The Impact of Internal Control System

REPUBLIQUE DE CAMEROUN REPUBLIC OF CAMEROON
Paix – Travail – Patrie Peace – Work – Fatherland
MINISTERE DE L’ENSEIGNEMENT SUPERIEUR MINISTRE OF HIGHER EDUCATION
INSTITUT SUPERIEUR DE MANAGEMENT HIGH INSTITUTE OF MANAGEMENT

ET DE L’ENTREPRENARIAT AND ENTREPENEURSHIP
INTERNSHIP REPORT
THE IMPACT OF AN INTERNAL CONTROL SYSTEM
ON THE PERFORMANCE OF A BUSINESS: CASE
OF STD PHARMA
An Internship report carried out from august 5 th 2019 to September 6th 2019 in
partial fulfilment of the requirements for the award of the Bachelor’s Degree in
ACCOUNTING, AUDIT AND CONTROL
Written and presented by:
FUH CELESTINE AMABO
SPECIATY: ACCOUNTING, AUDIT AND CONTROL
Matricule:
ACADEMIC SUPERVISOR PROFESSIONAL SUPERVISOR

MR ESEGEMU AMSTRONG MR NUOBE CELESTIN
IME LECTURER MARKETTING MANAGER
ACADEMIC YEAR: 2020 - 2021

THE IMPACT OF INTERNAL CONTROL ON THE PERFORMANCE OF A
BUSINESS CASE OF STD PHARMA
CERTIFICATION
This is to certify that this report titled THE IMPACT OF AN INTERNAL

CONTROL SYSTEM ON THE PERFORMANCE OF A BUSINESS CASE OF STD
PHARMA is written and presented by FUH CELESTINE AMABO a third year
ACCOUNTING STUDENT in IME DOUALA. This is to meet the requirement and the
regulation governing the award of the BACHELOR’S DEGREE in ACCOUNTING,
AUDIT AND CONTROL at the HIGHER INSTITUTE OF MANAGEMENT AND
ENTREPRENEURSHIP.
UNDER THE SUPERVISION OF:
Academic Supervisor Professional Supervisor
MR ESEGEMU AMSTRONG MR NUOBE CELESTIN
LECTURER at IME MARKETTING MANAGER
Sign………………….. Sign……………………………..
Date…………………… Date……………………………
Written and presented by FUH CELESTINE AMABO

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DEDICATION
TO GOD AND
MY LOVELY
FAMILY

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ACKNOWLEDGEMENT
Work of this nature will not be realised without the help and support from many
beloved ones who have help me one way or the other during the course of this
research work. So I would like to express my profound gratitude first of all to GOD
ALMIGHTY for giving me wisdom, strength and inspiration throughout this
research and also to the following personalities;
 I will like to express my sincere gratitude to my academic supervisor Mr

NJUAFAC DONATUS lecturer of IME for his relevant guidance, support,
suggestions and contribution throughout this work.
 Special thanks to my professional supervisor Mr NUOBE CELESTIN for his
availability and support he gave me despite his busy schedule
 Special thanks goes to my parents Mr FUH SAMPSON NEBA and BIH
MARTHA for their spiritual, moral support and encouragement they have
been giving me and also for being my inspiration in everything I do THANKS
 Thanks to my uncle Mr VALENTINE NEBA and aunt MRS ACHA VERA
MANKA’A for their moral and financial support throughout my education
 Thanks to my siblings MACMILAN, ENSLEY, CHANCELINE, FRANKA,
MILDRED, PRECIOUS, DEUDONNE and my entire FAMILY for their
numerous support all this is for u thank you ALL
 Thanks to all my lecturers, friends, classmates and many others for their
various supports they have given me.
 Special thanks to any person who have inspired me directly or indirectly in
my research work and any other part of life to be a better person THANK you
very much
ABSTRACT
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The Treatment of invoices and stock control if a very important factor of an

enterprise as where there are no stocks there will be no sales and there are some
important element of an invoice like trade discount should always be taken in to
consideration and not ignored as it increase the sales turnover of the enterprise.
During our internship at STD PHARMA we discover some problems in related to

their purchases and sales transactions like the in availability of stock and the
improper treatment of invoices (like ignoring trade discounts and cash discounts
which prompt us to write on the topic THE IMPACT OF PROPER
TREATMENT OF PURCHASES AND SALES TRANSACTIONS ON THE
PERFORMANCE OF A BUSINESS to access the treatment of invoices and stock
control at STD PHARMA. From these observations and assessment we were able to
bring up some recommended solutions to these problems identified like the
implementation of stock control and the introduction of discount to encourage bulk
buying which will in turn increase the sales turnover of the business. This report is
partition in to four chapters: general presentation of the enterprise, evolution of
internship activities, treatment of purchases and sales transactions in STD
PHARMA and problems and recommended solutions.
RESUME
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Le traitement des factures et le contrôle des stocks, si un facteur très

important d'une entreprise, comme où il n'y a pas de stocks, il n'y aura pas de ventes
et il y a un élément important d'une facture comme l'escompte commercial doit
toujours être pris en considération et non ignoré car il augmenter le chiffre d'affaires
de l'entreprise.
Au cours de notre stage chez STD PHARMA, nous découvrons certains problèmes
liés à leurs transactions d'achat et de vente comme la disponibilité des stocks et le
traitement inapproprié des factures (comme ignorer les remises commerciales et les
remises en espèces qui nous incitent à écrire sur le sujet L'IMPACT DE LA
PROPRIÉTÉ TRAITEMENT DES ACHATS ET TRANSACTIONS
COMMERCIALES SUR LA PERFORMANCE D'UNE ENTREPRISE pour
accéder au traitement des factures et du contrôle des stocks chez STD PHARMA A
partir de ces observations et appréciations nous avons pu dégager quelques solutions
recommandées à ces problèmes identifiés comme la mise en place du contrôle des
stocks et l'introduction de remises pour favoriser les achats en vrac qui vont à leur
tour augmenter le chiffre d'affaires de l'entreprise. Ce rapport est divisé en quatre
chapitres: présentation générale de l'entreprise, évolution des activités de stage,
traitement des achats et des transactions de vente dans STD PHARMA et problèmes
et solutions recommandées
PREFACE

