly shown that on norm, out of the entire houses listed on the exchange market, the figure that study or disclosed their internal control mechanism on their one-year fiscal statement is closed to half of the entire population in the market therefore 46 % of 100 % . And that those who disclosed their internal control mechanisms are able to run into their short term fiscal duty as and when it falls due therefore have their current ratio to be 1:1.4. The mean periodic net income earned over the 10 old ages was besides GH 4.7.
The consequence above besides shows that out of the four ( 4 ) elements measured under the control environment factor ( direction duty, internal audit commission, ethical values and assignment of responsibilities and organisational construction ) , houses that report their internal control mechanisms, on norm besides have three out of the four factors which make the survey to reason that the listed houses in the exchange market hold control system in topographic point which accounted for their fiscal public presentation as seen above. From the above analysis the survey conclude that listed houses in Ghana stock exchange market have some degree of internal control mechanism installed in their company merely that most do n’t see the demand to describe them on their fiscal statement this supported the survey undertaken by Joseph at el. , 2012 that attested on the being of internal control system of listed companies in the Ghana stock exchange merely that there is more room for betterment in the effectivity of the internal control system particularly in the countries of control activities and monitoring. This makes the survey to hold with earlier surveies that listed houses in Ghana stock exchange studies on internal controls in their one-year fiscal statement.
The survey besides identified two ( 2 ) monitoring factors viz. ; studies of being of internal control by an external independent hearer and execution of recommendation by hearers in the following twelvemonth ‘s one-year study. The consequence shown that approximately 1.3 out of the 2 factors examined was put in topographic point by those who report their internal control system. Again about 52 % of the sample size population has put some steps in topographic point to at least pull off the fiscal hazard that might happen in the class of their day-to-day operations. These attest to the fact that most of the listed houses understood the deductions of hazard on fiscal public presentation and hence are ready to contend it. It is instead unfortunate that out of the entire houses that have been sampled, merely 11 % therefore three out of 30 listed houses report on their internal control mechanisms in their one-year studies with mention to an international internal control codification. Though the staying 35 % out of 46 % do describe on their internal control mechanisms, they do so based on what their direction has designed without doing any mention to any of the international codification criterions like studies of COSO, Turnbull, and SOX.
4.3 Arrested development Analysis
The tabular arraies 3a, 3b and 3c below present the correlativities among all the variables used in the survey. From table 3a utilizing the Pearson correlativity, REP is positively correlated with the house ‘s control environment factors and it is important ( sig 0.0000 ) . Similar consequences appeared for hazard direction, monitoring and mention to international codification and are all important. However control environment and hazard direction have comparatively stronger correlativity with describing variable among other independent variables as they have about 52 % and 51 % severally and with monitoring factor holding the lowest correlativity with the coverage variable.
The positive correlativity that exist between the dependant variable and the independent variables indicate that houses disclosure policy in one-year study will increase when there is equal internal control mechanism put in topographic point by that house.
Table 3a: Correlations ( Pearson ) – Rep as steadfast public presentation index AT significance degree of 5 %
Rep
CONENV
RISKMGT
MONT
Code
Rep
1.0000
0.5214
0.5051
0.1311
0.3767
CONENV
0.5214
1.0000
0.4298
0.1537
0.2553
RISKMGT
0.5051
0.4298
1.0000
0.0841
0.3036
MONT
0.1311
0.1537
0.0841
1.0000
0.1981
Code
0.3767
0.2553
0.3036
0.1981
1.0000
Sig ( 1-tailed ) Rep
–
0.0000
0.0000
0.0154
0.0000
CONENV
0.0000
–
0.0000
0.0044
0.0000
RISKMGT
0.0000
0.0000
–
0.1211
0.0000
MONT
0.0154
0.0044
0.1211
–
0.0002
Code
0.0000
0.0000
0.0000
0.0002
–
Obs.
341
341
341
341
341
Table 3b: Correlations ( Pearson ) – LIQ as steadfast public presentation index AT significance degree of 5 %
LIQ
CONENV
RISKMGT
MONT
Code
LIQ
1.0000
0.0837
-0.1130
-0.0479
-0.0888
CONENV
0.0837
1.0000
0.4298
0.1537
0.2553
RISKMGT
-0.1130
0.4298
1.0000
0.0841
0.3036
MONT
-0.0479
0.1537
0.0841
1.0000
0.1981
Code
-0.0888
0.2553
0.3036
0.1981
1.0000
Sig ( 1-tailed ) LIQ
–
0.1229
0.0371
0.3780
0.1017
CONENV
0.1229
–
0.0000
0.0044
0.0000
RISKMGT
0.0371
0.0000
–
0.1211
0.0000
MONT
0.3780
0.0044
0.1211
–
0.0002
Code
0.1017
0.0000
0.0000
0.0002
–
Obs.
