INTERNAL CONTROLS AND ORGANIZATIONAL PERFORMANCE:



INTERNAL CONTROLS AND ORGANIZATIONAL PERFORMANCE:

A CASE OF MEDIPONT INDUSTRIES LIMITED

BY

OCHOGE JOHN

05/U/9462/EXT

SUPERVISOR

MR. NZIBONERA ERIC

A RESEARCH REPORT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF

BACHELOR OF COMMERCE OF

MAKERERE UNIVERSITY

JUNE 2011

DECLARATION

I, Ochoge John, declare that this research report is my original work. It has not been submitted to any other university or higher institution for any award and where it is indebted to work of others, due acknowledgement has been made.

Signature………………………… Date:………………………..

OCHOGE JOHN

05/U/9462/EXT

APPROVAL

I hereby certify that this work entitled “Internal controls and organizational performance: a case of Medipont Industries Limited” has been submitted with my approval for examination as a university supervisor.

Signature……………………………………. Date ……………………..

MR. NZIBONERA ERIC

UNIVERSITY SUPERVISOR

DEDICATION

This piece of work is dedicated to my father, mother, wife and children.

ACKNOWLEDGEMENT

I truly thank God for the gift of good health and friends. My sincere heart appreciation goes to my supervisor Mr. Nzibonera Eric for the guidance and encouragement up to this stage of submission. My lecturers for academic encouragement and guidance. Fellow students for moral, academic support and encouragement. To my respondents of this study, please thank you for the cooperation during my interactions with you. Sincere appreciation to all relatives and friends especially Mr. Obbo Israel Ochieng of KPMG and family. May God bless you all.

TABLE OF CONTENTS

DECLARATION i

APPROVAL ii

DEDICATION iii

ACKNOWLEDGEMENT iv

TABLE OF CONTENTS v

LIST OF FIGURE viii

LIST OF TABLES ix

ABSTRACT xi

CHAPTER ONE 1

1.0 Introduction 1

1.1 Background to the study 1

1.2 Statement of the problem 3

1.3 Purpose of the study 3

1.4 Objective of the study 3

1.5 Research questions 3

1.6 Scope 4

1.7 Significance of the study 4

CHAPTER TWO 5

LITERATURE REVIEW 5

2.0 Introduction 5

2.1 Definition and understanding of internal controls 5

2.2 Internal Control Systems 8

2.3 Elements of internal controls 13

2.4 Organizational performance 17

2.5 Relationship between internal control and organizational performance 19

CHAPTER THREE 21

METHODOLOGY 21

3.1 Introduction 21

3.2 Research design 21

3.3 Study population 21

3.4 Sampling design 21

3.5 Sampling size 21

3.6 Sources of data collection 22

3.7 Instruments of data collection 22

3.8 Data processing, analysis and presentation 22

3.8.1 Data processing 22

3.8.2 Data Presentation and Analysis 23

3.9 Limitations of the study 23

CHAPTER FOUR 24

DISCUSSION AND INTERPRETATION OF FINDINGS 24

4.1 Introduction 24

4.2 Findings on general information 24

4.3 Findings on the effectiveness of internal controls used in Medipoint Industries Limited 29

4.4 Findings on the level of performance in Medipoint Industries Limited 36

4.5 Findings on the relationship between internal control and organizational performance at Medipoint Industries Limited. 41

CHAPTER FIVE 43

DISCUSSION, CONCLUSION AND RECOMMENDATIONS OF FINDINGS 43

5.1 Introduction 43

5.2 Discussion of major findings. 43

5.3 Conclusion 45

5.4 Recommendations 45

5.5 Areas for further research 46

REFERENCES 47

APPENDIX 1 50

R.V. KREJCIE AND D. W. MORGAN (1970) SAMPLE SIZE ESTIMATION TABLE 50

APPENDIX 1 51

QUESTIONNAIRE 51

LIST OF FIGURE

Figure 1: Gender of respondents 25

Figure 2: Marital status of respondents 26

Figure 3: Age of respondents 27

Figure 4: Education level of respondents 28

LIST OF TABLES

Table 1: Gender of respondents 24

Table 2: Marital status of respondents 25

Table 3: Age of respondents 26

Table 4: Education level 27

Table 5: Length of service 28

Table 6: Responses on whether there are adequate asset listings done by management 29

Table 7: Responses on whether procedures in place ensure asset additions, disposal, replacement and transfers for proper accountability 30

Table 8: Responses on whether capital assets purchased are approved by appropriate level of management 31

Table 9: Responses on whether asset numbering is done to show location and protection of the assets 32

Table 10: Responses on whether there is free access to cheque books and organization assets 33

Table 11: Responses on whether a person responsible for inventory management is different from the bookkeeper 33

Table 12: Responses on whether stock taking is done following the procedures and in the presence of the internal auditor 34

Table 13: Responses on whether the petty cashier is different from the main cashier 35

Table 14: Responses on whether there are adequate policies to ensure effective collection and follow ups of due accounts 35

Table 15: Responses on whether cost of production has been reducing dramatically for the past two years 36

Table 16: Responses on whether the company is now in a better position to serve clients more efficiently and effectively 37

Table 17: Responses on whether effectiveness is measured through quality services and products 38

Table 18: Responses on whether the company is able to build customer satisfaction through quality products and services 39

Table 19: Responses on whether performance of the company results from assets finance, employee skills and processes involved in production 39

Table 20: Responses on whether there is evaluation and discussion of the organizational performance annually by management 40

Table 21: Responses on whether stock outs increases the cost of production 41

Table 22: Correlations 41

ABSTRACT

The study sought to establish a relationship between internal control and organizational performance of Medipoint Industries Limited. The study objectives were; to examine the effectiveness of internal controls used in Medipoint Industries Limited, to establish the level of performance in Medipoint Industries Limited and to establish a relationship between internal control and performance in Medipoint Industries Limited.

A cross sectional survey was used in the course of the study. Both qualitative and quantitative data was gathered in order to establish the relationship between the independent and dependent variables, so as to examine how internal controls are used in Medipoint Industries Limited and therefore account for the performance levels. The study comprised of 30 employees and 20 customers of Medipoint Industries Limited. Simple random approach was used during the study. Purposive sampling was also used to select only respondents for the researcher to attain the purpose of the study. Data was collected using both primary and secondary sources. After collecting data, the researcher organized well-answered questionnaire, data was edited and sorted for the next stage. The data was presented in tabular form, pie charts and bar graphs with frequencies and percentages. The researcher used Statistical Package for Social Sciences (SPSS) to analyze the relationship between the variables under study.