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The government of Cameroon wishes to train youths in all fields of vocational

training in order to build up their professional skills. It is becoming in dispensible
and even urgent for the youths to acquire a professional training. It is in the
connection ministerial Order No N008/CAB/PR which brought about the creation
of state universities and higher professional institutions, among which is IME.
For these reasons, the Higher Institute Of Management And Entrepreneurship
(IME) was created by the miniterial order No 12/0362 MINISUP in August 2012,
Institution Privee d`enseignement superieur (IPES) for further education abroad.
This institution contributes to the professional specialisation of several youths
bearing either GCE Advanced Level Certificate or Baccalaureat or any other
equivalent certificate recognised by the ministry of higher education at the level of
HND or BTS for a training of two years. It also involves professional training for
the BACHELOR Degree program or LICENCE for the French section and
MASTER program.
These different levels of training are composed of several specialized courses both
in French and English which include the following:
 Accounting
 Banking and Finance
 Human Resource Management
 Executive secretariat duties
 Transport and Logistics.
LIST OF ABBREVIATIONS
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STD PHARMA société techn&²ologique de distribution des

produits pharmaceutiques
SARL Société a la responsable limité
CD Cash discount
TD Trade discount
VAT Value added tax
IDENTIFICATION SLIP

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RAISON SOCIALE SOCIETE TECHNOLOGIQUE DE

DISTRIBUTION DES PRODUITS
PHARMACEUTIQUES
ABBREVIATION STD PHARMA
YEAR OF CREATION 2012
LOCATION CONTAINER ROUGE MAKEPE
CAPITAL 1000000
IDENTIFICATION M05120004W
NUMBER
ADDRESS BP 1381 DOUALA
E-EMAIL [email protected]
JUDICIAL FORM SARL
ACTIVITIES IMPORTATION AND SALES OF

PHARMACETICAL PRODUCTS
DIRECTOR MR TCHINDA LONSTSI SAMUEL
TABLE OF CONTENT

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Contents
CERTIFICATION...............................................................................................................................................1
DEDICATION...................................................................................................................................................2
ACKNOWLEDGEMENT....................................................................................................................................3
ABSTRACT......................................................................................................................................................4
RESUME.........................................................................................................................................................5
PREFACE.........................................................................................................................................................6
....................................................................................................................................................................... 6
LIST OF ABBREVIATIONS.................................................................................................................................7
IDENTIFICATION SLIP......................................................................................................................................8
TABLE OF CONTENT.......................................................................................................................................9
GENERAL INTRODUCTION..............................................................................................................................9
PART ONE: INTERNSHIP FRAME WORK........................................................................................................12
CHAPTER ONE: GENERAL PRESENTATION OF STD PHARMA........................................................................13
SECTION ONE: THE CREATION AND HISTORICAL EVOLUTION..................................................................14
1.1 THE CREATION OF STD PHARMA SARL...........................................................................................14
1.2 HISTORICAL EVOLUTION OF STD PHARMA.....................................................................................14
1.3 ACTIVITIES, OBJECTIVES AND MISSION..........................................................................................15
SECTION 2: ORGANISATION AND ITS BUSINESS ENVIROMENT................................................................16
2.1 LOCATION OF STD PHARMA...........................................................................................................16
2.2 THE ORGANISATION OF STD PHARMA...........................................................................................16
2.3 IT’S BUSINESS ENVIROMENT..............................................................................................................18
2.3.1 INTERNAL BUSINESS ENVIROMENT.............................................................................................19
2.3.2 EXTERNAL BUSINESS ENVIROMENT.............................................................................................20
CHAPTER TWO: THE EVOLUTION OF THE INTERNSHIP AT STD PHARMA.....................................................22
SECTION ONE: PRESENTATION AT THE ENTERPRISE................................................................................23
SECTION TWO: EVOLUTION OF INTERNSHIP ACTIVITIES..........................................................................24
2.1 Chronological Order Of Activities...................................................................................................24
2.2 Justification Of Topic......................................................................................................................26
PART TWO: PRACTICAL IMPLEMENTATION..................................................................................................27

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3.0 CHAPTER OBJECTIVE.....................................................................................................................29

SECTION ONE: THE THEORITICAL REVIEW OF ACCOUNTING AND INTERNAL CONTROL SYSTEM (ISA 400)
................................................................................................................................................................. 30
3.1 DEFINITION OF KEY TERMS.......................................................................................................30
CHAPTER 4: PROBLEMS AND RECOMMENDATIONS....................................................................................31
SECTION ONE: PROBLEMS AND WEAKENNESSES.........................................................................................32
SECTION TWO: RECOMMENDED SOLUTIONS..............................................................................................33
GENERAL CONLUSION..................................................................................................................................35
REFERENCE...................................................................................................................................................36
APPENDICES.................................................................................................................................................37
GENERAL INTRODUCTION
An accounting profession is on which enables the practitioner to present the

financial image of an enterprise. It helps to draw clear and accurate information on a
range of transaction and facilitate decision making. For this financial image to be
outstanding and different from others in the same line of business will depend firstly
on how effectively their purchases and sales transactions are being carried out and
treated. As a small size enterprise the effective treatment, timely preparation, issue
and follow up on invoices will help to boost up its sales and hence increase in
revenue. These invoices are greatly affected by the availability of stock and for this
reason there will be a need to control stocks so as to ensure its availability and
readiness for sales. There for there is the need to effectively, timely prepare and
issue invoices and also to effectively control stocks so as to ensure its availability.
By so doing it will boost up its sales revenue and hence a better financial image.