341
341
341
341
341
Table 3b indicates that though LIQ is positively correlated with control environment, it is non statistically important ( sig 0.1229 ) . However LIQ is negatively correlated with the other three internal control factors but merely risk direction is important ( sig 0.0371 ) . Though the other two variables are non statistically important, their negative correlativity shows that the absence of internal control mechanism in a house makes that house financially vulnerable in run intoing its short term fiscal duties.
Table 3c: Correlations ( Pearson ) – Autopsy as steadfast public presentation index AT significance degree of 5 %
Autopsy
CONENV
RISKMGT
MONT
Code
Autopsy
1.0000
0.0155
-0.1508
-0.1248
0.0133
CONENV
0.0155
1.0000
0.4298
0.1537
0.2553
RISKMGT
-0.1508
0.4298
1.0000
0.0841
0.3036
MONT
-0.1248
0.1537
0.0841
1.0000
0.1981
Code
0.0133
0.2553
0.3036
0.1981
1.0000
Sig ( 1-tailed ) Autopsy
–
0.7756
0.0053
0.0211
0.8069
CONENV
0.7756
–
0.0000
0.0044
0.0000
RISKMGT
0.0053
0.0000
–
0.1211
0.0000
MONT
0.0211
0.0044
0.1211
–
0.0002
Code
0.8069
0.0000
0.0000
0.0002
–
Obs.
341
341
341
341
341
Table 3c besides shows that PM which is the last fiscal public presentation index of this survey is positively correlated with control environment and mention to international codification variables but non statistically important ( sig 0.7756 and 0.8069 severally ) . It nevertheless shows that the net income border of the house can merely increases when those two factors are installed in a house. On the other manus hazard direction and monitoring variables are negatively correlated with house ‘s net income border and are all important ( sig 0.0053 and 0.0211 severally ) . This negative relationship make the survey to hold with the earlier survey on the demand for listed houses on Ghana stock exchange to make more work on their hazard direction and monitoring activities so as to heighten their fiscal public presentation in the long tally.
Table 4a: ANOVA – REP as dependent variable
Model
SUM OF SQ
DF
MEAN SQ
F
SIG
1 Arrested development
37.407
6
6.234
43.82
0.000
Residual
47.520
334
.1423
Entire
84.927
340
.2498
Forecasters: ( Constant ) , conenv, riskmgt, mont, codification
Dependent variable: Rep
Table 4b: ANOVA – LIQ as dependant variable
Model
SUM OF SQ
DF
MEAN SQ
F
SIG
1 Arrested development
19.876
6
3.313
2.59
0.018
Residual
426.475
334
1.277
Entire
446.351
340
1.313
Forecasters: ( Constant ) , conenv, riskmgt, mont, codification
Dependent variable: LIQ
Table 4c: ANOVA – Autopsy as dependant variable
Model
SUM OF SQ
DF
MEAN SQ
F
SIG
1 Arrested development
113.917
6
18.986
3.64
0.002
Residual
1743.217
334
5.219
Entire
1857.137
340
5.462
Forecasters: ( Constant ) , conenv, riskmgt, mont, codification
Dependent variable: Autopsy
Tables 4a, 4b and 4c show the analysis of discrepancy ( ANOVA ) of the variables. With F- values of 43.82 ( sig 0.000 ) , 2.59 ( 0.018 ) and 3.64 ( 0.002 ) for REP, LIQ and PM as fiscal public presentation indexs of the survey severally, it clearly shows that there is a strong relationship between the dependent variables ( REP, LIQ and PM ) and the four independent variables ( control environment, hazard direction, monitoring and mention to international internal control codification ) at 1 % , 5 % and 10 % statistical important degrees.
Table 5: Coefficient estimations Dependent Variables
Independent Variables
Dependent Variables
Rep
LIQ
Autopsy
Conenv
.144
[ 0.020 ] *( 0.000 )
.174
[ 0.139 ] *( 0.003 )
.210
[ 0.118 ] ***( 0.075 )
Riskmgt
.297
[ .047 ] *( 0.000 )
-0.375
[ 0.139 ] *( 0.007 )
-0.973
[ 0.282 ] *( 0.001 )
Mont
.0155
[ .046 ]( 0.733 )
-0.113
[ 0.132 ]( 0.393 )
-0.684
[ 0.269 ] **( 0.011 )
Code
.3113
[ .072 ] *( 0.000 )
-0.276
[ 0.208 ]( 0.187 )
0.570
[ 0.424 ]( 0.180 )
Changeless
-.166
1.271
0.782
R2
0.4041
0.0426
0.0514
Adjusted R2
0.3970
0.0312
0.0401
F – Statisticss ( 4, 336 )
56.95
3.74
4.55
P & gt ; F
0.0000
0.0055
0.0014
No of observations
341
341
341
St mistake are shown in the signifier [ ] , while the p – values are in the signifier { }
* , ** , *** indicate statistical significance at 1 % , 5 % and 10 % severally.