It was concluded; the study findings indicated that the internal controls used in Medipoint Industries Limited were ineffective and unsatisfactory, the level of organizational performance was found to be inadequate and a significant positive relationship between internal controls and organizational performance was established to exist. It was recommended that; management of Medipoint Industries Limited should design effective internal control systems through ensuring that adequate asset listings is done by management, capital assets purchased are approved by appropriate level of management and asset numbering is done to show location and protection of the assets; management ensures that it strengthens strategies aimed at improving organizational performance in all categories of staff; management should appreciate the findings in the relationship between internal controls and organizational performance to ensure its continued production in a competitive industry in Uganda.

CHAPTER ONE

1.0 Introduction

This chapter presents the background of the study, problem statement, purpose, objectives, research questions, scope, and significance of the study and structure of the report.

1.1 Background to the study

Internal controls are put in place to keep organization on course towards profitability goals and achievement of its mission and to minimize surprise along the way. They enable management to deal with rapidly changing economic and competitive environment, shifting customer demands and priorities and restructuring for future growth. Internal controls promote efficiency, reduce risks of asset loss and help to ensure the reliability of financial statements and compliance with laws and regulations (Coso, 1992).

Because internal controls services many component purposes, there are increasing calls for better internal control systems; internal control is looked upon more and more as a solution to a variety of potential problems (Coso 1992). According to Chambers (1995), Cosserat (1999), Ridley and Chambers (1998) internal controls are systems comprising of the control environment and control procedures. They further state that the internal control systems includes all the policies and procedures adopted by the directors and management of an entity to assist in achieving their objective of efficient conduct of its business, including adherence to internal policies, the safeguarding of assets, the prevention and detection of fraud and error, the accuracy and completion of the accounting records and timely preparation of reliable financial information. Successful organizations ensure that they attain and consolidate continued survival in a competitive environment Drucker (1999). Thus successful organizations set performance measures that focus attention that identifies and communicates the success, support organization learning and provide a basis for assessment and reward (Brown, 1996).

Organizational performance is measured in terms of customer satisfaction, through reduced customer complaints (Kloot, 1999). In order to be able to perform organizations should critically look at customers and all stakeholders in business and know how best they are satisfying their needs. Kloot adds that organizations should continuously improve their services through assets accumulation, create value, improved quality services and flexibility internal control system is intervened with organizations operating activities and it is most effective when controls are built into the organizations infrastructure becoming part of the very essence of the organizations success in terms of continued improvement on performance standards as part of the competitive advantage of the organization.

However, the performance of Medipoint Industries Limited seems to be declining. The stakeholders are increasingly complaining on the stagnant asset accumulation, inadequate staff members especially in the accounts department low quality services provided by Equity bank, Wandegeya branch to mention but a few Medipoint Industries Limited annual report (2009/10).

1.2 Statement of the problem

Despite of the important role played by internal controls in organizations, Medipoint Industries Limited is experiencing low levels of performance, in terms of low levels of innovations, slow asset accumulation, inefficiency and fraud cases (Annual report, 2009/2010). The unsatisfactory performance could be attributed to weak internal control systems used by Medipoint Industries Limited.

1.3 Purpose of the study

The study sought to establish a relationship between internal control and organizational performance of Medipoint Industries Limited.

1.4 Objective of the study

1. To examine the effectiveness of internal controls used in Medipoint Industries Limited.

2. To establish the level of performance in Medipoint Industries Limited.

3. To establish a relationship between internal control and performance in Medipoint Industries Limited.

1.5 Research questions

1. How effective are internal controls in Medipoint Industries Limited?

2. What is the level of performance in Medipoint Industries Limited?

3. What is the relationship between internal control and performance in Medipoint Industries Limited?

1.6 Scope

1.6.1 Subject scope

The study was confined on internal control as an independent variable and the effectiveness was measured basing on control environment, control activities, information and communication flow; competence with the laws and regulations toward monitoring of operations, performance of Medipoint Industries Limited departments was the dependent variable and it was measured basing on asset accumulation efficiency, improved quality service increased innovations and flexibility.

1.6.2 Geographical scope

The study was conducted at Medipoint Industries Limited Kampala.

1.7 Significance of the study

i) The study will enrich the researcher’s knowledge on the variables under study and help the researcher fulfill the requirements that lead to the award of the degree of Bachelor of commerce from Makerere University.

ii) The study results will be useful to management, board of governors, and all stakeholders of Medipoint Industries Limited specifically they will use findings from the study to redesign policies aimed at improving on the levels of performance.

iii) Findings will also be available for reference by academicians, researchers who seek to conduct further research in any of the variable under this study.

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This chapter provides a critical review of related literature on the study variables, definition and understanding of internal controls, Internal Control Systems, earlier studies on internal control elements, common weaknesses of internal control systems, determinants of internal control strength and components of an internal control system, it also discusses a link between the variables of this study.

2.1 Definition and understanding of internal controls

Internal control is a process effected by an entity’s board of directors management and other persons designed to provide reasonable assurance regarding the achievements of objectives in the following categories; efficiency and effectiveness of operations, reliability of financial reporting and compliance with applicable laws and regulations (Lower, 1998). The first category addresses an entity’s basic objectives, including performance and progressing goals and safeguarding of resources. The second category relates to preparations of reliable published financial statements. The third deals with complying with the laws and regulations to which the entity is subject to.

Internal Controls (IC) are to be an integral part of any organization's financial and business policies and procedures. They are adopted by management to ensure that the organization conducts business in an orderly and efficient manner (KPMG Forensic, 2004). Consequently Knechel et al (2007) argues that they provide the framework through which management uses the resources at its disposal to achieve the organization's goals. According to Romanian banking literature, internal controls consists of couple of measures at management's disposal intended to ensure the organizations proper functioning, correct management of its assets and liabilities and true recording in accounting evidences.

A broader definition provided by Furrugia (2002) views IC as the plan of organization and the coordinated procedures used within an entity to; safeguard its assets from loss by fraud or errors, check the accuracy and reliability of accounting data which management uses in decision making, and promotion of operational efficiency and encourage adherence to adopted policies in those areas in which the accounting and financial departments have direct or indirect responsibilities.