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PROBLEM STATEMENT
During my internship period at STD PHARMA I identified some problems in the

treatment of invoices like; delay in the establishment of invoices the improper
treatment of invoices like the ignore of trade discount which is a very important
aspect of customer motivation to purchase in bulk. This problem co-existed with
stock shortages and stock out due to lack of stock control. This works must be
treated and regulated with care and effectively if not it may lead to lose of customers
and apparently a fall in sales and hence fall in revenue.
RESEARCH QUESTIONS
Related to the problem, the research seeks to address the following questions
1 Do internal control systems exist at STD PHARMA LTD?
2 Are employees or staff of STD PHARMA ltd conscious of internal control

systems in the work place?
3 How effective are the internal control systems in STD PHARMA ltd?
4 What measures need to be adopted to enhance the effectiveness of internal control

systems in STD PHARMA ltd
THE OBJECTIVES OF THE STUDY
In an attempt to address the above research questions, the following objectives were
set
 To determine whether internal control exit in STD PHARMA Limited.

 To examine the consciousness of employees of STD PHARMA Limited.
 To examine the measures adopted to enhance the effectiveness of internal
Controls in credit risk management.
 To recommend appropriate policy measures that will improve the
effectiveness of internal controls in managing risk.

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METHODOLOGY
Information on this report was gathered through primary and secondary sources.
Primary sources was through observation and asking of questions to personnel and
secondary method was through past reports text books as well as internet and
existing documents in STD PHARMA.
SIGNIFICANCE STUDY
This research work will provide a basis or a conceptual framework and standard
against which companies could assess their internal control system and judge their
effectiveness. In other words, the study is to provide common language,
understanding and a practical way for companies to assess and improve their
internal control systems.
To the researcher studying on the same subject, it will provide way of delving into
what this research could not cover considering its limitations
STRUCTURE OF WORK
This report is divided into two parts each part is divided into two chapters and a
chapter having two sections.
Part one talks about the internship framework: chapter one; general presentation
of STD PHARMA and chapter two; evolution of internship
Part two have to do with Practical implementation where chapter three talks of the
treatment of purchases and sales transactions and chapter four the analysis and
recommendations.

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PART ONE: INTERNSHIP

FRAME WORK

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CHAPTER ONE: GENERAL

PRESENTATION OF STD PHARMA
This chapter will be divided in to two sections:

SECTION 1: creation of the company and background
SECTION 2: organization and its business environment

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SECTION ONE: THE CREATION AND HISTORICAL

EVOLUTION
3.4.2.1 1.1 THE CREATION OF STD PHARMA SARL
STD PHARMA SARL (Société technologique des distribution de produits
pharmaceutiques) is a company whose main activity is the importation and sales of
pharmaceutical products. It was created in 2012 and approved on the 21 janauary
2013 by the ministry department N°: 0118/MINSATE/SSPS/SG/SDP/SPH of the
MINISTRY OF HEALTH. It’s a limited liability company (SARL) with its
activities base in DOUALA.
3.4.2.2 1.2 HISTORICAL EVOLUTION OF STD PHARMA

Trading company was born in 2012 on behalf of FT medico in order to ease the
distribution of pharmaceutical products imported from abroad. However the success
of the company depends on the relationship with its partners (suppliers, customers,
employees). Given that this is a commercial enterprise; the number of employees,
customers and suppliers is growing day by day. To illustrate the creation of the
company had 5 employees and to today's 15 directly and indirectly employed.
However we cannot talk about its evolution without mentioning its activities,
objectives and mission
3.4.2.3 1.3 ACTIVITIES, OBJECTIVES AND MISSION

1) THE ACTIVITIES
STD pharma is mainly on activities: import: which is the purchase of a product
to a foreign country; export: is the sale of a product to a country foreign;
distribution: it is available to the composition of a product for those who feel
they need within the country which is where most of its products are sold.
2) THE OBJECTIVES

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The company's objective on the one hand is to always maximize profit despite the
economic situation which is unfavourable. And on the other to survive; that is not to
go bankrupt
3) THE MISSION
The greatest ambition of STD PHARMA is to become an industrial company

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SECTION 2: ORGANISATION AND ITS BUSINESS

ENVIROMENT
3.4.2.4 2.1 LOCATION OF STD PHARMA
STD PHARMA SARL is located in the littoral region of Cameroon
specifically in MAKEPE (containuer rouge makepe)
In order to avoid leakage of information or cause a disorder within the

company, It is therefore obliged to assign each body a definite function. The reason
why STD pharma established its organizational structure is to properly carry out its
activity and achieve its objectives fully, each company must be well organized and
structured.
3.4.2.5 2.2 THE ORGANISATION OF STD PHARMA

The organizational structure explain how decision, power task are being delegated to
subordinates. That is it shows a system of allocation of tasks and responsibilities.
Thus a structure is not static taking into account these realities and objectives, it
must be adaptable to change that could intervene in the business environment. A
company is well performed when it has a good structure. However it is necessary to
present the organizational structure of the STD pharma on the one hand and on the
other hand the responsibilities of each function.it is structured as follows
a) THE DIRECTOR
The DIRECTOR shall be responsible for the planning, organization,

coordination, control and the implementation of all the activities of the
activities.it is responsible to be the guarantor of the company in any place to
work in compliance with all legal, civic, tax and administrative requirements he

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describes, apply and enforce pharmaceutical regulatory procedures; he also

validate the budget.
b) THE PHARMACIST
IT is responsible for managing the Department of supply and distribution.

