EFFECTIVENESS OF INTERNAL CONTROL SYSTEM OVER CASH

MANAGEMENT

CASE STUDY: TANZANIA BREWERIES LIMITED

BY

LEON TIMOTHY ISAAC

BBA/16851/71illF

A RESEARCH DISSERTATION SUBMITTED TO THE SCHOOL OF

BUSINESS AND MANAGEMENT IN PARTIAL FULFILMENT

FOR THE AWARD OF A BACHELORS DEGREE IN

BUSINESS ADMINISTRATION OF KAMP ALA

INTERNATIONAL UNIVERSITY

KAMPALA-UGANDA

MAY2010
 DECLARATION

I, LEON T. ISAAC, hereby declare that this project is my original work and has never been

submitted to any university or college for any award. Where the works of others have been cited,

acknowledged has been made.

Date ... ..... ?-~.\..1

.~.~.t~~.l.1?...............................
. •
S1gnature . .. .. .. ... ... . ................ ...... .... ....... ... .

ii
 APPROVAL

This is to certify that my approval has been given for this research report to be given to the

school of Business and Management as a requirement for the partial fulfillment of the award of

Bachelor of Business Administration.

SUPERVISOR: MR. OMARA THOMSON

Signature ........... ~ .. ....... .

Date ....... .. ....... /r.

;?-:.(./ ~.?. .<?............ .

iii
 DEDICATIONS

I would like to dedicate this research to my beloved mother Ms. Judith Ayengo for her support

towards different levels of my life to the point I am now, she exposed me to the learning

environment, also for the conductive parental care and responsibility which made me where I am

today. Also I would like to dedicate this work to my Aunt Dorothy C. Msangi, my sisters Joyce,

Neema and Salha without forgetting my uncle Ademba Gomba.

iv
 ACKNOWLEDGEMENTS

I wish to express my sincere thanks to everyone who in one way or another supported me to

go through my research in the first and foremost place. I would like to thank my mother for

her full support both materials and financial in whole journey to pursue my degree program.

Through her assistance, I managed to carry out my research at Tanzania Breweries Limited

headquarters with no problem.

I would like also to thank my Aunt Caroline for her support she gave me during my studies at

Kampala International University, as well as my family.

Sincere thanks go to my supervisor Mr. Omara Thompson Said for tireless effort and

commandment toward the production of this work. To the management and staff of Tanzania

Breweries Limited, To my course mates BBA and Marketing class Mr. James Kimani, Edwin

Casmir, Nasib Amour, Stephen Karisa, Alex Moding, Jeremiah Masidza, Anorld Katende,

Betty Musimbi, Pauline Barnabas, and Nancy Kavua.

Also would like to thank my sisters Joyce, Neema and Salha for their technical as well as

tactical support.

V
 TABLE OF CONTENTS

DECLARATION ............................................................................................ .ii

APPROVAL ................................................................................................. .iii

DEDICATION ............................................................................................... .iv

ACKNOWLDGEMENT ..................................................................................... v

TABLE OF CONTENTS .................................................................................... vi

LIST OF TABLES .......................................................................................... .ix

CHAPTER ONE .............................................................................................. 1

1.0 Introduction ................................................................................................ I

I.I Background of the study .................................................................................. !

1.2 Background of the case study ........................................................................... .2

1.3 Statement of the problem ................................................................................ .3

1.4 Purpose of the study ....................................................................................... 3

1.5 Objective of the study ................................................................................... .3

1.6 Research questions ........................................................................................ .3

I. 7 Scope of the study ........................................................................................ .4

1.8 Significance of the study ................................................................................ .4

1.9 Conceptual frame work .................................................................................. 5

CHAPTER TWO ............................................................................................. 7

LITERATURE REVIEW ..................................................................................... 7

2.0 Introduction ................................................................................................ 7

2.1 Internal control ............................................................................................ 7

2.2 Types of control. ........................................................................................... 8

2.3 Establishing internal control. ............................................................................. 8

2.4 Accounting systems and records ........................................................................ I 0

vi
2.5 Means of achieving effectiveness....................................................................... 10

2.5.1 Cash disbursement ..................................................................................... I I

2.5.2 Petty cash fund ......................................................................................... 12

2.5.3 Control of transactions ................................................................................ 12

2.5.4 Importance of internal control ....................................................................... 13

2.5.5 Advantages oflntemal Control Over Cash ......................................................... 13

2.6 Cash control weaknesses ................................................................................ 14

2. 7 Guidelines for strong internal control over cash..................................................... 14

2.8 Cheque payment ........................................................................................ .14

2.9 Internal Audit ............................................................................................ 15

CHAPTER THREE ......................................................................................... 17

METHODOLOGY ......................................................................................... .17

3.0 Introduction .............................................................................................. 17

3. I Research design .......................................................................................... 17

3.2 Population of the study .................................................................................. 18

3.3 Sample size ............................................................................................... 18

3 .4 Sampling procedure ................................................................................................................ 18