Chamsers (1995), Cosserat (1999), Ridley and Chambers (1998) defined internal control systems as comprising of the internal control environment and control of procedures. They further state that the internal control systems includes all the policies and procedures (internal controls) adopted by the directors and management of an entity to assist in achieving their objective of ensuring as far as practicable, the orderly and efficient conduct of the business, including allowance to internal policies, the safe guarding of assets, the prevention and detecting of fraud and error, the accuracy and completeness of the accounting records and timely preparation of reliable financial information.

The control environment sets the tone of an organization influencing the control cautiousness of its people (Gauthoier, 1996). It is a foundation for all other components of internal control providing discipline and structure. Effectively controlled entities strike to have competent people, instill an enterprise wide atitude of integrity and control consciousness, and set a positive tone at the top (Tener, 1993). They establish appropriate policies and procedures often including a written code of conduct which foster shared values and teamwork in pursuit of the entity’s objectives (Mautz and Wijan 1981).

In evaluating the effectiveness of the internal control environments, Coopers and Lybraud (1993) argued that there was need to consider whether the following control objectives are met; management conveys the message that integrity and ethical cannot be compromised, the organization structure provides a moral framework for planning, directing, and controlling operations, management ensures that appropriate responsibility and delegation of authority is assigned to deal with goals and objectives and the Board of Directors and audit committee are sufficiently independent from management to construct a challenge to management decision and take an active role in ensuring that an appropriate “tone at the top exists”.

Control activities are policies and procedures that help ensure that management directives are carried out. They help ensure that necessary activities are taken to address risks to achievements of the entity’s objectives. Control activities occur throughout the organization at all levels and all functions (Junner, 1993). They include arrange of activities; authorization, verifications, reconciliations, review of operating performance security of assets and segregation of duties (Ernst and Yong, 1995).

Information flow is essential to effecting control, information about an organization’s plan, control environment, risks, control activities and performance must be communicated up, and access an organization (Ruttrman Working Group, 1994). Reliable and relevant information flow both internal and external sources must be identified, captured, processed and communicated to the people who need it in a form and time frame that is useful (Chambers 1995). Information systems produce reports, containing operational financial and compliance – related information that makes it possible to run and control an organization (Coseo, 1992).

2.2 Internal Control Systems

The traditional accounting professional definition of internal control hinged on financial reporting and compliance aspect of control, however COSO, (1994) describes internal control system as a process involving board of directors, management, and other personnel created as a means of ensuring that the organization’s objectives can be achieved. The objectives are categorized as; effectiveness and efficiency of operations, reliability of financial reporting, compliance with the relevant laws and regulations. According to the Australian Auditing Standard AUS 402 (ISA 400), control environment is distinguished from control procedure in that the former represents the general management attitude, awareness and actions as far as it concerns internal control whereas the later refers to what management has put in place as guidelines to control information and transaction procedure so as to achieve the organization’s objectives.

Since organizations differ in management philosophy, structure and size the wider outlook of control elements will always reflect the above differences, (COSO, 1994). Organizational culture determines control through self-discipline and internal monitoring (Ezzamel et al., 1997). According to COCO (1995), ‘top down, command and controlled’ organizations emphasize formal controls while those that are down sized and empowered will adopt informal controls.

According to (Kirsty, 2008) an internal control system is an organization’s confidence in its ability to perform or undertake a particular behavior. He further asserts that a system of internal controls potentially prevents errors and fraud through monitoring and enhancing organizational and financial reporting processes as well as ensuring compliance with pertinent laws and regulations. The Basel Committee on Banking Supervision, as well as by the National Bank of Romania (Regulation no. 17/2003) claim that internal controls represent a continuous process which takes part of the board of directors, senior management and all levels of personnel, and whose aim is to ensure that all the established goals will be achieved.

Williams (2005) says that some things considered to be good are not always enough for information. Internal controls have to give the possibility to check quality. Shelton and Whittington (2008) concurs that sometimes even the quality of an information is not enough, if it is uncompleted; that is why internal control needs to ensure that all elements are taken into consideration during their processing and the information always need to be geared to the pursued aim. He concludes that it’s availability is not enough to take possession of the information because sometimes it might be too late and that is why internal control has to avoid such situations and ensure the procurement of information is availed in a suitable time. The International Organization of Supreme Audit Institutions (INTOSAI), focuses more on a series of actions that permeate an entity's activity rather than one event or circumstance where by these actions occur throughout an entity's operations on an ongoing basis.

2.2.1 Components of an internal control system

Antecedents of internal control procedure strength include; organizational ethical environment, Risk management training and internal audit activities. The ethical environment refers to how top management is committed to the morally acceptable behaviors which are based on honesty, integrity and self discipline. Victor and Cullen (1987) similarly, COSO (1992) identifies control environment factors, risk assessment, control activities, information and communication and monitoring as interrelated components of a control system. Control categorized as control environment is being more emphasized over control activities by writers like Cary and Stringer (1995), also COSO (1994) and CoCo (1995). This is a shift from traditional control procedures that are put forward to monitor in real time or after the event, which puts greater importance on setting control around people. It is believed that people with strong set of belief are able to do their own, do the right thing for the institutions they work for without necessarily being directed to do so.

Control environment encompasses integrity and ethical values, management philosophy and operating style, accountability and human resource practices and is considered to be an important control element. Ethical environment can be enhanced by leadership and or management’s firm adherence to punishing those who violate the code of ethics (COSO, 1994). Control activities are top down reviews, functional or activity management, information processing, performance indicators, segregation of duties and physical controls (COSO, 1994). Crosschecking or authorization as control activities are portrayed as being of reducing importance. Risk control involves systematic procedures put in place to identify and measure risk associated with the institution’s continuity and strategies for controlling and monitoring it. Risk assessment focuses on cost versus benefit approach to control and is not just the risk of fraud or misstatement of reports (COSO, 1995 and Mills, 1997).

COSO (1994) recognizes information and communication as separate control environment. Information sharing enables employees to get right and timely information thus developing a feedback Davis and Militello (1994), organizations where information sharing is encouraged decision making and performance is highly enabled. Employees take ownership of information and can easily identify and put right their own and their team’s faults.

2.2.3 Determinants of internal control strength

While CPA Australia, (2003) emphasizes that internal control procedural quality depends upon the control strength on cash management, physical assets, purchasing and accounts payable, sales, payroll, bank account management and employee recruitment, Simon (1995), suggests that effectiveness of internal control system will be judged from the reliability of financial reports, efforts to comply with applicable laws and regulations, unfailing management reporting, protection of assets, guarding against fraud and errors and encouraging efficiency and effectiveness of operations.

