Internal Control and Financial Performance of Manufacturing Industries in Mbale District ,Uganda, A Case Study of Elgon Springs Mineral Water Company.

TABLE OF CONTENTS

DECLARATION ............................................................................................................................ i

APPROVAL .................................................................................................................................. ii

DEDICATION .............................................................................................................................. iii

ACKNOWLEDGEMENT ........................................................................................................... iv

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

ABSTRACT .................................................................................................................................. xi

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

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

1.0 Introduction ............................................................................................................................... 1

1.1 Background of the Study .......................................................................................................... 1

1.1.1 Historical background. .......................................................................................................... 1

1.1. 2 Theoretical perspective ......................................................................................................... 2

1.1. 3 Conceptual background. ........................................................................................................ 3

1.2 Statement of the problem .......................................................................................................... 5

1.3 Purpose of the study .................................................................................................................. 6

1.4 Research Questions ................................................................................................................... 6

1.5 Specific objectives .................................................................................................................... 6

1.6 Research hypothesis ........................................................................................ : ......................... 6

1.7 Scope ........................................... ." .......................................................................................... 7

1. 7.1 Geographical scope ............................................................................................................... 7

1. 7.2Content Scope ......................................................................................................................... 7

1. 7.3 Time scope ........................................................................................................................... 7

1.8 Significance of the study ........................................................................................................... 7

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CHAPTER TWO .......................................................................................................................... 9

LITERATURE REVIEW ............................................................................................................ 9

2.0 Introduction ............................................................................................................................... 9

2.1. Theoretical review ................................................................................................................... 9

2.1.1 Contingency theory ................................................................................................................ 9

2.2 Conceptual Framework ........................................................................................................... 12

2.3.1 The concept oflnternal controls .......................................................................................... 13

2.3.2 The concept of financial performance ................................................................................. 15

2.4 Related Literatme .................................................................................................................... 17

2. 4.1 Control environment and financial performance ................................................................ 17

2. 4. 2 Control activities & financial pelformance ......................................................................... 18

2.4.3 Risk Assessment Process and financial performance .......................................................... 20

2.5 Internal controls and Financial Performance .......................................................................... 21

2.6 Research Gaps ......................................................................................................................... 23

CHAPTER THREE ...................................... : ............................................................................. 24

RESEARCH METHODOLOGY .............................................................................................. 24

3.0. Introduction ............................................................................................................................ 24

3.1 Research Design ...................................................................................................................... 24

3 .2 Population ............................................................................................................................... 24

3.3 Sample Size ............................................................................................................................. 26

3.5.1 Primary data ........................................................................................................................ 27

3.5.2 Secondary data ............................. : ....................................................................................... 27

3.7 Data processing, analysis and presentation ............................................................................. 28

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3.8 Validity and Reliability ........................................................................................................... 29

3.8.1 Validity ......................................... ~ ....................................................................................... 29

3.8.2 Reliability ............................................... , ............................................................................. 29

3.9 Ethical Consideration .............................................................................................................. 30

3.10 Study limitations ................................................................................................................... 30

CHAPTER FOUR. ...................................................................................................................... 32

DATA PRESENTATION, ANALYSIS AND INTERPRETATION OF FINDINGS ................ 32

4.0 Introduction ............................................................................................................................. 32

4.1 Demographic Information ....................................................................................................... 32

4.1.1 Gender of Respondents ........................................................................................................ 33

4. I. 2 Age of the Respondents ........................................................................................................ 34

4.1.3 Education Status of Respondents ......................................................................................... 36

4.2 Response Rate ......................................................................................................................... 40

4.2.1 Findings about Control environment and Finance performance ........................................ 41

4. 2. 3 Findings about Risk assessment and financial performance ............................................... 46

CHAPTER FIVE ........................................................................................................................ 49

SUMMARY CONCLUSION AND RECOMMENDATIONS .................................................... 49

5.0 Introduction ............................................... : ............................................................................. 49

5.1 Summary of Findings .............................................................................................................. 49

5.1.1 The effect of control environment on financial performance in manufacturing firms ......... 49

5 .1.2 The effects of control activities and financial performance ................................................ 50

5.1.3 The effect of risk assessment and financial performance on manufacturing firms .............. 50

5.2 Conclusions ............................................................................................................................. 51

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5. 2.1 Conclusion on The effect of control environment on financial performance . .....................

ABSTRACT 

The study examined the effect of internal control on financial performance of manufacturing firms in Mbale from which Elgon springs mineral water Company was used as a case study. The research also capitalized on three objectives which require establishing the effect of controlling environment, control activities, and 1isk assessment on financial performance. In this study, internal control was used as an independent variable whereas financial performance as a dependent variable. The stndy employed stratified, simple random and purposive sampling techniques to draw representative samples and a sample size of 32 respondents was determined fi"om a population of 35 members using Krejcie and Morgan table. Closes-ended questionnaires with eight point Iikert scale were used to obtain response. During this research data was carefully collected, classified and analyzed using frequency tables and data was summarized using graphs and charts. The findings of the study revealed that there is a relationship between internal control and financial performance. This is because the three indicators of internal control researched on showed that on average, over 85% of the respondents believed that an effective adaptation of control environment, control activities and risk assessment would ensure effective financial perf01mance to manufacturing fi1ms. Finally, the researcher suggested some recommendations which included an improved effort by management of manufacturing firms to foster internal control through monitoring accountants, strengthening ethical code of conduct and professionalism, improving employee 'integrity, separation of staff roles and installation of an accounting system that pe1mits works of accounting team to be monitored by others.