3.5 Data collection ........................................................................................... 18

3.6 Data analysis ............................................................................................. 19

3.7 Limitation of the study .................................................................................. 19

3.8 How limitations were handled ......................................................................... 20

3.9 Conclusion ............................................................................................... .20

CHAPTER FOUR .......................................................................................... 21

ANALYSIS, PRESENTATION AND DISCUSION OF FINDINGS .............................. 21

4.0 Introduction ............................................................................................. 21

vii
CHAPTER FIVE ......................................................................................... .28

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS ................................... 28

5.0 Introduction ........................................................................................... 28

5.1 Overview .............................................................................................. 28

5 .2 Financial Reporting .................................................................................. 29

5.2.1 Internal environment .............................................................................. 29

5.2.2 Monitoring system ................................................................................ .29

5.3 Conclusion ........................................................................................... .31

5.4 Recommendations .................................................................................. .32

REFERENCES .......................................................................................... .33

Appendix I Questionnaires .............................................................................. 35

Appendix II Interview guide ........................................................................... .39

viii
 LIST OF TABLES

Table I: Classification of Respondent According to the Age ...................................................... 21

Table 2: Classification of Respondents According to Sex............................................................ 22

Table 3: Classification of Respondents According to their Education Levels ............................ .22

Table 4: Classification of Respondents According to their Business Position with TBL

···················································································································23

Table 5: Classification of Respondents According to the Time they have been in the

Business ....................................................................................................... 23

Table 6: Responses on whether the employees have been involved with any organisation before

··················································································································· 24

Table 7: Response on whether the experience from former organisations has helped

employees ...................................................................................................................................... 24

Table 8: Responses on whether Internal control system has other services apart from giving

reliable information in cash management..................................................................................... 25

Table 9: Responses to whether employees experience problems as a result of dealing with this

organisation ................................................................................................... 25

Table I 0: Response on the quality of internal control system in the organisation...................... 26

Table 11: Responses on whether there is any need to have the internal control system in the

organisation ..................................................................................................... 26

ix
Table 12: Responses on whether there is any relationship between Internal control system and

cash management ............................................................................................ .27

X
 CHAPTER ONE

1.0 Int rod nction

This chapter discusses the background, problem statement, and purpose, objectives,

research questions, scope, and significant of the study.

1.1 Background oftbe study

Internal control refers to all the policies and procedures (financial or otherwise)

adopted by the managers of an entity to help ensure as far as is practical the

orderly and efficient conduct of its business. That is, management philosophy and

operating style, and all policies and procedures adopted by management to assist in

achieving the entity's objectives. (Penne A. & Dan, 2004).

An organisation which is orderly and efficiently run will be able to satisfy its

suppliers, customers, use its productive facilities efficiently and above all meet the

needs of employees far better than businesses which are disorderedly and

inefficient. An efficient organisation will have good flow of timely info1mation.

(Roger H. H, Salmanson R.F & D.E, 2001)

Internal control ensures adherence to management policies that is, all transactions

are carried out in accordance with management's general or specific authorization.

An organisation which has effective internal control can prevent and detect frauds

and errors. This is a key responsibility of management therefore a well designed

and adhered to internal control system will assist the management to meet its

requirements. (Penne A. & Dan, 2004).

1
1.2 Background of case study

Tanzania Breweries Limited (TBL) is a joint venture company between the

Government of Tanzania and the South African Breweries (SAB), with a

percentage shareholding status of 50:50 for TBL Tanzania Government and SAB

respectively. TBL started its operations in the country in 1933 as private business

enterprises known as Tanganyika Breweries Limited. In 1945 the former TBL

associated with other East African Breweries, Kenya Breweries and Uganda

Breweries to form East African Breweries Ltd., a public company.

In 1967, TBL- Tanzania was nationalized under the Arusha declaration, and the

National Development Corporation (NOC) acquired the Management of the TBL

on behalf of the Tanzania Government hence TBL became a parastatal as a

company in NOC group of companies. The shareholding status was presumed to

be 51:49 percentages for NOC and East African Breweries Ltd. (EABL)

respectively.

In 1971, NOC bought Kilimartjaro Breweries Ltd. From a private owner Ms.

Madhvan. This made NDC shareholding increased to 55%. In 1993 the

government decided to privatize TBL through joint venture this privatization

resulted into joint venture with SAB.

1.3 Statement of the problem

Cash is a small item which lack of owner identification and is immediate

transferable, is the asset most subject to misappropriation, embezzlement,

2
 falsification, fraud, losses and theft, are the causes of weak control over cash

management in many organizations.

1.4 Purpose of the study

This purpose of the study is to find out the internal and external factors which

hinder the effectiveness of internal control over cash management at the TBL.

1.5 Specific objectives of the study

i. To examine the effects of internal control system over cash management at

TBL.

ii. To review the performance of internal control system at TBL.

iii. To identify the problems connected with the internal control system over cash

management.

iv. To establish the relationship between internal control system and cash

management.

1.6 Research questions

1. What are the effects of internal control system over cash management at

TBL?

ii. What is the nature and indicators of performance of internal control

system at TBL?

m. What are the problems connected with internal control system over cash

management

3
 iv. What is the relationship between internal control and cash management?

1.7 Scope of the study

i. Subject scope: The study focuses on internal control system and

management of Cash at Tanzania Breweries Limited.

ii. Geographical scope: The study will be covered in Tanzania Breweries

Limited headquarters in Dar-es-salaam as our study area.

iii. Time scope: This study focused on the period from August 2007 - April

2010.