Table 5 shows the consequences of the coefficient estimations. The control environment has a coefficient of 0.144. This indicates a positive relationship between it and REP and is statistically important at 1 % , 5 % and 10 % degrees. Similar consequence is shown for hazard direction and codification. However supervising variable shows a positive relationship between the REP but is non statistically important ( sig 0.733 )
The tabular array farther reveals that both control environment and hazard direction are statistically important ( sig. 0.003 and 0.007 severally ) but control environment is positively related to LIQ while the hazard direction is negatively related to LIQ. Though monitoring and mention to international codification is non important, they have negative relationship with the LIQ. Again it can be seen clearly that control environment is positively related to PM and is important ( sig 0.075 ) , whiles hazard direction and monitoring variables are negatively related to PM and are besides important ( sig 0.001 and 0.011 severally ) .
By analysing, the descriptive tabular arraies and the tabular array 5 above it is clear that the control environment has a positive relationship with the three public presentation indexs and is important with all the public presentation indexs used in the survey at 1 % , 5 % and 10 % degrees severally. The consequence above seem to certify to Whittington and Pany ‘s findings that control environment set tone of the organisation even in a non-regulatory internal control environment. DeZoort et all. , 2002 defined in his work that control environment which is reflected by the audit commission aims at “ protecting the proprietors ‘ involvements by supervising direction ‘s actions, in footings of fiscal coverage, hazard direction and internal control ” . Hence proprietors ‘ involvements can merely be protected through answerability and accurate coverage of fiscal statement. It is hence clear that control environment is extremely related to fiscal public presentation and therefore our hypothesis one ( H1 ) , there is a important relationship between the control environment and company fiscal public presentation on Ghana stock exchange market is accepted.
From the hazard direction position, though it is seen as important in all the three public presentation indexs it is merely positively related to describing But the instance is different for liquidness and net income border as it negatively associate to and at a important degree. The negative relationship with liquidness besides confirm that when a houses ‘ hazard direction system is less effectual, it increases the current ratio of that house much higher that it gives an feeling that most of the house ‘s fiscal resources are idle and could negatively impact the fiscal public presentation of that house. The two deductions thereby attest to most of the surveies carried out that hazard direction has positive effects on the fiscal development of houses ( Abdulazzi et al. , 2012 ) .
Though the relationship between hazard direction and net income border is negatively related, it merely attest to the fact that most listed companies in Ghana stock exchange do non describe in their one-year fiscal statement their hazard direction activities due to the stiff competition they faced in the market even though their direction might utilize their experience or traditional method in covering with most of the hazard the concern might confront. On history of hazard direction and fiscal public presentation, the 2nd hypothesis ( H2 ) there is a relationship between hazard direction and company public presentation on Ghana stock exchange market is accepted in the instance of coverage and liquidness but rejected in the instance of profitableness.
COSO ‘s study on supervising counsel suggests that an effectual monitoring system put in topographic point by a company may assist better the internal control system which in bends increases the likeliness of the organisation in achieved its set aims hence increases its fiscal public presentation. But our statistically analysis does non back up this averment even though the coverage and liquidness degree seems to certify to COSO ‘s study, but they are all non important ( sig 0.733 and 0.393 severally ) . Again the net income border which is important at 0.011 has a negative relationship with the monitoring which does non back up the averment of COSO that effectual monitoring installed seeks to better fiscal public presentation of a house. And therefore most listed houses on the Ghana stock exchange market do non supervise efficaciously their internal control mechanisms that they have installed in their company therefore Our 3rd hypothesis nevertheless, H3 = there is a important relationship between the monitoring and the company public presentation is rejected.
But this confirm to the survey conducted by Joseph at el. , 2012 that reveals the failing in monitoring system put in topographic point by the listed houses in Ghana stock exchange market. On history of mention to the internal codification, it is clear that houses that structured their internal control system based on international criterion perform financially good than those that do non. The statistically analysis shows a positive relationship between coverage and mention to international codification and is important ( sig 0.000 ) bespeaking that houses fiscal public presentation additions when they employed international internal control codification. Though similar reading can be deduced from liquidness and net income border, they are non statistically important in this survey. Hence internal control mechanisms affects fiscal public presentation of listed houses in Ghana stock exchange market can be accepted.