2.2.4 Common weaknesses of internal control systems

Albrecht (1984), outlines twelve most common internal control weaknesses, in order of frequency as; Too much trust in employees, lack of proper procedure for authorization, lack of personal financial information disclosure (for bank frauds), lack of separation of transaction authority from custodian of assets, absence of independent checks on performance, lack of adequate attention to detail, failure to separate asset custody from accounting for assets, failure to separate accounting duties, absence of clear lines of authority, relaxed or absence of audit activities or reviews, no conflict of interest statement required and lack of adequate documents and records.

A view held by Buckoff (2002), and supported by literature by Mac Arthur, Waldrup and Fane (2004) is that lack of segregation of duties, lack of independent reconciliation on cash received and deposited and performing incompatible roles greatly facilitates internal fraud. The conditions for fraud to occur include an incentive to commit fraud (pressure), good reason for justifying fraudulent behavior (attitude) and an opportunity to commit fraud Albrecht et al (1984), it is pointed out that opportunity is easy to control by establishing strong internal system unlike pressure and attitude which are human factors that are usually beyond direct influence of management.

2.2.5 Earlier studies on internal control elements

Previous research have focused on studying certain control elements such as communication which was handled by Hooks et al (1994), risk management Mills (1997) and human resource practices done by Carey and Stringer, (1995). The study on village banks in Uganda, Kenya and Tanzania by German Technical assistance (GTZ) and Africa Rural Agriculture and Credit Association (AFRICA) (2002) revealed that most of the MFIs were operating without documented policies and procedures and lacked operational manuals. It identified the necessity to provide support to the MFIs so that they can come up with operational manuals and to improve on the existing systems. Information system is a set of interrelated components all of which should be present and work together for a common purpose. Internal control mechanisms must have well documented processes that are understood by everyone involved. There is immense need for MFIs to set aside resources such as time, money and personnel to develop or improve a MIS that can match its information requirement (The Center for Micro Enterprise Development Project, 1999). An organization which lacks information will be unable to attain its potential performance even if it may have capable and motivated staff (CGAP, 1998).

2.3 Elements of internal controls

Internal control is a multifaceted concept and has been defined in various ways in management control literature. Dawson (2003), provide one of the narrower definitions of IC and they view IC as a part of the overall management control system comprising of the measures taken by an organization to avoid errors and irregularities while operations are in progress.

Anthony (2004) suggests that it is not solely a procedure or policy that is performed at certain Point in time but rather a continually operating and integrated system at all levels within an organization which consists of five interrelated components i.e., Control environments, risk assessment, control activities, information and communication; and monitoring. Doyle et al (2007) concurs that it is generally felt that all the following five components must be present for an internal control system to be considered as effective.

2.3.1 Control environment

The control environment is the foundational context within which the other aspects of internal control operate (Konrath, 1999). The philosophy and management style, organizational structure, methods of imposing control, assignment of authority and responsibility are all key aspects of the control environment (Jones, 2007).

Beneish et al (2008), defines the control environment as the tone of an organization and the way it operates. He further says that it concerns the establishment of an atmosphere in which people can conduct their activities and carry out their control responsibilities effectively. Likewise, COSO (2004) looks at the ethical environment of an organization to encompass aspects of upper management’s tone in achieving organizational objectives, their value judgments and management styles. The control environment represents the control atmosphere for the entity and is the foundation for the other components (Nicolaisen, 2004). Bates (2001) considers the factors relating to the control environment to include the integrity, ethical values, and competence of employees and management, management’s philosophy and operating style, the manner in which authority and responsibility are assigned, the organization and development of employees, and the attention and direction of the board of directors towards organizational success.

ISA400 clearly looks at the control environment to represents management’s overall attitude, awareness and actions regarding internal controls. Lou (2008) concurs that higher level administrators of an organization are responsible for establishing the appropriate control environment.

2.3.2 Risk assessment

Risk assessment is the process used by an organization (management) to decide how it will deal with the risks that pose a threat to achieving its objectives (Furrugia 2002). It entails the identification and prioritization of objectives, the identification of risks and assessment of their likelihood and impact. Consequently Jones (2007), looks at risk assessment as the identification, evaluation and management of risks. He further notes that risks can relate, to financial statement fraud or to the misappropriation of assets.

2.3.3 Control activities

Control activities are the policies and procedures implemented by an organization to ensure that management’s directives are carried out. These activities are often grouped into the three categories of objectives to which they relate, namely, operations, financial reporting, and compliance (Shelton & Whittington, 2008). He further argues that these control activities include a range of activities as diverse as approvals, authorizations, verifications, reconciliations, reviews of operating performance, security of assets and segregation of duties, segregation of duties and authority.

2.3.4 Information and communication

According to Britnell (2001), Information and communication refer to the systems put in place by an organization to identify, capture, process and report relevant and reliable information in a timely manner so that people can carry out their responsibilities effectively. In addition, these systems deal with both internally and externally generated/required data and flows both vertically and horizontally in the organization.

Gaskill (2000), looks at information and communication component as the identification, capture, and communication of pertinent information in an appropriate form and timeframe to accomplish the financial reporting objectives. Open channels of communication are necessary to allow information to flow throughout the entity and into the financial statements and therefore management should discuss the identification, capture, and flow of financial information in its report (Richard & Janet 1997).

2.3.5 Monitoring

This refers to the process of assessing the quality of a system’s performance over time (Jones, 2008). It entails the activities and procedures designed to assess the effectiveness of the internal control system in achieving the entity’s financial reporting objectives (Coffin, 2003). Monitoring activities may be ongoing or may be separate evaluations and it is important given the complex and dynamic environments faced by most organizations (Henle 2005). It seeks to ensure that systems are performing as intended. However this is accomplished through ongoing monitoring activities, periodic evaluations or a combination of the two (COSO, 2004).he further contends that these activities permeate the entire organization, at all levels and in all functions.

2.4 Organizational performance

Brown (1996), argues that performance measures in organizations must focus attention on what makes, identifies and communicates the drivers of success, support organizations learning and provide a basis for assessment and reward. Dixion (1990), adds that appropriate performance measures are those which enable organizations to direct their actions towards achieving their strategic objectives. This is because according to him a firm’s performance is central to the future well being and prosperity of any enterprise.