1.8 Significance/ rational of the study

1. The study may help to enlighten various benefits that may be found on its

implementation.

11. It is expected that, the study may help other organizations to improve their

internal control systems.

m. The study may be useful to assist managers on their decision making about

planning on organization resources.

iv. The firm may know why strong and effective controls are useful.

v. The study may assist investors from outside to make decisions on whether

to invest or not.

4
 vi. The study may also be used by other lecturers, students, researchers and

top level managers for further references.

vii. The study may help the researcher to fulfill institute requirement

programme and award ofBBA.

1.9 Conceptual framework

Independent/ predictor variable

They are variable which predict the amount of variation that occurs in another

variable.

Dependent/ criteria variable

They attempt to indicate the total influence arising from the effect of the

independent variable; therefore it varies as a function of the independent variable.

Intervening variables

They do come between the independent and dependent variable and they are

caused by independent variable and as being a determinant of the dependent

variable.

5
 Illustration of Conceptual Framework

Intervening
variables

Positive impacts

• Increase in performance
• Coordination of activities
• Effective & efficient
operations
• Increase in commitment Dependent
Independent
variables
variables

Cash
Internal Control
Management
System

Negative impact

• Poor performance
• Lack of coordination
• Poor management
" Poor productivity

Source: Leone Timothy Isaac

6
 CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This chapter focuses on the review and analysis of existing literature about internal

control systems and cash management and how they are related. Besides, a need for a

system, functions, qualities of a good internal control system and cash management will

be pointed out.

2.1 Internal control system

The system of internal control is defined as the whole system of controls, financial and

otherwise, established by the management in order to carry on the business of the entity

in an orderly and efficient manner to ensure adherence to management policies, safeguard

the assets and secure as far as possible completeness and accuracy of the records. (Woolf

E, I 986).

Internal control as a system used by management to maintain control over assets of a

company or a corporation respectively (Meigs W.B, 1981 ). However Smith pointed out

that accounting control includes the plans, procedures and records necessary for

safeguarding assets and producing reliable financial records. And pointed out that cash is

referred to as the standard medium of exchange, cash may also provide the basis for

measurement and accounting for all other items, therefore cash is the most active item on

accounting statements, as it is applied in most business transactions. Therefore it can be

said that internal control is that system of control which include procedures and

techniques, quality control, statistical analysis and variance analysis so as to ensure

7
 compliance with established policies in all organization parts which provide measures

that relate to protection of assets and reliability of accounting and financial reports (Jay

M. Smith 1987, 156-157 and 160) . Emphasizes that it is so important to maintain strong

internal control over transactions involving cash receipts and cash payments.

Internal control

Is the system comprising the plan of organization and all co-ordinate methods and means

adopted within the business to safeguard the assets, check the accuracy and reliability of

its account data, promote operational efficiency and encouraging adherence to prescribe

managing policies.

2.2 Types of control

There are two types of internal controls, namely accounting and administrative controls.

Accounting Controls

Accounting controls include procedures for authorization and approval, segregation of

duties, records and operations, physical control over assets and internal auditing.

Administrative Control

This type of controls comprises the organization plan and methods, procedures aimed on

enhancing operations, efficiency and compliance with management policies.

2.3 Establishing Internal Control

It states that strong internal control system needs proper segregation of duties and

responsibilities, internal check for verification before issue of cheque, authorization

procedure and approval. Physical content over cash and records, competent and

8
 trustworthy personnel, arithmetic and accounting, supervision, management control,

adequate documentation and records and internal audit department. (Meigs W.B, 1981).

The following points were noted by another author as guidelines to ensure strong control.

1. Organization plan to ensure proper segregation of duties.

n. Authorization, records and custody procedures to provide for satisfactory accounting

over assets, liabilities and capital.

iii. Managerial supervisor and other elements which include internal audit must ensure

sound practices to be followed and assigned of responsibilities to competent staff.

1v. Financial forecasts in which a plan of operations is prepared each year, setting goals

for each division of the business, expected sales volume and expenses should be

budgeted.

v. Serial numbering of documents such as cheques, purchase order payments vouchers

and sale invoices so as to ensure proper accounting for the documents. (Mahushi P.H.

1985)

It was summarized that the effectiveness of internal control comprises organization policy,

physical devices and documentation. Those components interact to ensure the achievement of

management objectives. On cash transaction involve cash receipts, cheque payments and

petty cash payments as a three major components. (Holmes and Burns, l 979).

9
 2.4 Accounting System and Records

Accounting is the system which lays down procedure and device used by entity to keep

track of the financial activities which are useful to the decision makings, (Larson D.K and

Pyle W. W, 1988).

General Overview of Internal Control

Was defined as "the whole system of controls financial and otherwise, established by the

management in order to carry out on the business of the entity in an orderly and efficient

manner to ensure adherence to managerial policies, safeguard the assets and secure as far

as possible the competence and accuracy of the records.(National Board of Accountants

and Auditors, 1989, 15).