Including:-he is responsible for the supply and distribution of pharmaceutical
products - it ensures the management of stocks and deliveries
-It controls the inputs and outputs of the drugs and supervises the holding of
records and records of stocks
c) CHIEF OF ADMINISTRATIVE AND FINANCIAL

DEPARTMENT
it is responsible for the administrative, financial and accounting of STD pharma

management. As such, the chief administrative and financial director must:-
Have the company legal protection – have the Human Resource process -
ensures the financing of permanent and necessary activities of the company
d) THE ACCOUNTANT
-It is the responsible for the recording of the financial transactions
-organisation and control of the accounting and financial management
-propose payment method - -

For the participation in the calculation and the determination of the cost of
products.
e) THE STORE KEEPER

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It is the head of supply and distribution Department, the Chief storekeeper is

responsible for the Department store
-Is responsible for the management of contents, inventory, packaging, and the good
performance of the store
-state and propose the quantity of goods to be purchase
- Do the stock taking and establish the delivery note
f) THE CLERK OR SECRETARIAT
He is responsible for the reception of customers and visitors, he takes minutes

during meetings, he prepares the source documents on daily bases and work as the
director’s personal assistant.
2.3 IT’S BUSINESS ENVIROMENT

The environment plays a greater role in decision making process of the organization
because no company operate in vacuum, their activities in the business environment,
will influence them in one way or the other. The environmental factors considered
here are the internal business factors and external business factors. Any company
that fails to understand its changing business environment is likely to face a lot of
problems and may go out of business in the future. These factors will be classified in
to two internal and external business environments.

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3.4.2.6 2.3.1 INTERNAL BUSINESS ENVIROMENT

These are factors within the organization which needs to be efficiently managed and
utilized to boost production. These factors include;
a) Organisational resources
Resources are the financial and material resources, and human resources all
available to a company for the performance of its activities. The resources of
STD PHARMA include
 Financial resources;
It's all the means allowing the operation of the activities of the company.
These resources come from pharmaceutical sales.
 Human resources
STD PHARMA has competent staff of at least a BTS of certificate and
a good and efficient management body
 Material resources
It has computing devices such as: 08 computers, 01 scanner, Fixed and
mobile phones for communication and 03 buses to provide
transportation for the delivery of products.
b) Organisational objectives
The objectives set by STD PHARMA will affect the decision of the company
directly and her activities. The company’s objective might not be to maximize
profit but increase her market share. Therefore, to achieve this they need to
adopt a marketing decision to obtain her goal.
c) Organizational stakeholders

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Stakeholders are all those affected by the company directly or indirectly. This
may include workers, Shareholders, customers, suppliers, competitors and
intermediaries.
d) Organisational structure
The cultures of a company are the fundamental believes and values, customs
and attitude which the institution assume at its creation. This culture will
influence the way the organization is structured.
2.3.2 EXTERNAL BUSINESS ENVIROMENT

These are the forces of the company that affects decision making directly and
indirectly. It is divided into macro and micro factors. These include
a) customers
These are those who buy the products of the company and their choices
and perception will affect the business decision making of the company
and its activities since customer’s taste and fashion can change overtime.
The customers are the main factors that will make the company to stay in
business as they are the ones that buy and supply the company with funds
to finance its activities and hence must be treated and care so as to satisfy
its needs.
b) Suppliers
They consist of all persons who supply the company with resources if
needed for the good functioning of the company. We have among others:
CAMTEL which provides the network to be use on the fixed phones to
have the internet connection, ENEO provides electric power that electrify
devices of the company, ECOBANK is our banking partner. With regard

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to pharmaceuticals providers we have: international suppliers: FOURRTS,

SHIJIAZHUANG Co LTD and national suppliers: K PHARMA, SPD
Participation, Poly pharma.
c) competitors
These are those that supply similar products in the market. This
competition is manifested by the presence of competitors on the market of
suppliers whose goods are replaceable with those of the STD pharma. The
competition is really real because it is ' has at least 50 companies enrolled
in the PBF which are in the distribution of pharmaceutical products.

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CHAPTER TWO: THE EVOLUTION

OF THE INTERNSHIP AT STD
PHARMA
In this chapter, we are going to see the evolution of the internship and its
various activities in STD PHARMA from the first day to the last day. Section
one will be on how we were receive at company and section two will
elaborate on the different activities that we carried out.

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SECTION ONE: PRESENTATION AT THE ENTERPRISE

On the first day at STD PHARMA we were receive by the secretary, she told us to
sit and wait for the Marketing Manager who was in charge of interns. We waited
until the marketing manager came he ushered us into his office we introduced our
self and our various field of studies. We were taken to the conference room and
introduced us to every staff member of the company and when the director came we
were taken to his office by the marketing manager and introduced us to him, and
then he welcome us and gave us educative talks and words of encouragement. We
started work on the same date but we were being trained on how to market their
products of enterprise when we go for prospection, every one of us was assigned to
a number of prospections potential customers to go for prospection and lastly we
were the time work starts and close and the time given for break and where to eat
when necessary.

