Impact Of Internal Control Systems on the Petrol Station Inventory Management in Uganda: A Case Study Of Kampala Stations Operated By Petro Uganda Limited.

ABSTRACT The purpose of this study was to find out the impact of internal control systems on inventory management at Petro Uganda stations in Kampala district. The first objective was to establish the nature and scope of internal control system employed at Petro Uganda. The second objective was to examine the impact of internal controls on successful management of inventory at petro Uganda stations in Kampala district. The third objective was to assess the effectiveness of the existing internal control system at Petro Uganda stations in Kampala district. The design of the study was a case study with Petro Uganda limited used as an illustrative example. The population was 12 station managers and all the population was utilized for the study. The study found out that internal controls exist in Petro Uganda. However the study also established that if at least one or more elements of internal controls are weak or inexistent the whole process is jeopardized. It was confirmed that a weak internal control system provides opportunities for fraud, waste and negligence which negatively affect inventory management thus the profitability or success of an organization. At the end of the study, it was recommended that there is need to re-evaluate and review the existing policies at petro Uganda. It was also recommended that internal audits however frequent conducted should not be seen to replace the reporting element of internal control system.

TABLE OF CONTENTS 

Title Page ................................................................................................................................... i 

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

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

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

ACKNOWLEDGEMENTS ............••••............•.••••...........••••................•••••.............••................• v 

LIST OF TABLES .................................................................................................................... x 

LIST OF FIGURES ................................................................................................................. xi 

ABSTRACT ..........•................................................................................................................. xii 

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

INTRODUCTION .................................................................................................................... 1 

1.1. Background of the study ................................................................................................ I 

1.2. Problem Statement ......................................................................................................... 3 

1.3 Purpose of the study ........................................................................................................ 4 

1.4 Research objectives ......................................................................................................... 4 

1.5 Research Questions ......................................................................................................... 5 

1.6. Scope of the study .......................................................................................................... 5 

1.7 Significance of the study ................................................................................................. 5 

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

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

2.1 Overview ......................................................................................................................... 7 

2.2 Conceptual Framework ................................................................................................... 7 

2.2 Internal Control System .................................................................................................. 8 

2.2.1 Policies & Directives in Inventory management.. ................................................. JO 

vi 

2.2.2 Segregation of duties .............................................................................................. 11 

2.2.3 Responsibilities and Authorities ............................................................................ 12 

2.2.4 Procedures for collecting & summarizing data ...................................................... 13 

2.2.5 Monitoring transactions and internal audits ........................................................... 14 

2.2.6 Reporting system ................................................................................................... 16 

2.3 Successful Inventory Management ............................................................................... 16 

2.3.1 Managing stock-outs .............................................................................................. 18 

2.3.2 Minimizing Wastage .............................................................................................. 19 

2.3 Equipment and Climate ................................................................................................. 20 

CHAPTER THREE ................................................................................................................ 21 

RESEARCH METHODOLOGY ....................................•....................................................... 21 

3.lOverview ........................................................................................................................ 21 

3.2. Research Design ........................................................................................................... 21 

3.3. Research Location ........................................................................................................ 21 

3.4. Research Population ..................................................................................................... 21 

3.6. Data Collection Instruments ........................................................................................ 22 

3.6.1 Primary Data .......................................................................................................... 23 

3. 7 Procedures ..................................................................................................................... 23 

3.8. Data Analysis ............................................................................................................... 24 

3.8 Reliability and Validity ................................................................................................. 25 

CHAPTER FOUR: .................................................................................................................. 27 

DATA PRESENTATION, ANALYSIS AND INTERPRETATION. ..........•.......................• 27 

4.1 Overview ....................................................................................................................... 27 

vii 

4.2 Demographic Information ............................................................................................. 27 

4.2.1 Respondents' Age .................................................................................................. 27 

4.2.2 Educational Level .................................................................................................. 28 

4.2.3 Duration at Petro Uganda ....................................................................................... 28 

4.3 Research Question One: What is the nature and scope of internal control system 

employed at Petro Uganda Limited? ................................................................................... 29 

4.3.1 The nature of internal control system employed at Petro Uganda stations in 

Kampala district .............................................................................................................. 29 

4.3.2 The Scope of internal control system employed at Petro Uganda stations in 

Kampala district .............................................................................................................. 34 

4.3.3 The Relationship between the various elements of internal control systems 

existing at Petro Uganda stations in Kampala ................................................................ 35 

4.4 Research Question Two: How has internal control system impacted on the 

successful management of inventory at Petro Uganda stations in Kampala? ..................... 37 

4.4.1 Effects of policies & procedures on inventory losses ....................................... 38 

4.4.2 Effects of Segregation of duties on Inventory control ...................................... 38 

4.4.3 Effect of Authorization of transactions on successful Inventory management 38 

4.4.5 Effect of monitoring of transactions on successful Inventory management ..... 39 

4.4.6 Effect of reporting system on successful Inventory management ......................... 40 

4.5 Research Question Three: How effective is the existing internal control system at 

Petro Uganda Ltd? .............................................................................................................. 41 

4.5.1: Level of stock outs at Petro Uganda stations ........................................................ 41 

4.5.2: Level of inventory wastage at Petro Uganda stations ........................................... 42 

viii 

4.5.3: Optimum wastage and stock-out... ........................................................................ 42 

4.5.3: Frequency of stock-outs ........................................................................................ 43 

CHAPTER FIVE: ................................................................................................................... 45 

DISCUSSION, SUMMARY OF FINDINGS, CONCLUSION AND 

RECOMMENDATIONS ........................................................................................................ 45 

5.1 Discussions of Findings ................................................................................................ 45 

5.1.1 The nature and scope of internal control system employed at Petro Uganda 

stations in Kampala district. ............................................................................................ 45 

5.1.2 The impact of internal control system on the successful management of 

inventory at Petro Uganda stations in Kampala .............................................................. 48 

5.1.3 Effectiveness of the existing internal controls at Petro Uganda stations in 

Kampala district. ............................................................................................................. 49 

5.2 Summary of Findings ............................................................................................... 49 

5.3 Conclusion .................................................................................................................... 50 

5.4 Recommendations ......................................................................................................... 51 

5.5 Areas for Future Research ............................................................................................ 52 

5.6 Chapter Review ............................................................................................................. 52 

REFERENCES ....................................................................................................................... 53 

APPENDICES .......................................................................................................................... a 

Appendix I: Introduction Letter from University .................................................................. a 

Appendix 2: Letter from Country Manager of Petro Uganda ............................................... b 

Appendix 3: Structured Questionnaire ................................................................................... c