2.5 Means of Achieving Effectiveness

Different authors commented on the following:-

!. Cash received over the counter at the time of a sale should be rung up on a cash

register so located that the customer will see the amount recorded since the customer

will not pay more than shown on the register. The use of cash registers provides

assurance that an immediate record is made of all cash sales. At the end of the day the

store supervisor should compare the cash register with the total cash collected.

ii. Many large shops and supermarkets have achieved stronger internal control by using

electronic scanning equipment to read and record all sales of the day, payless

supermarket may be cited as an example.

Ill. Money received should be subjected to adequate safeguards and controls at all stages.

IV. Cash collected and for deposit should be centralized in a minimum number of hands.

10
 v. Employee handling cash should be bonded with insurance.

v1. Annual leave roster must be used to allow such employees to take their leave.

Vil. Cash transactions have to be recorded in the ledger promptly.

Vil!. Bank reconciliation should not be prepared by a clerk who handles cash or signing

cheque.

ix. Pre-numbered receipt forms must be used and they should run sequentially.

x. Dishonored cheques and post dated cheques are recorded and held by responsible

official properly.

x1. Cancelled receipts must be retained for audit inspection and verification.

xn. Surprise checks to be done regularly to verify cash balance.

xiii. At the close of business everyday the manager should determine that the total cash

receipts recorded that day in the accounting records agree with the amount of the

cashier deposit, and also with the list of total cash receipts for the day.

Excess and shortage

It was also explained that in handling over the counter cash receipts a few errors in making

change will inevitably occur. These errors may either cause a sho1iage or overage at the end

of the day.

2.5.1 Cash disbursements

It was pointed out that cash receipts should be deposited intact in the bank and that all

disbursements be made by cheque. He also says that the cheque should be pre-numbered.

Any spoiled cheques should be marked void and filed in sequence so that all numbers in the

series can be accounted for. Every transaction requiring cash disbursements should be

verified and approved before payment is made.

11
 2.5.2 Petty cash fund

The author also comes out with a concept that internal control over cash should be applied on

petty cash fund where by in establishing a cheque is written for a round amount which will

cover small expenses. In making disbursements Meigs pointed out that the custodian of the

fund should fill out a petty cash voucher for each expenditure.

2.5.3 Control of transaction

Meigs gives out a description that transactions should go through four steps and each step

must be performed by different employees rather mentioned and explains the steps as:-

1. Authorized, Meigs suggested that it is only the duty of Top management to authorize

transactions.

ii. Approved, he elaborated that every transaction must be approved and by a manager.

iii. Executed, after all the above two steps the execution is done by sales personnel.

1v. Recorded, Meigs conducted that the last step to every transaction is recording in

books by debiting accounts receivable and crediting sales.

More major steps in establishing internal control over cash management includes

(a) sub-division

Meigs pointed out that: - "one person should not handle transaction from beginning to the

end".

(b) Separation of accounting and custody of Assets

An employee with custody of asset or access to an asset should not maintain the

accounting record of that asset.

12
(c) Rotation of Employees

Meigs suggested that employees should always be rotated throughout the company's

depruiments; he says of employees who are assigned a certain duty for a long time, it

might be easier for dishonest employees collude in fraud actions.

( d) Financial forecasts

This is a plan of operations for a future period. And was judged that if specific goals are

set for exrunple, volume of sales, amount of expenses and planned cash balance, actual

results achieved month by month can be compared with the plarmed results.

2.5.4 Importance of Internal Control

Importance of internal control is urgently required to adhere to the internal control

procedures for the purposes of protecting assets and ensure compliance with laws and

company policy. And he concluded that a sound internal control system for cash

increases the likelihood that the reported values for cash and cash equivalents are

accurate may be relied upon by financial statements users (Dyekyman et ta!, 1993).

2.5.5 Advantages of Internal Control Over Cash

Internal controls have the following advantages on the respective firms; (Meigs W.B, 1981)

1. Protect resources against waste, fraud and inefficiency

ii. Assist the firm in making decisions from the accounting data.

iii. Secure compliance with company policies.

1v. Insure accuracy and reliability in accounting and operating data.

v. Evaluate the level of performance in all divisions of the company.

13
2.6 Cash Control Weaknesses

Cash is a small bulk lack of owner identification and is immediate transferability. Cash is

the asset most subject to misappropriation, intentional or otherwise. Losses can be avoided

only by careful control of cash from the time it is received until the time it is spent. (Jay M.

Smith Jr & K. Fred Skounsen, 1987).

2.7 Guidelines for strong internal control over cash

In order for organization to have a strong internal control, it must establish a plan which must

indicate clearly the departments or persons responsible for such functions as purchasing,

receiving incoming, shipments, maintaining accounting records, approving credit to

customers and preparing the payroll, one person should be clearly responsible for each duty.

Where internal control is good, the recording of fictious transactions would be reduced to the

minimum, (Kishdwalla & M. V. Sheet, 1992).

Larger organizations should investigate throughout the company, the efficiency of operations

in every department or other organization. The study of both accounting and administrative

controls and repmiing to top management on standard and problems requiring adjustments.

2.8 Cheque payment

1. The main cashier makes cheque payment through official pre-numbered cheque

payment voucher properly na1Tated and authorisd.

ii. Payment is made after voucher is checked and approved by designated officer.

m. Cheque should be signed by two signatories.