Study by Whyte (1991), shows that performance can be measured at both organizational and individual levels. This measurement is sometimes referred to as performance appraisal. Whyte argues that organizations have desired potentials in terms of capacity, attraction, manual share and financial strength and performance is the difference between those potentials and those that have been achieved. Whyte argues that human capital asset accumulation has significant impact on the organizations ability to introduce new products, compete within markets thus influencing the level of performance. It increases knowledge base within the organization’s success and performance.

Rumelt (1994), assert that availability and level of resources can also be used to analyze the performance of an organization. Remelt content that resources which may include assets finances, employee skills and organizational process are key indicators of the organizations performance one time. In agreement with this, Barney (1991) suggested that resources could be grouped into physical, human and capital resources and that a firm can increase its performance only when the firms are unable to imitate its resources. Ryne (1994), argues that although a strong financial performance indicates a strong institution, qualitative indicators like the nature of management and education level of labour force must supplement the quantitative indicators in order to enable the enterprise ability to meet its focus and objectives.

Palmer (1993), emphasizes that performance in organizations is looked at in terms of economy, efficiency and effectiveness. Economy and efficiency are usually measured in financial terms and data such as costs, volume of sales and productivity are used. Economy is defined as acquiring resources in appropriate quantities and at the least cost.

Druker (1999), defines efficiency as maximizing inputs for a required output. On the other hand Drucker defines effectiveness as the extent to which the defined task has been accomplished and is consistent with notions of non financial accountability. Effectiveness may partly be measured in terms of quality service, customer satisfaction and achievement of goals.

Morton (1992), is also in agreement with Drucker’s (1999), contention that performance should be measured in terms of customer satisfaction. Morton argues that in order to be able to perform, organizations should critically look at their customers and know how best they are satisfying their needs. He adds that organizations should continuously improve on their services through innovations and great value. Kloot (1999), adds that in order to assess performance, organizations should be examined in terms of quality of services, flexibility, utilization and innovations.

2.5 Relationship between internal control and organizational performance

Coso (1992), provided a criteria against which effectiveness of internal controls can be assessed. Internal control can be judged effective if the entity’s operations objectives are being achieved; published financial statements are being prepared, reliable and applicable laws and regulations are being complied with. While internal control is a process, its effectiveness is a state or condition of the process at a point in time. Accordingly, the effective functioning of components of internal control provides a reasonable assurance regarding achievement of one or more of the stated categories of objectives to ensure high levels of organizational performance. Thus the company’s criteria for effective internal control and success of the entire organization.

Efficiency and effectiveness of operations have been taken to mean efficiencies and effective use of its resources including personnel, accurate information for decision making and safeguarding of assets and records (Aren and Lwebbecke, 1994).

One of the five interrelated components of an internal control system is a control environment factor. It refers to the integrity, ethical values and competence of the entity’s people (COSO, 1994). Internal control should be viewed in a broader context for example it should as well be reorganized as a function of people’s ethical values as it is of standards and compliancy mechanisms (CoCo, 1995). Wells (2001), illustrate practical fraud occurrences discovered by competent accountants within organizations and what the accountants say about how they detect fraudulent transactions. Internal control system helps an organization to achieve its objectives such as its efficiency and effectiveness, reliable financial reporting and compliance with regulations COSO (1994). Controls serve the systems goals, they interact with the system and its environment thus directing the energy of the system toward fulfillment, in the same way changes in the environment are easily noticed and adapted to (CoCo, 1995). ACMAD (1994), recognizes that internal controls can enhance the productivity and competitiveness of organizations.

CHAPTER THREE

METHODOLOGY

3.1 Introduction

This chapter provides an account on how this study was conducted and ends with limitations of the study.

3.2 Research design

A cross sectional survey was used in the course of the study. Both qualitative and quantitative data was gathered in order to establish the relationship between the independent and dependent variables, so as to examine how internal controls are used in Medipoint Industries Limited and therefore account for the performance levels.

3.3 Study population

This comprised of employees and customers of Medipoint Industries Limited.

3.4 Sampling size and technique

Simple random technique was used during the study because of its advantages like minimization of biased results. Purposive sampling was also used to select only respondents for the researcher to attain the purpose of the study.

|Category of respondents |Numbers of respondents |

|Employees |24 |

|Customers |20 |

|Total |44 |

Source: Primary Data

Total sample size of 44 respondents was selected for the study.

3.5 Sources of data collection

Data was collected using both primary and secondary sources. Primary sources included responses from Medipoint Industries Limited employees and customers through self administered questionnaires. Secondary sources included journals, newspapers and reports.

3.6 Instruments of data collection

The main instrument that was used during data collection was a self administered questionnaire because of its advantages to include among others; quick data collection and easy to explain respondents questions they do not understand.

3.7 Data processing, analysis and presentation

3.7.1 Data processing

After collecting data, the researcher organized well-answered questionnaire, data was edited and sorted for the next stage.

3.7.2 Data Presentation and Analysis

The data was presented in tabular form, pie charts and bar graphs with frequencies and percentages for classifications of responses, easier analysis and visual impression. The researcher used Statistical Package for Social Sciences (SPSS) to analyze the relationship between the variables under study.

3.8 Limitations of the study

3.8.1 Research was an expensive venture yet the researcher was constrained financially.

3.8.2 Time constraint was yet another challenge for the researcher to accomplish this study.

CHAPTER FOUR

DISCUSSION AND INTERPRETATION OF FINDINGS

4.1 Introduction

This chapter presents empirical findings in reference to research objectives in chapter one. These findings were obtained from both primary and secondary sources. They were presented and analysed using frequency tables, percentages (graphs) and finally SPSS was used to establish a relationship between the variables.

4.2 Findings on general information

Table 1: Gender of respondents

|Gender |Received |

| |Frequency (f) |Percentage (%) |

|Male |26 |66.7 |

|Female |13 |33.3 |

|Total |39 |100 |

Source: Primary Data

According to table 1 above, 66.7% of the respondents were males, while 33.3% were females. The respondents were mainly males implying that, probably male staff comprises a bigger percentage of the human resource at Medipoint Industries Limited.

[pic]

Figure 1: Gender of respondents

Table 2: Marital status of respondents

|Status |Frequencies |Percentage (%) |

|Single |11 |28.2 |

|Married |28 |71.8 |

|Divorced/separated |- |- |

|Total |39 |100 |

Source: Primary Data

Table 2 indicates that 71.8% of the respondents were married and 28.2% were single. The respondents were mainly married. This implies that, internal controls in Medipoint Industries Limited mainly influence married staff and thus the organizational performance is highly influenced by married staff compared to single and divorced/separated.