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SECTION TWO: EVOLUTION OF INTERNSHIP

ACTIVITIES
Here we are going to talk on the various activities carried out from the first
week to the last week in a chronological order and also to justify the reason why we
decided to choose this theme we are writing on.
3.4.2.7 2.1 Chronological Order Of Activities

During the first week at STD PHARMA we were receive by the secretary, she
told us to sit and wait for the Marketing Manager who was in charge of interns. We
waited until the marketing manager came he ushered us into his office, we
introduced our self and our various field of studies. We were taken to the conference
room and introduced us to every staff member of the company and when the director
came we were taken to his office by the marketing manager and introduced us to
him, during the week we were getting familiar with everyone and their activities, we
were also thought on how to market the products of the firm and was assigned to
some hospitals after haven told us on their various activities and their range of
products. We upload products for delivery into the truck for delivery and carried
some to the warehouse, we observed on how invoices are being treated and their
various methods of stock taking and how the books of the previous months were
being balanced and closed.
During the second week we still had training on the marketing of products,
observed and assisted in stock entry and exit recordings and how invoices were
established using software and compare to what we were thought in school. We
were thought on how to prepare cash receipts and records them in the cash book and
within the week we assisted in the preparation of the previous week statement of

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sales which involve grouping all the invoices of the previous week for follow up of
payments.
During the third week we were told to prepare invoices by the accountant,
prepare and input stock cards in to the machine using Microsoft excel on daily basis
and also prepare the weekly sales Statement of the week that just ended. Offloading
and packing of products in cartons in to the warehouse and uploading them in to the
truck to be delivered to customers, during this week we went for our first market
prospection with the marketing manager at l’hopital de akwa nord.
At the fourth week we still assigned the daily preparation of invoices and
various stock cards, input them into the machine, prepared the weekly statement of
sales and prepare cash receipts for disbarment of cash and entry of cash. We also
went for market prospection at Mboppi Baptist hospital. There was a severe
shortage of stock and later on stock out which led to a great fall or reduction in the
sales and unsatisfied customers were angry.
During last week we were told to balance the cash book and prepare the
Month’s Statement of Sales as it was the end of month. We would crosscheck every
cash receipt of the month with the various entries in the cash book to see if there
were any errors and correct them when we see any and the Statement of sales was a
lot more easier as it was done on weekly basis and it was just to incorporate all the
weeks statements and also stock variation to see if the stock card shows actually the
available stock in the warehouse simultaneously while balancing the books we also
prepare the daily invoices and stock card. We notice stock shortages and stock out
and an Order was place to the producers in japan.

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3.4.2.8 2.2 Justification Of Topic

During our stay and study at STD PHARMA it makes us to understand that the
proper treatment and evaluation of stocks and invoices and the timely preparation of
invoices (which makes up the daily transactions of purchases and sales) is a very
important aspect of the enterprise. It prevents stock shortages, stock out and the
timely preparation and follow up of invoices ensures customer satisfaction and
prevent the firm from being insolvent from too many accumulated debts.
From the invoices and stock cards of the enterprise we realized that the enterprise
had problems of stock control and treatment of invoices which made us to write on
the topic THE IMPACT OF PROPER TREATMENT OF PURCHASES AND
SALES TRANSACTIONIN THE PERFORMANCE A BUSINESS to identify the
errors and problems made In the original format and ameliorate them and bring out
possible solutions to enable the growth of this young enterprise.

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PART TWO: PRACTICAL

IMPLEMENTATION
This part is made up of two chapters: chapter three and chapter four. Chapter 3
brings out the context and objective (theoretical and practical) of the treatment of
purchases and sales transaction, in chapter 4 we will critically analyse the problems
and give the various recommendations.

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CHAPTER THREE
ACCOUNTING AND INTERNAL CONTROL SYSTEM
This chapter is divided into two sections; section one will give the theoretical
review of accounting and internal control system while section two is going to an
example of internal control system over sales, debtors and stocks

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3.0 CHAPTER OBJECTIVE

The objective of this chapter is to emphasis on the following
 Definition of basic terms like accounting system, internal control, control

environment etc
 Introduction to internal control system and accounting system
 Differences between internal control system and accounting system
 Types of internal control
 Components of internal control system
 Risk assessment
 Control environment
 Control procedures
 Advantages of internal control system to the company and auditor
 Limitations in application of internal control
 Tools used to assess the strength or otherwise of the internal control system
 Internal audit
 Practical example of internal control system over sales, debtors and stocks

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SECTION ONE: THE THEORITICAL REVIEW OF

ACCOUNTING AND INTERNAL CONTROL SYSTEM
(ISA 400)
3.1 DEFINITION OF KEY TERMS
a. Accounting system: it refers to the systems and procedures that management
has put in place to ensure that the company maintains proper books of
account.
b. Internal control:
c. Internal control system: Internal control systems consist of all the policies
and procedures adopted by management of an entity to assist in achieving
management’s objectives.
d. Internal audit: this is a control function set up by management to review
accounting and internal control system.
e. Control environment: this refers to the overall attitude, awareness and
actions of directors and management regarding the internal control system
and its importance in the entity.
3.4.2.2 INTRODUCTION
One of the basic instruments of enterprise control, whose implementation in
modern economic conditions provide conditions for achieving a competitive
advantage over other enterprises is the creation of an effective internal control
system. In the industry sector, the market is constantly changing, and this requires
changing the attitude to internal control from treating it only in the financial aspect
to the management of the control process. Internal control as such becomes an
instrument and means of risk control, which helps the enterprise to achieve its goals
and to perform its tasks. Only an effective internal control in the enterprise is able to
help objectively assessing the potential development and tendencies of enterprise
performance and thus to detect and eliminate the threats and risks in due time as
well as to maintain a particular fixed level of risk and to provide for its reasonable
security.