1v. Cashier must ensure that bank balance shows positive balance to avoid

dishonoured cheque.

14
v. Document supporting payments to be attached together

vi. Blank cheques are kept in safe custody.

2.9 Internal Audit

International Standard of Accounting (ISA) 400 requires that the audit to gain an

understanding of the entity's accounting system including;

• Major classes of transactions in the entity's operation.

• How such transactions are initiated (whether at branches or the head office).

• Significant accounting records, supporting documents and accounts in the

financial statements.

• The accounting and financial reporting process, from the initiation of significance

transactions and other events to their inclusion in the financial statements.

Audit Independence

Internal audit as defined by the Institute of International Auditors is an independent

appraisal activity, established within an organization as a service to the organisation. It is

a control which functions by examining and evaluating the effectiveness of other

controls, and through an audit committee, provides assurance to an organisation's board

of directors and stakeholders by reporting on :( TBL annual report, 2000).

• The quality of the organization's system of control

• The quality of the organization's performance as evaluated against agreed

standards.

15
Audit Mission

The audit mission is to strive to contribute to the achievement of the TBL mission by

providing the best most cost-effective service, which gives the board and management

reasonable assurance that systems to manage potential risks are:-

• Adequate

• Efficient

• Effective and

• Can accommodate change.

In this respect, the audit department believes very strongly that it is not a policeman and its

mission is not to check everybody or everything. It is there to assist all levels of management

to achieve their objectives although checking may indeed be part of that process. (TBL

annual report, 2000).

Internal control as one of the most important factor which the auditor must take into account

in order to decide on the extent and scope of this audit. The more effective an internal control

system the less work the auditor is likely to do, (K wame Gysi, 1990).

Internal control is of highly effective in increasing the reliability of data and in protecting

against fraud no internal control system however elaborate, can by itself guarantee efficient

administration and accuracy of the records. (Howard L. R. 1996)

16
 CHAPTER THREE

METHODOLOGY

3.0 Introduction.

This chapter contains the research design, description of population from which the sample will

be selected and sample size, data collection methods, data analysis and the likely limitation of

the study.

3.1 Research design.

This chapter deals with the methodological strategies adopted for the study. It justifies the choice

of a qualitative approach in a study like this which focuses its attention to the heads of

departments and other staffs. It describes how the research was conducted and the method used

to collect data and the procedure for data analysis.

This study adopts a qualitative approach, its main objective was to find out the external and

internal factors which hinder the effectiveness of internal controls over cash in TBL all facts

which enable to explain attitudes of employee and customers towards control. This approach is

chosen due to the following reasons;

• It assumes each individual has his\her own points of view or way of pe3rceiving and

interpreting a phenomenon.

• It is flexible in re3search design and data collection.

• It allows the researcher to gather large descriptive data which gives the context of the

experience.

17
3.2 Population of the study

The population of the study originates from diff3erent depruiments, sections and

customers who affect cash transaction that includes Accounting employee, stores,

suppliers, manpower and administration and all TBL directorate workers.

3.3 The sample size

Sampling in qualitative research in purposeful rather than random and is done with the

aim of gaining different understanding of the problem under investigation. The sample

was categorized into three main groups; heads of departments, clerk and suppliers.

The overall sample size comprises of 45 respondents that is 20 head of depruiments, 15

clerks and IO suppliers. Which questionnaire was dispatched to them.

3.4 Sampling procedure

Judgmental sampling is the procedure used to select TBL staff on the basis of their duties,

position and availability and willingness to respond in order to obtain required

information.

3.5 Data collection

The choice of research techniques depend on the purpose of the research questions under

investigation. In a study like this in which major interest was to understand employees

and customers attitudes.

18
 Written guidelines were based on issues identified from the broad research question. The

guidelines helped to increase the comprehensiveness of the data and make data collection

more systematic for each information.

3.6 Data analysis

Data analysis in this study was on-going process which began in the pre-field phase and

continued in the field work and post fieldwork phase. The initial analysis of data during

data collection yield immediate insights in the field.

The research questions were used as an appropriate guide to provide a framework for the

categories. The interview transcript was read carefully to search for general statements

about relationship among the categories.

3.7 Limitation of the study

• Getting the cooperation of the respondent may be a problem since people may not be

willing to disclose information about the organization due to security purpose.

• Resources due to financial constraints, the researcher work was limited to the TBL

head office only.

• Obtaining the relevant secondary information may be complex task to the researcher

since there may be lack of essential books.

• High cost of printing, traveling, telephone and communication costs may also be a

limiting factor to the researcher.

• Interview biasness

19
3.8 How the limitations were handled

• Included confidentiality quotes on the questionnaire ("All information will be treated

with maximum confidentiality").

• Accessed adequate financing from parents.

• Acquired communication skills knowledge.

• Use information from the internet

3.9 Conclusion

Despite the above limitation, the findings of the study were not materially affected and the

findings that followed in the next chapter, since it was part of the apparent knowledge gap.