[pic]

Figure 2: Marital status of respondents

Table 3: Age of respondents

|Age (years) |Frequencies |Percentage (%) |

|21-30 |10 |25.6 |

|31-40 |17 |43.6 |

|41-50 |12 |30.8 |

|Above 50 |- |- |

|Total |39 |100 |

Source: Primary Data

According to table 4 above 25.6% of the respondents were between the age 21-30, 43.6% were between the age of 31-40, 30.8% were between the age of 41-50 and none of the respondents were above the age of 50. Findings indicate that majority were in the age group of 31-40 years. This implies that respondents of this age group mainly contribute to the organizational performance of Medipoint Industries Limited influenced by the internal controls.

[pic]

Figure 3: Age of respondents

Table 4: Education level

|Level |Frequencies |Percentage (%) |

|Certificate |4 |10.3 |

|Diploma |14 |35.9 |

|Degree |16 |41.0 |

|Masters degree |5 |12.8 |

|Professional |- |- |

|Others |- |- |

|Total |39 |100 |

Source: Primary Data

Findings in table 4 above show that 10.3% of the respondents held certificates, 35.9% diploma, 41.0% degree and 12.8% Postgraduate. Majority were degree holders indicating that Medipoint Industries Limited organizational performance is mainly influenced by an educated staff, thus they can easily evaluate the effectiveness of internal controls used in the organization.

[pic]

Figure 4: Education level of respondents

Table 5: Length of service

|Length of service (years) |Frequencies |Percentage (%) |

|Less than 1 year |4 |10.3 |

|1-3 |14 |35.9 |

|4-6 |16 |41 |

|Above 6 years |5 |12.8 |

|Total |39 |100 |

Source: Primary Data

Findings in table 5 above show that 10.3% of the respondents served for less than 1 year, 35.9% 1-3 years, 41% 4-6 years and 12.8% above 6 years. Majority served for 4-6 years indicating that Medipoint Industries Limited is managed by experienced staff.

4.3 Findings on the effectiveness of internal controls used in Medipoint Industries Limited

Table 6: Responses on whether there are adequate asset listings done by management

|Response |Frequencies |Percentage (%) |

|Strongly agree |9 |23 |

|Agree |10 |26 |

|Not sure |5 |13 |

|Disagree |13 |33 |

|Strongly disagree |2 |5 |

|Total |39 |100 |

Source: Primary Data

Results in table 6 above show that 23% of the respondents strongly agreed that there are adequate asset listings done by management, 26% agreed, 13% were not sure, 33% disagreed and 5% strongly disagreed. Majority of the respondents were in disagreement and this implies that there are inadequate asset listings done by management at Medipoint Industries Limited.

Table 7: Responses on whether procedures in place ensure asset additions, disposal, replacement and transfers for proper accountability

|Response |Frequencies |Percentage (%) |

|Strongly agree |3 |7 |

|Agree |8 |21 |

|Not sure |6 |15 |

|Disagree |10 |26 |

|Strongly disagree |12 |31 |

|Total |39 |100 |

Source: Primary Data

Results in table 7 above show that 7% of the respondents strongly agreed that procedures in place ensure asset additions, disposal, replacement and transfers for proper accountability, 21% agreed, 15% were not sure, 26% disagreed and 31% strongly disagreed. Majority of the respondents disagreed and this implies that procedures in place do not ensure asset additions, disposal, replacement and transfers for proper accountability in the organization.

Table 8: Responses on whether capital assets purchased are approved by appropriate level of management

|Response |Frequencies |Percentage (%) |

|Strongly agree |7 |17.9 |

|Agree |4 |10.2 |

|Not sure |8 |20.5 |

|Disagree |12 |30.8 |

|Strongly disagree |8 |20.5 |

|Total |39 |100 |

Source: Primary Data

Results in table 8 above indicate that 17.9% of the respondents strongly agreed that capital assets purchased are approved by appropriate level of management, 10.2% agreed, 20.5% were not sure, 30.8% disagreed and 20.5% strongly disagreed. Majority of the respondents disagreed and this implies that capital assets purchased are not approved by appropriate level of management.

Table 9: Responses on whether asset numbering is done to show location and protection of the assets

|Response |Frequencies |Percentage (%) |

|Strongly agree |12 |30.8 |

|Agree |5 |12.8 |

|Not sure |7 |18 |

|Disagree |12 |30.8 |

|Strongly disagree |3 |7.7 |

|Total |39 |100 |

Source: Primary Data

Results in table 9 above show that 30.8% of the respondents strongly agreed that asset numbering is done to show location and protection of the assets, 12.8% agreed, 18% were not sure, 30.8% disagreed and 7.7% strongly disagreed. Majority of the respondents disagreed. This implies that asset numbering is not done to show location and protection of the assets at Medipoint Industries Limited.

Table 10: Responses on whether there is free access to cheque books and organization assets

|Response |Frequencies |Percentage (%) |

|Strongly agree |8 |21 |

|Agree |4 |10 |

|Not sure |3 |8 |

|Disagree |10 |26 |

|Strongly disagree |14 |36 |

|Total |39 |100 |

Source: Primary Data

Results in table 10 above indicate that 21% of the respondents strongly agreed that there is free access to cheque books and organization assets, 10% agreed, 8% were not sure, 26% disagreed and 36% strongly disagreed. Majority of the respondents disagreed, this implies that there is limited/no access to cheque books and organization assets.

Table 11: Responses on whether a person responsible for inventory management is different from the bookkeeper

|Response |Frequencies |Percentage (%) |

|Strongly agree |8 |21 |

|Agree |10 |26 |

|Not sure |7 |18 |

|Disagree |6 |15 |

|Strongly disagree |8 |21 |

|Total |39 |100 |

Source: Primary Data

Results in table 11 above depict that 21% of the respondents strongly agreed that a person responsible for inventory management is different from the bookkeeper, 26% agreed, 18% were not sure, 15% disagreed and 21% strongly disagreed. Majority of the respondents agreed, this implies that a person responsible for inventory management is different from the bookkeeper at Medipoint Industries Limited.

