International Journal of Civil Engineering and Technology (IJCIET)
Volume 10, Issue 03, March 2019, pp. 1078–1096, Article ID: IJCIET_10_03_105
Available online at http://www.iaeme.com/ijmet/issues.asp?JType=IJCIET&VType=10&IType=3
ISSN Print: 0976-6308 and ISSN Online: 0976-6316
© IAEME Publication
Scopus Indexed
IMPACTS OF INTERNAL CONTROL ON FINANCIAL
PERFORMANCE ON NIGERIAN AIRLINE INDUSTRY
(A CASE STUDY OF AIRLINE IN ILORIN, KWARA
STATE)
Festus Femi ASAMU
Department of Sociology, Landmark University,
Omu-Aran, Kwara State, Nigeria:
Adegbola Olubukola OTEKUNRIN
Department of Accounting and Finance, Landmark University,
Omu-Aran, Kwara State, Nigeria:
Adebanjo Joseph FALAYE
Department of Accounting and Finance, Landmark University,
Omu-Aran, Kwara State, Nigeria:
ABSTRACT
The research work examined the impacts of internal control on financial
performance in Nigeria airline industry. Airline was chosen due to the important role
they play in increasing the level of fiscal activity. The aim and target of his research is
to resolve whether internal control and its machineries has effect on the financial
performance of Nigerian Airline Industry in checking fraud and fraudulent activities in
the industry. The project was carried out by reviewing relevant journals, textbooks and
literature on the topic. Questionnaires were used to elicit information. A total of 50
copies were distributed to individuals at the airports visited. The data gathered were
analyzed using SPSS (Statistical Package for Sciences) to generate frequency
percentages and also run the chi-square tests. The results of the empirical findings
showed that internal control and its machineries has significant impacts on financial
performance in airline industry. It is recommend that internal control should be
undertaken with effective continuous monitoring of the controls and airline should be
stricter with compliance to control procedure.
Key words: Enterprise, Risk, Profitability, Leverage, Solvency.
Cite this Article: Festus Femi ASAMU, Adegbola Olubukola OTEKUNRIN,
Adebanjo Joseph FALAYE, Impacts of Internal Control on Financial Performance on
Nigerian Airline Industry (A Case Study of Airline in Ilorin, Kwara State),
International Journal of Civil Engineering and Technology 10(3), 2019, pp. 1078–
1096.
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Impacts of Internal Control on Financial Performance on Nigerian Airline Industry (A Case Study
of Airline in Ilorin, Kwara State)
1. INTRODUCTION
The aviation sector in any country plays a crucial role in increasing the level of commercial
activity. As intermediaries to both providers and customers, airlines are effectively situated in
a place that determines the pulse of the economy. The failure of airlines to adequately fulfill its
role arises from the several risks that they are exposed to; many of which are not properly
managed. One of such risks which is increasingly becoming a source of worry is, the airline
risk associated with fraud. Fraud is one of the biggest single causes of airline failure and distress
in the Nigerian aviation system. According to [1] “internal control is broadly defined as a
process, effected by an entity’s board of directors, management, and other personnel, designed
to provide reasonable assurance regarding the achievement of objectives.” Over the past
decade, organizations have invested heavily in improving the quality of their internal control
systems. They have made the investment for a number of reasons, notably: good internal control
is good business. It helps organizations ensure that operating, financial and compliance
objectives are met, and many organizations are required to report on the quality of internal
control over financial reporting, compelling them to develop specific support for their
certifications and assertions [1].
2. DEVELOPMENT OF HYPOTHESIS
The problem being stated here is the problem of fraud management in airlines i.e. how fraud
can be managed so it doesn’t result to a serious breakdown of airlines [2]. And also how fraud
should be discovered and handled by internal control system to produce positive results for
airlines. Incompetent and unproductive internal control system results in fraud transactions. The
control purpose and control plans put together by organizations should be a blend of three
control plans to make it efficient. This means it must be detective, preventive and corrective.
The effects of fraud on airlines are detrimental to its survival, stability and growth. This study
intends therefore to find out how internal control system and its components (monitoring,
control activities, risk assessment, information system and control environment) can effectively
lessen and control frauds in airlines. This section also, we shall examine the problem which is
present in the Nigerian situation which form the basis for the research work under consideration.
These problems include Wrong doings in operations, how fraud can be managed so it doesn’t
result to a serious cessation of airline industries. Also how fraud should be discovered and
handled by internal control system to produce positive results for airlines. Internal auditing have
found to follow otherwise rather than the spirit of the lawful requirement for various reasons
which revolve around maintaining an affable relationship with the director whom as we have
noted, auditors are specifically appointed to check. Examiners (auditors) sometimes have to
change their opinion if negative to assume that they holds their appointment as auditors,
whereas if perspective not changed constitute a problem. This state of affairs apart from its
allegations to the profession will mean that the company’s financial position could worsen as
there would be no pressure from uniformed shareholders and the public to apply corrective
measures.
2.1. Research Questions

Does internal control system have the support of the executive and audit committee?

How effective is the internal control in Nigerian Airline Industry?