20
 CHAPTER FOUR

ANALYSIS, PRESENTATION AND DISCUSION OF FINDINGS

4. 0 Introduction

This chapter is the presentation and discussion of findings on the study of the effective of

internal control over cash management; the case of Tanzania Breweries Limited. Exploratory and

descriptive analysis has been used to present these findings. The discussion of the findings has

been recognized especially to sewer the research questions and research objectives in

presentation, the researcher used tables.

Table 1: Classification of Respondent According to the Age

Age of respondent (yrs) Frequency (t) Percentage (%)

18-25 11 18
26-33 23 34
34-41 17 28
2-49 6 15
50+ 3 5
Total 60 100
Source: Pnmary data

The findings indicate that most of the respondents (34%) were of average age between 26-33

years, few were of age of 50+ years which is evident to 5% of respondents. The purpose of

asking the ages of respondents was to determine which class of sample provided a large number

of respondents.

21
 Table 2: Classification of Respondents According to Sex

Sex Frequency (f) Percentage(%)

Male 35 58
Female 25 42
Total 60 100
Source: Pnmary data

This is because large number of employee at TBL are male while female contain a small fraction

of workers. There is no gender balance.

The findings indicate that most of respondents were male (58%), while female was 42% of total

respondents.

Table 3: Classification of Respondents According to their Education Levels

Level Frequency (f) Percentage (%)

Primary 6 10
'0' level 14 24
A' Level 16 ~6
Diploma 20 34
Degree and above i 6
Total 60 100
Source: Pnmary data

The findings indicate that most of the respondents were literate which was equivalent to 90%.

The purpose of asking the respondents qualification was to determine whether they would

22
provide the required information about the effectiveness of internal control over cash

management.

Table 4: Classification of Respondents According to their Business Position with TBL.

Business position Frequency (f) Percentage(%)

Managers 2 i
Employees io '.J6
Clients/ customers JO 16
Others 8 14
Total 60 100
Source: Primary data

From the table above, the findings indicate that employees were the people who were

interviewed. This was because the employees were thought obtaining the required infonnation

and the fact that it was easy to access them and recognize them since most of them were putting

on shirts bearing TBL badges and identity cards.

Table 5: Classification of Respondents According to the Time they have been in the

Business Position.

Respondents Category(years) Frequency (f) Percentage(%)

0-15 12 20
6-10 45 75
11+ '~ 5

Total 60 100
Source: Primary data

23
From the able above, the findings indicate that most of people interviewed have been in the

business with TBL between 6 years to IO years (75%). because, this group of people were easy

to find and were thought to about TBL, though it was not as much as those from 11 years and

above 50%.This group of respondents was difficult to find because they are very few.

Table 6: Responses on whether the employees have been involved with any other

organization before.

Response Category Frequency (f) Percentage(%)

Yes 60 100
No 0 0
Total 60 100
Source: Primary data

From the table above, the findings indicate that the employees have earlier been involved with

other organisations. This has been shown by the response of respondents as 100% of them said

yes.

Table 7: Response ou whether the experience from former organisations has helped

employees

Response Category Frequency (f) Percentage (%1

Yes 54 90
No 6 IO

Total 60 100

Source: Primary data

24
From the table above, the findings indicate that the employees who were working with other

organisations before comprises of 90% by the response of the respondents of whom have said

yes. The findings suggest that the organisation to be recruiting its employees from time to time.

Table 8: Responses on whether Internal control system has other services apart from

giving reliable information in cash management

Response Category B<requency (t) Percentage(%)

Yes 45 75
\fo 15 25
Total i60 100
Source: Primary data

From the table above, the findings indicate that internal control system has other services apart

from information in cash management. This has been shown by the large number of

respondents (75%) to say yes.

Table 9: Responses to whether employees experience problems as a result of dealing with

this organisation

Response Category Frequency ( t) Percentage(%)

Yes 55 91
No 5 9
fotal 60 100
Source: Primary data

25
From the above table, the findings indicate that, most respondents (91 %) said that, they

experience problems with the organisation.

Table 10: Response on the quality of internal control system in the organisation

Response Category Frequency (f) Percentage(%)

Excellent 28 46
Very good 15 24
Good 10 16
Moderate 6 10
Fair I 4
Total 60 100
Source: Pnmary data

According to the table above, the findings indicate that, the organisation has an excellent internal

control system with (46%) from the respondents. The findings suggest that, TBL has to improve

over its internal control system so as to improve its effectiveness.

Table 11: Responses on whether there is any need to have the internal control system in the

organisation

Response Category Frequency (f) Percentage(%}

Yes 54 90
No 6 10
Total 60 100
Source: Primary data

26
The table above indicate that, large number of respondent (90%) said that there is need for the

internal control system in the organisation, from this findings it indicate that TBL should

implement internal control system and continue to change its system from time to time.

Table 12: Responses on whether there is any relationship between Internal control system

and cash management

Response Frequency(f) Percentage (%)

category

Yes 56 93

No 4 7

Total 60 100

Source: primary data

According to the table above, the findings indicate that most the respondents (93%) agree on

presence of relationship between internal control system and cash management.

27
 CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMEENDATIONS

5.0 Introduction.

This chapter presents the overview, conclusions and recommendation to the findings of the

effectiveness of internal control over cash management ofTBL.