5.4 Relationship between Internal Control and Financial Performance
This subdivision answers the last hypothesis and the chief aim of the survey. The relationship between the internal controls and fiscal public presentation of listed companies in the Ghanaian stock exchange market was examined utilizing control environment, hazard direction, monitoring and mention to international codification as indexs of internal control whilst coverage, liquidness and net income border were common steps of fiscal public presentation.
Table 6 Pearson ‘s Correlation analysis at 0.05 important degree.
The correlativity tabular array presents the relationship between internal controls measured by control environment, hazard direction, monitoring and mention to international codification as against steps of fiscal public presentation. The consequences show that control environment that set the tone for every organisation relates positively to fiscal public presentation. However the staying indexs ; hazard direction, monitoring and codification relate positively to describing but negatively to liquidness and net income border. This can be attributed to the less factors examined under hazard direction and monitoring as a consequence of the information available.
The consequence in general footings shows that there is a relationship between internal control and houses ‘ fiscal public presentation and hence strong internal control must be installed in all the listed companies to heighten public presentation.
5 CONCLUSIONS AND FUTURE RESEARCH
5.1 Decision
There is no uncertainty that several ranges have been conducted and there are still on – traveling surveies on the scrutiny of the relationship between houses ‘ fiscal public presentation and internal control mechanisms in organisations but the consequences of these surveies are assorted.
This survey specifically examines the relationship that exist between house public presentation, utilizing three fiscal indexs ( REP, LIQ and PM ) and four internal control mechanisms ( control environment, hazard direction, monitoring and mention to international codification ) . Sample size of 30 ( 30 ) listed houses on Ghana Stock exchange between 2000 and 2010 was used. The survey employs multiple arrested developments and the method of appraisal was OLS. However, the survey reveals the undermentioned results:
There is a positive and important relationship between control environment ( an internal control mechanism ) and all the three fiscal indexs ( REP, LIQ and PM ) used in the survey.
There is besides a important relation between hazard direction and the three fiscal indexs merely that it relates positively to merely describing pieces it relate negatively to both LIQ and PM
Monitoring factor is negatively related to PM and is statistically important excessively but it has no important relationship with REP and PM
There is positive and important relationship between codification and coverage but it has no statistically important relationship with LIQ and PM.
Listed houses on Ghana stock exchange markets have their ain internal control mechanisms installed in topographic point and hence choses to describe on it or non.
5.2 Restrictions
As a consequence of clip and resources restraints, it was impossible for the research worker to use primary informations aggregation techniques where welled worded questionnaires will be developed and administered every bit good as interviews conducted to the top degree direction of all the listed companies on the exchange market to determine the being of the internal control mechanisms in their several outfits. Hence the research worker belies that some companies might hold the system in topographic point working more absolutely but failed to describe it in their one-year statement.
More besides though companies in Ghana are non mandated to give one-year study on the effectivity of their internal control system, it is possible that those companies who tries describing it might non besides report suitably the consequence of their monitoring which might besides impact the result of this survey.
Finally, people might non read this work hence might non acquire the benefits of this survey. However, the purpose of the research worker will be to step out a small higher with this subject through authorship of documents and perchance making presentation in conferences in the close hereafter.
5.3 Future Research
More research should be conducted into the hazard direction activities and monitoring of internal control system of the listed companies in the stock exchange market and associate it to how it affects their public presentation. And besides future researches should increase the sample size to even analyze the little and average graduated tables houses in Ghana. This is because these classs of houses account for near to 75 % of the entire figure of houses in the state.
Again future surveies in the same country attempts should be put in topographic point to increase the internal control mechanisms variables recommended by the international codification like COSO so as to do the result of the survey to be more robust.
Recognitions
First of all, cubic decimeter will wish to that this chance to thank all people who made a part in my academic life up to this degree.
I would wish to show my sincere dear gratitude to my supervisor, Prof Yang QingXiang, for her support and encouragement throughout the authorship of this thesis. Prof Yang, you so restored hope back in me at the clip cubic decimeter felt hopeless ; a can make spirit that lead me through to the terminal. Yes no sum of words can show my sincere gratitude for your eternal moral and academic support during my research period. May you find favour and fortune in all your hereafter enterprises.
I am besides greatly indebted to all the lectors ( professors ) of school of direction, the full staff and the 2010/2012 academic twelvemonth international pupils for doing my two old ages analyzing in Wuhan worth life.
I take this chance besides to thank my full atomic household back place in Ghana for their attention, love and encouragement shown me during my two old ages of survey in China. I am peculiarly indebted to my Dad ; Jacob Kwesi Agboado and my loving sisters Belinda and Lucky for their sound fiscal support for my stay here in Wuhan. May the good Lord amply reward you in multiple creases.
Last but non least, my warmest respects and approvals go to HUST Bible Study Group members for your supplications and positive parts made to my life. God bless you all.