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Internal control is the process where management compares actual activity with pre-
established plans to see if all the necessary principle and procedures are respected.
Therefore this chapter covers the internal control system and internal audit.
When carrying out audit, the auditor first needs to carry out an evaluation of the
internal control system and evaluate its operating effectiveness and its efficiency.
This will help the auditor to ascertain the degree of reliance he or she needs to place
on the control. Therefore internal control is the first step towards auditing. Internal
control is covered and regulated by the International Standard of Auditing (ISA)
315 on understanding the entity and its environment and assessing the risk of
material misstatement.
Internal audit is normally the set up by the management to help in the risk
assessment process and to ensure the company adheres to good corporate
governance. This function can either be out in-house whereby the employees of the
company employed as the internal auditor or it can be outsource. Internal auditing is
covered by the International Standard of Auditing (ISA) 610 on considering the
work of internal auditing.
3.4.2.3 CONCEPT OF ACCOUNTING SYSTEM
ISA 400 defines accounting system as the series of task and procedures by which
transactions are process as a means of maintaining proper financial records. The
accounting system identifies, assembles, analyses, defines, records and summaries
transactions of an entity. Management requires complete and accurate accounting
and other records to assist in executing their responsibility. The objectives of
accounting system include;
 Safeguarding the company’s assets and preventing fraud and errors

 Selecting suitable accounting policies and applying them consistently
 Ensuring that the company keeps proper accounting records as per the
companies Act

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 Delivering to the government agency, court or stock exchange a copy of the

company’s audited financial statement within the specified period after year
end
 Stating whether applicable accounting standards have been followed subject
to any material departure disclosed and explained in the financial statement
 Prepare financial statement on the going concern basis
 Setting up an internal control system enabling all the above responsibility to
be carried out as required
3.4.2.4 CONCEPT OF INTERNAL CONTROL

SYSTEM
ISA 400 defines internal control system as the policies and procedures adopted by
management in achieving objectives as far as practicable. In every enterprise, the
management design controls to assist in the achievement of company’s objectives.
Objective of internal control system
 Orderly and efficiently conduct business

 Adherence to management policies
 Safeguarding of company’s assets
 Preventing and detection of fraud and error
 Accuracy and completeness of accounting records
 Timely preparation of reliable financial information
3.4.2.5 TYPES OF INTERNAL CONTROL
a) Detective control
Detective internal controls are those controls that are used after the fact of a
discretionary event. Think of Sherlock Holmes, walking onto the scene of an event,
trying to piece together what happened.
 What caused the event to occur?
 What process failed that allowed the event to occur?

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 Is there a policy that can be implemented to keep the event from happening
again in the future?
Some examples of detective controls are internal audits, reviews, reconciliations,
financial reporting, financial statements, and physical inventories.
b) Preventive control
Preventative internal controls are those controls put in place to avert a negative
event from occurring. For example, most applications have checks and balances
built-in to avoid or minimize entering incorrect information. There are also physical
controls or administrative preventive controls, such as segregation of duties that are
routinely performed by companies.
Assigning one person to write checks, and another staff member to authorize the
payments, are segregation of duties that fall under the umbrella of preventative
controls from an administrative standpoint. Others, like video surveillance or
posting security guards at entry points verifying ID credentials and restricting
access, are illustrative of physical safeguards.
Training programs, drug testing, firewalls, computer and server backups are all
types of preventative internal controls that avoid asset loss and undesirable events
from occurring.
c) Corrective control
Corrective internal controls are typically those controls put in place after the internal
controls discover a problem. These controls could include disciplinary action,
reports filed, software patches or modifications, and new policies prohibiting
practices such as employee tailgating. They are usually put into place after
discovering the reasons why they occurred in the first place.
3.4.2.6 COMPONENTS OF ACCOUNTING AND INTERNAL

CONTROL SYSTEM
There are three main components:
 Risk assessment

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 Control environment
 Control procedures
3.4.2.7 Risk Assessment

Audit risk means the risk that the auditor may give an inappropriate audit opinion
that is the auditor may report that the financial statement show a true and fair view
while in reality they are material misstatement.
Types of audit risk
a) Inherent risk
This is the risk that the account balances of transactions could be materially
misstated assuming that there were no internal control system. Inherent risk
could increase a result of an adverse attitude of managers on the internal
control system that is if they view internal control system as unimportant.
b) Control risk
This is the risk that material misstatement could occur in an account balance
or clan of transactions which will not be prevented or detected in a timely
manner by the entity’s accounting and internal control system.
c) Detection risk
This is the risk that the auditors test of balance and transactions will not detect
a material misstatement that exist in an account balance or class of
transactions. This implies that detection risk is the only component of audit
risk under auditor’s control.
Risk based audit

This audit uses a model called audit risk mode. If inherent risk and control
risk are assessed to be high, then to remain within an acceptable audit risk, the
level of acceptable detection risk must be low meaning that the level of test of
balances and transactions must be relatively high. If inherent and control risk
assessed to be low, then the level of acceptable detection risk may be higher
leading to relatively lower level of test of balances and transaction. Therefore

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the assessment of inherent and control risk is an essential part in deciding the
overall approach to an audit.
3.4.2.8 Control Environment

ISA 400 refers as being the overall attitude, awareness and actions of directors and
management regarding the internal control system and its importance to the entity.
The control environment has an effect on the effect on the effectiveness of the
specific control procedures. A strong environment that is one with tight budgetary
control and an effective internal audit function can significantly complement
specific control procedures. Thus the control environment sets the tone of the entity
by influencing the control consciousness of people. It may be viewed as the
foundation of the other component of internal control.
Factors influencing the control environment
 The functions of the board of directors or the audit committee. The control
environment is significantly influence by the effectiveness of the board of
directors or the audit committee, this effectiveness is determined by the extent
of its independence from management, experience and status of members.
 Management philosophy, style and ease with which managers could override
controls. Management philosophy refers to whether management likes taking
risk in business or has conservative approach. If they like taking risk there are
most likely to be making loss and will want to hide them but if they don’t like
taking risk there will be no business and hence low profit which may lead to
falsification of financial statements.
 The implementation of organizational structure and methods of assigning
authority and responsibility. This determines how well employees understand
the limits placed upon their powers and responsibility. The objective is to
separate responsibility of authorizing a transaction, keeping records for the
transaction and custody of asset acquired from the transaction.
3.4.2.9 Control procedures and activities

These are policies and procedures in addition to the control environment, which the
management has established to achieve the entity’s objective. The mix of types of