5.1 Overview

This chapter tries to determine the main factors that contribute to the effective internal control

over cash management. The system of internal control over cash management at Tanzania

breweries limited is fairly good, basing on the fact that basic principles which includes use of pre

numbered documents, segregation of duties, use of properly authorised payments voucher in

making payments, use of petty cash fund records and custody procedures, managerial

supervision, internal audit quality of personnel and financial forecast.

No system of internal financial control can provide absolute assurance against material

misstatement or loss. However, the following process and discipline are in places which provide

reasonable assurance that assets are safeguarded, transactions are authorised recorded properly

and that material errors and irregularities are either prevented or would be dictated within a

timely period.

28
5.2 Financial Reporting

There is a comprehensive planning and budgeting system which confo1m to policies and

methods. The result of operating units are reported monthly and compared to plan. Forecasts are

prepared regularly throughout the year. The company reports to directors on a quarterly basis.

5.2.1 Control environment

Management effort has been focused towards the definition of appropriate values and codes of

ethical conduct within the company since the privatisation of former parastatal organisation in

support of the directors expectation of the highest standards of integrity amongst all company

personnel significant strides have been taken towards paying wages which can sustain employees

and their family thereby regarding the need for employees to find alternative sources of income.

A company adopted number of alternative means or methods to achieve satisfactory internal

control. All means adapted upon to variety of factors such as the size or volume of the business

and objectives of the organisation.

5.2.2 Monitoring system

The external auditors complete an analysis of the system of internal control, all findings are

brought to the attention of management through audit committee which meets at least three times

per year. Also there is internal audit department of 8 personnel whose functions to examine

systems and procedures on an on-going basis and report to management and the audit committee

on any errors or departures from policy or good practice. The audit committee has considered the

results of review, none of which indicate that the system of internal control were in appropriate

29
or unsatisfactory. Moreover, no break downs involving cash loss, nature have been reported to

the auditors in respect of the year under review.

Internal audit is one of the effective way adopted by the management, additional functions are as

follows:

• Strengthening the control environment and specific controls.

• Helping managers identify control weaknesses and performance problems.

• Help managers to correct those problems which will affect the effectiveness and

efficiency of their operations.

• Enhancing the quality of the management process.

• Improving the understanding of the distribution of risk across the organisation.

• Improving mangers understanding of internal control and risk across the organisation.

• Enhancing fraud prevention and detection.

• Enabling the board of directors to demonstrate compliance with the requirement for an

effective internal audit functions.

Therefore the audit mission is to strive to contribute to the achievement of the TBL mission by

providing the best most cost-effective service, which gives the board and management

reasonable assurance that systems to manage potential risks are adequate, efficient, effective and

can accommodate change.

In this respect, the audit depaiiment believes very strongly that it is not a policeman and its

mission is not to check everybody or everything. He is there to assist all levels of management to

achieve their objectives, although checking may indeed be part of that process.

30
5.3 CONCLUSION

This study examined the effectiveness of internal control over cash in TBL. Factors examined

described the effectiveness by more than 80% that is the evidence of effectiveness of internal

control. Also loss of cash and theft indicates effectiveness that reduces loss of cash. Therefore

with effective control system TBL has been able to control cash as observation and questionnaire

responded with. Test for hypothesis table I and 2 supports the hypothesis that says, "With

effective internal control, TBL has been able to control cash management".

But there are some problems which hinder the smoothness of control system as follows:-

Delay of payments

Petty cash fund is an amount set aside for minor payments. The process of preparing payments is

not prompt. For instance, internal auditors requested Tshs. 90,000/= but the process took almost

2 to 3 days forcing them to use their pocket money.

Recording of transaction

The research observed lack of immediate recording in every business activities the accounting

events need to be recorded and when they fall due, delay in recording them cause difficulties in

making reconciliation ofrecords.

Rotation of employees

Lack of rotation of staff from one position to another was not followed accordingly.

31
5.4 RECOMMENDATIONS

Basing on the analysis of findings and conclusion the following recommendations are made.

I. Management should agree that rotation of employees throughout the company's

departments enforced internal control system because employees who are assigned a

certain duty for a longtime, it might be easier for dishonest employees to collude in fraud

actions.

2. The TBL management should bear in mind that investing in people, makes the difference.

Training program is an effective means to accelerating employee's development and of

increasing the number of persons who are available to assure great responsibility. Long

training courses is highly recommended to enable employee to obtain professional

certificates. Management should not limit employees with indoor training programs only.

3. The accounting events need to be recorded immediately when they fall due and the

records should be updated accordingly. For example TBL cashier does not post cheque

issued immediately. Normally this causes difficulties in making reconciliation.

4. Management is advised to set direct banking procedures, to the nearest agent's bank, this

can limit dishonest agents or distributors on theft and frauds.

5. The organization should be efficient on payments through petty cash, in order to meet

daily business expenditures properly.

32
References:

Angelo K. & Brian K. W, (1997). Management a Practical I11troductio11. New York, Mc Graw

Hill Inc.

Chuck Williams, (2003). Accounting Principles and Practices. (2 nd Ed): Mason Ohio, Thomson

Learning.