Table 12: Responses on whether stock taking is done following the procedures and in the presence of the internal auditor

|Response |Frequencies |Percentage (%) |

|Strongly agree |7 |18 |

|Agree |9 |23 |

|Not sure |5 |13 |

|Disagree |14 |36 |

|Strongly disagree |4 |10 |

|Total |39 |100 |

Source: Primary Data

Results in table 12 above show that 18% of the respondents strongly agreed that stock taking is done following the procedures and in the presence of the internal auditor, 23% agreed, 13% were not sure, 36% disagreed and 10% strongly disagreed. Majority of the respondents disagreed implying that stock taking is not done following the procedures and in absence of the internal auditor.

Table 13: Responses on whether the petty cashier is different from the main cashier

|Response |Frequencies |Percentage (%) |

|Strongly agree |10 |25.6 |

|Agree |5 |12.8 |

|Not sure |7 |18 |

|Disagree |14 |35.9 |

|Strongly disagree |3 |7.7 |

|Total |39 |100 |

Source: Primary Data

Results in table 13 above reveal that 25.6% of the respondents strongly agreed that the petty cashier is different from the main cashier, 12.8% agreed, 18% were not sure, 35.9% disagreed and 7.7% strongly disagreed. Majority of the respondents disagreed, this implies that the petty cashier and the main cashier are the same at Medipoint Industries Limited.

Table 14: Responses on whether there are adequate policies to ensure effective collection and follow ups of due accounts

|Response |Frequencies |Percentage (%) |

|Strongly agree |6 |15 |

|Agree |8 |21 |

|Not sure |3 |8 |

|Disagree |5 |13 |

|Strongly disagree |17 |44 |

|Total |39 |100 |

Source: Primary Data

Results in table 14 above show that 15% of the respondents strongly agreed that there are adequate policies to ensure effective collection and follow ups of due accounts, 21% agreed, 8% were not sure, 13% disagreed and 44% strongly disagreed. Majority of the respondents disagreed implying that there are inadequate policies to ensure effective collection and follow ups of due accounts.

4.4 Findings on the level of performance in Medipoint Industries Limited

Table 15: Responses on whether cost of production has been reducing dramatically for the past two years

|Response |Frequencies |Percentage (%) |

|Strongly agree |4 |10 |

|Agree |10 |26 |

|Not sure |3 |8 |

|Disagree |13 |33 |

|Strongly disagree |9 |23 |

|Total |39 |100 |

Source: Primary Data

Results in table 15 above show that 10% of the respondents strongly agreed that cost of production has been reducing dramatically for the past two years, 26% agreed, 8% were not sure, 33% disagreed and 23% strongly disagreed. Majority of the respondents disagreed, this implies that cost of production has not been reducing dramatically for the past two years.

Table 16: Responses on whether the company is now in a better position to serve clients more efficiently and effectively

|Response |Frequencies |Percentage (%) |

|Strongly agree |3 |8 |

|Agree |12 |31 |

|Not sure |4 |10 |

|Disagree |15 |39 |

|Strongly disagree |5 |13 |

|Total |39 |100 |

Source: Primary Data

Results in table 16 above indicate that 8% of the respondents strongly agreed that the company is now in a better position to serve clients more efficiently and effectively, 31% agreed, 10% were not sure, 39% disagreed and 13% strongly disagreed. Majority of the respondents disagreed implying that the company is not in a better position to serve clients more efficiently and effectively.

Table 17: Responses on whether effectiveness is measured through quality services and products

|Response |Frequencies |Percentage (%) |

|Strongly agree |17 |44 |

|Agree |8 |21 |

|Not sure |5 |13 |

|Disagree |6 |15 |

|Strongly disagree |3 |8 |

|Total |39 |100 |

Source: Primary Data

Results in table 17 above depict that 44% of the respondents strongly agreed that effectiveness is measured through quality services and products, 21% agreed, 13% were not sure, 15% disagreed and 8% strongly disagreed. Majority of the respondents agreed. This implies that effectiveness at Medipoint Industries Limited is measured through quality services and products.

Table 18: Responses on whether the company is able to build customer satisfaction through quality products and services

|Response |Frequencies |Percentage (%) |

|Strongly agree |2 |5 |

|Agree |9 |23 |

|Not sure |5 |13 |

|Disagree |15 |39 |

|Strongly disagree |8 |21 |

|Total |39 |100 |

Source: Primary Data

Results in table 18 above show that 5% of the respondents strongly agreed that the company is able to build customer satisfaction through quality products and services, 23% agreed, 13% were not sure, 39% disagreed and 21% strongly disagreed. Majority of the respondents disagreed. This implies that the company has not been able to build customer satisfaction through quality products and services.

Table 19: Responses on whether performance of the company results from assets finance, employee skills and processes involved in production

|Response |Frequencies |Percentage (%) |

|Strongly agree |15 |38.5 |

|Agree |12 |30.8 |

|Not sure |7 |17.9 |

|Disagree |3 |7.7 |

|Strongly disagree |2 |5.1 |

|Total |39 |100 |

Source: Primary Data

Results in table 19 above show that 38.5% of the respondents strongly agreed that performance of the company results from assets finance, employee skills and processes involved in production, 30.8% agreed, 17.9% were not sure, 7.7% disagreed and 5.1% strongly disagreed. Majority of the respondents agreed. This implies that performance of the company results from assets, finance, employee skills and processes involved in production.

Table 20: Responses on whether there is evaluation and discussion of the organizational performance annually by management

|Response |Frequencies |Percentage (%) |

|Strongly agree |5 |13 |

|Agree |14 |36 |

|Not sure |3 |8 |

|Disagree |11 |28 |

|Strongly disagree |6 |15 |

|Total |39 |100 |

Source: Primary Data

Results in table 20 above indicate that 13% of the respondents strongly agreed that there is evaluation and discussion of the organizational performance annually by management, 36% agreed, 8% were not sure, 28% disagreed and 15% strongly disagreed. Majority of the respondents agreed. This implies that there is evaluation and discussion of the organizational performance annually by management at Medipoint Industries Limited.

Table 21: Responses on whether stock outs increases the cost of production

|Response |Frequencies |Percentage (%) |

|Strongly agree |4 |10 |

|Agree |14 |36 |

|Not sure |8 |21 |

|Disagree |10 |26 |

|Strongly disagree |3 |8 |

|Total |39 |100 |

Source: Primary Data

Results in table 21 above show that 10% of the respondents strongly agreed that stock outs increases the cost of production, 36% agreed, 21% were not sure, 26% disagreed and 8% strongly disagreed. Majority of the respondents agreed. This implies that stock outs increases the cost of production at Medipoint Industries Limited.