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control implemented by management will depend on the control objective and the
size of the entity.
a) Organizational plan chart
Companies should have proper organizational plans. An organized plans show

clearly the various departments within the company, their functions and persons
charged with ensuring that such functions are fulfilled. They seek to ensure that the
company is properly departmentalized preventing duplication of duties across
departments and boosting accountability within the entity. Delegation and limits
should be well and clearly defined.
b) Segregation of duties
This refers to separation of various duties and responsibilities such that one person
cannot process and records a complete transaction from beginning to end without
being checked by another person
c) Physical control
These are security measures concerned with the custody of the company’s assets by
limiting access to authorized persons only. Direct physical control include keeping
asset under lock and key, employment of security guards, building fences and use
of closed circuit cameras. Indirect physical control includes use of a fixed asset
movement registers and use of computers to record utilization of company vehicle.
d) Authorization and Approval
Transaction that commits the organization’s resources should be subjected to

authorization and approval by a responsible official. The limit for authorization
should also be specified.
e) Arithmetic and Accounting control
These are controls within the accounting function which check that transactions are
authorized and accurately recorded. These ar e aimed at ensuring completeness and
accuracy of the accounting records. The key features are;

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 Use of pre-numbered documents in processing transactions

 Issuing of document in sequence when processing transactions
 Monitoring movement of documents by use of a register in which all the
people in possession of specific document have signed that they are in
possession of those documents
 Production of exception report e.g where a local purchase order has been
raised and the order has not been fulfilled by the supplier
 Reconciliation of different accounts and the related control accounts e.g bank
reconciliation statement. Reconciliation would only be effective if prepared
by independent persons and non-reconciling items resolve in a timely manner.
f) Personnel
The proper functioning of any system is dependent on the competence and integrity
of those operating it. The company must therefore recruit competent staff with
integrity and intelligence. Staff should be assigned responsibilities that match their
capability and undergo training where necessary.
g) Supervision
Transaction and their recording should be subjected to supervision by competent

and responsible officials. Supervision is necessary because it gives chance of
correcting errors and also because lower level employees generally tend to be
indiscipline if not closely supervised.
h) Management control
These are control exercised by management in addition to daily routines of the

system. They include comparison of actual performance with budgets review of
management account e.g budgets and internal audit function.
i) Rotation of duties
Duties should be rotated between personnel at the same organizational level e.g
payroll staff and credit control staff. Staff should be encouraged to take annual leave
to provide an opportunity for their work to be checked by an independent person.
j) Routine and automatic checks

Page 38

Page 39
CHAPTER 4: PROBLEMS AND

RECOMMENDATIONS
This chapter is divided in to two sections; section one problems and weaknesses and
section two will be recommended solutions

Page 40
SECTION ONE: PROBLEMS AND

WEAKENNESSES
STD PHARMA just like any other company is not perfect and therefore makes
some mistake in its day to day activities or management which may affect his
business directly or indirectly. Some of these problems include:
 STOCK SHORTAGES
At the time of internship there were problems of stock shortages as the goods
available were unable to satisfy the demands of customers
 STOCK OUT
From the stock shortages over time some type of products were not more available
again as the have all been sold and customers demand were unsatisfied. This was
due to lack of stock controls like the use of minimum stock, this can greatly affect
the business as customers can look for different and reliable suppliers.
 LACK OF STOCK CONTROL
The stock shortages and stock out came as a result of lack of stock controls by the
use of stock levels like the minimum stock level, reorder stock level as well as
security stock
 INADEQUATE TRAINED PERSONELL
We realised that there was a poor stock valuation and control as the storekeeper was
not a professional but uses his personal initiative to do his duties. He was unable to
estimate and calculate stock levels, when to place and order and sometimes exit
stocks without recording them in the stock card and this usually cause the physical
stock not to be equal to the final stock in the stock card.

Page 41
 INADEQUATE, EFFECTIVE AND EFFICIENT TREATMENT OF

INVOICES
As seen in the practical application above there ignore discount which is an

important factor of the business as it encourage customers to buy in bulk and to pay
promptly and also invoices were not timely prepared and sent to the customers to
ensure their timely payment when due “ late issue may influence late payments”.
 WEAKNESS
From personal analysis during the weekly preparation of weekly sales statements I
observed that there was a single customer who at the end of the month will have a
greater proportion of the turnover estimated to have ranged from 20% and above. It
act as a weakness to the enterprise as there is dependency on the customer and if this
type of customer is lost the turnover of the company will greatly fall.
 CASH INBALANCES
At the end of each month the cash book hardly balance with the physical cash and
there was the need to trace this errors and amend them. This work was very hectic
and time consuming meanwhile there was and accounting software available which
could be used to record these transactions in the cash book.
 NEGLIIGENCE ON INTERNS
The enterprise does not devotes task or even give attention to interns, as interns of
the enterprise we were hardly given task to perform or even give us the chance to
express our ideas . During our time there with did little transactions this is a limiting
factor to the enterprise as they have human resources but cannot explore them, as
intern we are still learning but we can still contribute ideas and know things that can
contribute to the growth of the enterprise.

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SECTION TWO: RECOMMENDED SOLUTIONS

 IMPLEMENTATION OF STOCK LEVELS
With regards to the problem of stock shortages, stock out and lack of stock control
we will like to recommend that the enterprise should implement stock control by the
use of stock levels like minimum stock, security stock and reorder stock level this
will help the enterprise to know when to place and order and also ensure the
availability of stock at all times.
 TREATMENT OF INVOICES
We believe it will be more beneficial to the enterprise if it grants a trade discount to

a certain level of quantity bought by a customer. This will act as a motivational
factor to the customers to buy goods in bulk and a cash discount should be granted
to those customers who hardly pay in time so as to encourage their prompt
payments. And all invoices should be prepared and sent alongside goods during
their delivery.
 INADEQUATE TRAINED PERSONNEL
The storekeeper should be trained on the procedure and methods of stock valuation
and how to calculate and maintain and stocks levels in the enterprise.
 HIGH PROPORTION CUSTOMER TURNOVER
With regard to this customer who is a vital asset to the enterprise should be treated
with high preference by granting his trade discount so as to ensure his high
satisfaction and fidelity. Also the company should do more marketing to gain more
customers and reduce the proportion of sales of this customer on the total turnover.