Frank Wood, (1995). Business Accounting. (5 th Ed): London, pitman.

Gary D. & Kathryn M, (1999). Management: Leading people and Organisation in the 21''

Century. (2nd Ed): New Jersey, Prentice Hall

Holmes and Burns, (1979). Auditing. (I 0th Ed): Hong Kong, Longmen College.

Howard L.R, (1996). Auditing Standards and procedures. (8 th Ed): Bombay, Vikas publishing

House Pvt. Ltd.

Jay M. Smith, Jr & K. Fred Skounsen, (1987). I11tematio11al Accounting. (9th Ed): New York,

South West Publishing.

Jerry, J.W, Donald E.K & Walter. G.K, (2001). Accounting Principles. (3 rd Ed). New York,

John Wiley & Sons Inc.

Kishnadwala V.H, (1992). Auditing principles and practice. New York, Mc Graw Hill Inc.

Kwame Gysi, (1990).An I11tematio11al Guide to Auditing. London, Graham Burn U.K

Larson K.D Pyke W.W, (1988). Fu11dame11tal Accounting Principles. (I 1th Ed): Prentice Hall

International Inc.
33
Mahushi P.H, (1985). Basic Internal Control. Vancouver, Peramiho Printing Press.

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York, Mc Graw Hill Inc.

National Board of Accountants and Auditors, (2000). Tanzania Statements of Auditing and

Guidelines. Dar es Salaam, Jamana Publishers Inc.

Nixon A. K (2006). Cost and Management Accounting. (1 st Ed): Kampala, Makerere University

Business School.

Penne A. & Dan D, (2004). Introduction to Accounting. (3 rd Ed): New York, Mc Graw Hill Inc.

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Publication Inc.

Stephen P. Baginski & John M. Hassell, (2001). Intermediate Accounting Manageme11t

Decisio11s and Fi11ancial Acco1111ti11g Reports. New York, South West Publishing.

Thomson S. & Scott A (1998). Management: competing i11 tlte new era. New York, Mc Graw

Hill Inc.

Walter B. Meigs & Robert F. Meigs, (2001). Accounti11g tlte basis for business decisio11s, (7th

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34
 APPENDIX I

Kampala International University School of Business

Questionnaires (for respondents)

Dear respondents I am a student from Kampala International University by names LEON

TIMOTHY ISAAC registration nwnber BBA/16851/71/DF pursuing a Bachelor of Business
Administration, carrying out a research on the topic "effectiveness of internal control system
over cash management". I'm kindly requesting you to fill in this questionnaire to enable me to
carry on my research infonnation. The information being gathered will be purely of academic
purposes and will be treated with the high degree of confidentiality. You are therefore requested
to tick or fill in the appropriate answers respectively.

You need to include your name.

Thank you

Put a tick were applicable

General information

I) Age
D
2) Marital status

Mauied single --~widowed

l) Education level

Primary secondary ~-~I diploma

Degree none

Others(specify) .................................................................................................. .

Thank you.
35
OBJECTIVE: THE QUALITY OF INTERNAL CONTROL SYSTEM

(4) Have you been involved with any other organization before?

Yes No

If yes which
organization .......................................................................................... .
(5) Did you ever experience any problem in that organization concerning Internal Control
System?
a) Yes
'-----'!No
(6) Have you tried to use to any method to solve that problem?

Yes

No

(7) Do you think that the experience of internal control system assisted you?

a) Yes No

b) If yes
how ............................................................................................... .

Thank yon.

36
OBJECTIVE: ROLES OF INTERNAL CONTROL SYSTEMS IN THE
ORGANISATION.

(8) Apart from giving the reliable information in cash management, what other service does
internal control system provide?
a) Does it have any other services?

Yes NO

b) If yes, what are the services it offers?

Employment of resources

Reduce cost

Best use of resources

Other
(specify) ........................................................................................................ .

(9) Do you think you have benefited from the information of financial performance

Yes No

If yes how have you benefited

Managing the business

Reduce the cost

Employment of resources

Others(specify) ............................................................................................... .

Thank you.
37
(I 0) Have you experienced any problems as a result of dealing with this organization?

Yes No

If yes which problems?

(11) In which ways did it affect you?

Thank you.

38
 APPENDIX II

INTERVIEW GUIDE

General information

I) Title .............................................................................. (for example the

ICS officer)
2) Age .................................................................................................. .

3) Sex: Male Female

4) Educational level

Certificate

Diploma

Degree

Others ........................................................................................................... .

5) What is the quality of the internal control systems in your organization?

6) Why is there a need to have the internal control systems m the organization?

7) What is the relationship between internal controls systems relate to cash management?

8) Do you think good system of internal control leads to firm prosperity?

Thank you.

39
 9) Have you faced any problems with your organization's internal controls systems?

Yes No

If yes, what problems

·····················································································································
·····················································································································

( I 0) What measures are you putting in place to solve those problems?

·····················································································································
·····················································································································

(11) Is there any job rotation from one section to another?

·······················································································································
····························································································································································

(12) How many signatories must appear on the cheque?

·····················································································································
·············································································································
( 13) Are cheques accompanied by bank cheque list to the bank?

·····················································································································
·····················································································································

Thank you.

40