Internal Control System and Organisational Performance: An Evaluation of Capacity Utilisation and Profitabilty in Selected Nigerian Manufacturing Companies

Abstract

The importance of Internal Control (IC) system as a process established by entity’s board or management cannot be underplayed, particularly in a volatile business environment characterised by high cost of manufacturing induced by inflationary pressure and currency instability. This study examined the impact of internal control systems on capacity utilisation and financial performance of listed Nigerian industrial goods manufacturing companies. The study used a survey research design. The population of study comprised of the 278 Management staff of the 4 selected listed industrial goods manufacturing companies as of 31 December 2023. Using purposive sampling technique, 163 respondents were circularized electronically. From this number 104 (64%) returned the questionnaire. Purposive sampling was adopted based on the availability and willingness of the individuals to respond to the questionnaire. Inferential statistics using multiple regression model was adopted in analysing the data collected. The results of the analysis revealed that internal control system has significant effect on capacity utilisation with Adjusted R² = 0.333, F-statistics= 13.843 and P-value = 0.000. It also shown significant effect on the profitability of the listed manufacturing firms with Adjusted R² = 0.576, F-statistics =35.926, P-value =0.000. The study concluded that internal control system significantly impacts on capacity utilisation and profitability of listed Nigeria industrial goods manufacturing firms. Hence, management of the listed Nigeria industrial goods manufacturing firms should continually review internal control system to ensure optimum capacity utilisation, such that will place them on the path of profitability and growth in consideration of the volatility of business environment.