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 CASH IN INBALANCES
The staff responsible should be trained on how to use the accounting software
available, this will help to reduce the too much workload from the manual
recordings and in trying to trace the errors and balance the cash book but instead
whenever and account balance is needed the will just consult and interrogate the
account concern in the SAGE program.
 The method of exiting stock in use is the weighted average cost method since
this enterprise deals with pharmaceutical products which have a short
lifespan, the expiry date is not too long and the most suitable method to be
use is the FIFO method this will help avoid goods no to expire in the
warehouse. And also stocks to be sold should be recorded in the stock card
before their exit.
 NEGLIGENCE ON EMPLOYEES
Here we will recommend that the enterprise should devote tax to any person as
interns and also give them opportunity to express their ideas who knows it might
contribute little or greatly to the growth of the enterprise.

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GENERAL CONLUSION
Invoices and stock is a fundamental aspect for all economic establishments.

Therefore there is a need for their proper treatment and control for the profit of the
company depends on their effective treatment and availability.
During our stay at STD PHARMA as interns we experience and learned a lot of
things as well also we noticed some problems. Our objective was to evaluate the
treatment of invoices and assess the treatment of stocks and bring out some
recommendations that will help the enterprise boost its activities relating to the
problems identified
During my internship I learned a lot as I had the chance to see and encounter with
the practical activities and gained professional knowledge on how actual activities
are being carried out. From this I can say the objective of the internship was
achieved as I got the chance to compare and merge theoretical knowledge with the
professional world.

Page 45
REFERENCE
 NGITIR JONAS, (2015) ADVANCE ACCOUNTING IN PRACTICE

Revised edition
 BATEY PAUL & MOSE NANJE, (2014) OHADA Accounting System,
updated edition, destiny print Bamenda
 www.google.com
APPENDICES
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ORGANIGRAM
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APPENDIX TWO ; FORMAT OF AN INVOICE

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REPUBLIQUE DE CAMEROUN REPUBLIC OF CAMEROON

Paix – Travail – Patrie Peace – Work – Fatherland

MINISTERE DE L’ENSEIGNEMENT SUPERIEUR MINISTRE OF HIGHER EDUCATION

INSTITUT SUPERIEUR DE MANAGEMENT HIGH INSTITUTE OF MANAGEMENT

Written and presented by:

FUH CELESTINE AMABO

SPECIATY: ACCOUNTING, AUDIT AND CONTROL

ACADEMIC SUPERVISOR PROFESSIONAL SUPERVISOR

ACADEMIC YEAR: 2020 - 2021

This is to certify that this report titled THE IMPACT OF AN INTERNAL

UNDER THE SUPERVISION OF:

Academic Supervisor Professional Supervisor

MR ESEGEMU AMSTRONG MR NUOBE CELESTIN

LECTURER at IME MARKETTING MANAGER

Written and presented by FUH CELESTINE AMABO

Written and presented by FUH CELESTINE AMABO

 I will like to express my sincere gratitude to my academic supervisor Mr

The Treatment of invoices and stock control if a very important factor of an

During our internship at STD PHARMA we discover some problems in related to

Le traitement des factures et le contrôle des stocks, si un facteur très

Written and presented by FUH CELESTINE AMABO

The government of Cameroon wishes to train youths in all fields of vocational

STD PHARMA société techn&²ologique de distribution des

Written and presented by FUH CELESTINE AMABO

RAISON SOCIALE SOCIETE TECHNOLOGIQUE DE

ACTIVITIES IMPORTATION AND SALES OF

Written and presented by FUH CELESTINE AMABO

Written and presented by FUH CELESTINE AMABO

3.0 CHAPTER OBJECTIVE.....................................................................................................................29

An accounting profession is on which enables the practitioner to present the

Written and presented by FUH CELESTINE AMABO

During my internship period at STD PHARMA I identified some problems in the

1 Do internal control systems exist at STD PHARMA LTD?

2 Are employees or staff of STD PHARMA ltd conscious of internal control

4 What measures need to be adopted to enhance the effectiveness of internal control

THE OBJECTIVES OF THE STUDY

 To determine whether internal control exit in STD PHARMA Limited.

Written and presented by FUH CELESTINE AMABO

Written and presented by FUH CELESTINE AMABO

PART ONE: INTERNSHIP

Written and presented by FUH CELESTINE AMABO

CHAPTER ONE: GENERAL

This chapter will be divided in to two sections:

Written and presented by FUH CELESTINE AMABO

SECTION ONE: THE CREATION AND HISTORICAL

3.4.2.2 1.2 HISTORICAL EVOLUTION OF STD PHARMA

3.4.2.3 1.3 ACTIVITIES, OBJECTIVES AND MISSION

Written and presented by FUH CELESTINE AMABO

Written and presented by FUH CELESTINE AMABO

SECTION 2: ORGANISATION AND ITS BUSINESS

In order to avoid leakage of information or cause a disorder within the

3.4.2.5 2.2 THE ORGANISATION OF STD PHARMA

The DIRECTOR shall be responsible for the planning, organization,

Written and presented by FUH CELESTINE AMABO

describes, apply and enforce pharmaceutical regulatory procedures; he also

IT is responsible for managing the Department of supply and distribution.

c) CHIEF OF ADMINISTRATIVE AND FINANCIAL

it is responsible for the administrative, financial and accounting of STD pharma

-It is the responsible for the recording of the financial transactions