4.5 Findings on the relationship between internal control and organizational performance at Medipoint Industries Limited.

Table 22: Correlations

| |Internal controls |Organizational performance |

| Internal controls Pearson correlation | 1 | .618** |

|Sig. (2-tailed) |. | |

|N |39 |.000 |

| | |39 |

|Organizational performance Pearson correlation |.618** | 1 |

|Sig. (2-tailed) |.000 |. |

|N |39 |39 |

** Correlation is significant at the 0.01 level (2-tailed).

The results in the table above indicate a significant positive relationship between internal controls and organizational performance of Medipoint Industries Limited (r = 0.618**, P value < 0.01). These findings, relate well with previous studies by Coso (1992) who provided a criteria against which effectiveness of internal controls can be assessed. He contends that internal control can be judged effective if the entity’s operations objectives are being achieved; published financial statements are being prepared, reliable and applicable laws and regulations are being complied with. While internal control is a process, its effectiveness is a state or condition of the process at a point in time. Accordingly, the effective functioning of components of internal control provides a reasonable assurance regarding achievement of one or more of the stated categories of objectives to ensure high levels of organizational performance.

CHAPTER FIVE

DISCUSSION, CONCLUSION AND RECOMMENDATIONS OF FINDINGS

5.1 Introduction

This chapter presents a discussion, conclusion and recommendations of the study findings and ends with areas of further research.

5.2 Discussion of major findings.

5.2.1 To examine the effectiveness of internal controls used in Medipoint Industries Limited

Findings indicated that the internal controls used in Medipoint Industries Limited were ineffective and unsatisfactory. Findings rhyme with studies by Coopers and Lybraud (1993) who argued that there was need to consider whether the following control objectives are met; management conveys the message that integrity and ethical cannot be compromised, the organization structure provides a moral framework for planning, directing, and controlling operations, management ensures that appropriate responsibility and delegation of authority is assigned to deal with goals and objectives and the Board of Directors and audit committee are sufficiently independent from management to construct a challenge to management decision and take an active role in ensuring that an appropriate “tone at the top exists”.

5.2.2 To establish the level of performance in Medipoint Industries Limited

The findings revealed a low level of organizational performance in Medipoint Industries Limited. Findings are in agreement with studies by Brown (1996) who argues that performance measures in organizations must focus attention on what makes, identifies and communicates the drivers of success, support organizations learning and provide a basis for assessment and reward. Further more, Dixion (1990) adds that appropriate performance measures are those which enable organizations to direct their actions towards achieving their strategic objectives. This is because according to him a firm’s performance is central to the future well being and prosperity of any enterprise.

5.2.3 To establish a relationship between internal control and performance in Medipoint Industries Limited.

The results in the table above indicate a significant positive relationship between internal controls and organizational performance of Medipoint Industries Limited (r = 0.618**, P value < 0.01). These findings, relate well with previous studies by Coso (1992) who provided a criteria against which effectiveness of internal controls can be assessed. He contends that internal control can be judged effective if the entity’s operations objectives are being achieved; published financial statements are being prepared, reliable and applicable laws and regulations are being complied with. While internal control is a process, its effectiveness is a state or condition of the process at a point in time. Accordingly, the effective functioning of components of internal control provides a reasonable assurance regarding achievement of one or more of the stated categories of objectives to ensure high levels of organizational performance.

5.3 Conclusion

From the study findings, it is concluded that; the study findings indicated that the internal controls used in Medipoint Industries Limited were ineffective and unsatisfactory, the level of organizational performance was found to be inadequate and a significant positive relationship between internal controls and organizational performance was established to exist.

5.4 Recommendations

5.4.1 To examine the effectiveness of internal controls used in Medipoint Industries Limited

The management of Medipoint Industries Limited should design effective internal control systems by ensuring that adequate asset listings is done by management, capital assets purchased are approved by appropriate level of management and asset numbering is done to show location and protection of the assets.

5.4.2 To establish the level of performance in Medipoint Industries Limited

The management of Medipoint Industries Limited should ensure that it strengthens strategies aimed at improving organizational performance in all categories of staff and this should continuously be used to ensure that performance levels are satisfactory.

5.4.3 To establish a relationship between internal control and performance in Medipoint Industries Limited.

The management of Medipoint Industries Limited should appreciate the findings in the relationship between internal controls and organizational performance to ensure its continued production in a competitive industry in Uganda.

5.5 Areas for further research

The study did not exhaust all the dependent variables that influence organizational performance thus the need for other researchers to conduct an exhaustive study on variables under listed.

Leadership style and organizational performance

Organizational learning and organizational performance

Consumer behavior and organizational performance

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APPENDIX 1

R.V. KREJCIE AND D. W. MORGAN (1970) SAMPLE SIZE ESTIMATION TABLE

|N* |S† |N |S |N |S |

|There are adequate asset listings done by management | | | | | |

|Procedures in place ensure asset additions, disposal, replacement| | | | | |

|and transfers for proper accountability | | | | | |

|Capital assets purchased are approved by appropriate level of | | | | | |

|management | | | | | |

|Asset numbering is done to show location and protection of the | | | | | |

|assets. | | | | | |

|There is free access to cheque books and organization assets | | | | | |

|A person responsible for inventory management is different from | | | | | |

|the bookkeeper | | | | | |

|Stock taking is done following the procedures and in the presence | | | | | |

|of the internal auditor | | | | | |

|The petty cashier is different from the main cashier | | | | | |

|There are adequate policies to ensure effective collection and | | | | | |

|follow ups of due accounts | | | | | |

SECTION THREE: ORGANIZATION PERFORMANCE

In this section the researcher seeks to establish the level of organizational performance in Medipont Industries Limited. Please Tick the appropriate alternative

Key: Where, SA=strongly agree, A= Agree, NS= Not sure, D=Disagree, SD=strongly disagree

|Statements |SA |A |NS |SD |D |

|Cost of production has been reducing dramatically for the past two| | | | | |

|years | | | | | |

|The company is now in a better position to serve clients more | | | | | |

|efficiently and effectively | | | | | |

|Effectiveness is measured through quality services and products | | | | | |

|The company is able to build customer satisfaction through quality| | | | | |

|products and services | | | | | |

|Performance of the company results from assets finance, employee | | | | | |

|skills and processes involved in production | | | | | |

|There is evaluation and discussion of the organizational | | | | | |

|performance annually by management | | | | | |

|Stock outs increases the cost of production | | | | | |

Thank you

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