What is the impact of internal control and audit committee on the financial performance of
Airline industry?
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Festus Femi ASAMU, Adegbola Olubukola OTEKUNRIN, Adebanjo Joseph FALAYE
2.2. Objectives of the Study
The aim and target of this research is to resolve whether internal control and its machineries
has effect on the performance of Nigerian Airline Industry in checking fraud and fraudulent
activities in the industry.
(1)
To investigate whether there exist persistent fraud and fraudulent activities despite the
existence of functioning internal control system in Airline sector.
(2)
To examine the structure of internal control in Airline industry.
(3)
To examine the effects of audit committee on internal control of the organization.
2.3. Hypothesis of the Study
In other to have achieved the objectives of this paper and have precise answer to the questions
presented in this paper the following answers are suggested.
2.3.1. Hypothesis One
H0: Internal control does not have the support of the executive committee and the audit
committee.
H1: Internal control has the support of the executive committee and the audit committee.
2.3.2. Hypothesis Two
H0:
Internal control is not that effective in Airline industry compare to other industry.
H1:
Internal control is very effective in Airline industry compare to other industry.
2.3.3. Hypothesis Three
H0:
The impact of internal control and audit committee is not numerous on the financial
performance of Airline industry.
H1:
The impact of internal control and audit committee is numerous on the financial
performance of Airline industry.
3. REVIEW OF RELATED LITERATURE
Conceptual framework
3.1. Definition of internal control
According to [4], it is the whole system of controls, financial or otherwise, established by the
management in order to carry on the business of the enterprise in an orderly and efficient
manner, ensure adherence to management policies, safeguard the assets, and secure as far as
possible, the completeness, accuracy and validity of the records. According to [3], “the internal
control systems extend beyond those matters that relate directly to the functions of the
accounting system and comprise:
Control Environment: It means the overall attitude, awareness and actions of directors and
management regarding the internal control systems and its importance in the entity. The control
environment has an effect on the effectiveness of the specific control procedures. We must
however know that a strong control environment do not by itself ensure the effectiveness of the
internal control system. Features signaled in the control environment include: the functions of
the board of director and its committees. The management’s philosophy and operating style,
the entity’s organizational structure and methods of assigning responsibility and authority,
management’s control system including the internal audit, function, personnel policies,
procedures and segregation of duties.
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Impacts of Internal Control on Financial Performance on Nigerian Airline Industry (A Case Study
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Procedural Control: It refers to those guiding principles, processes in additions to the control
environment which entity has founded to achieve the organization’s specific goals. Specific
control process include:
Stating, going through and endorsing reconciliations, verifying the arithmetical exactness
of the records, maintaining and reviewing control accounts and trial balance, endorsing and
regulating documents and restricting direct physical contact to assets and records. The system
of internal control comprises of methods by which top administrators gives authority and
assigned duties for function like selling, purchasing, accounting and production. The internal
control consist the program for formulating, validating and issuing to various levels of
administration those recent reports and enquires that enable executives to sustain control over
all sorts of activities and roles that are carried out in a large organization.
3.1.1. Internal control system and financial performance
Considering the major components or structure of an internal control process, according to [11]
the components of internal control is of five interconnected components which includes control
environment, risk recognition and assessment, control activities and segregation of duties,
information and communication and monitoring activities and correcting deficiencies but for
the purpose of this research, control environment, control activities and segregation of duties
and internal audit will be looked into while other components will be held constants.
3.1.2. Control Environment
Many consider these components as the most important of an entity’s internal control system.
Control environment generally arranged the tone of a firm, guiding the awareness of control of
different individuals. Control environment factors involve the reliability, moral values,
management’s operating style, commission of authority systems, and the procedures for
managing and developing people in the organization. Explaining control, [11] note that “control
environment generally arrange the tone of a firm, guiding the awareness of control of different
individuals.” Also added that control environment is seen as the substance for other part of
internal control it consists. The features of control environment consist of management values
and the style of operation (in of their assertiveness or conservativeness which may define risk
level that may be taken up), executive committee or audit committee, reliability and ethical
values of various individuals assigned for administering, controls monitoring and creating, the
commitment and skills of individuals carrying out designated duties and the structure of
organization (which could be a well- ordered structure that caters for good preparations, guiding
and governing operations or a disordered structure that may only aid to confuse the vital players
by initiating uncertain parts).
3.2. Fraud management lifecycle theory
The theory of management lifecycle explains the process and activities surrounding the
management and reduction of fraud and its losses. Information technology plays a respected
role throughout the Fraud Management Lifecycle. There is no stage in the theory of fraud
management lifecycle that does not gains from effective application of information technology
resources or suffer inefficient or inflexible systems [16]. The theories Fraud Management
Lifecycle are made up of eight stages. Restriction (deterrence), the first stage, is branded by
actions and activities intended to stop or prevent fraud before it is attempted; that is, to turn
aside or deject even the attempt at fraud through, for example, card activation programs. The
second stage of the Fraud Management Lifecycle prevention involves actions and activities to
prevent fraud from taking place. in detection, the third stage actions and activities such as
statistical monitoring program are used to identify and locate fraud before, during, and
subsequent to the completion of the fraudulent activity [17]. The intent of detection is to expose
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or reveal the presence of fraud or a fraudulent attempt. The goal of mitigation, stage four, is to
stop losses from occurring or continuing to occur and / or to hinder a fraudster from continuing
or completing the fraudulent activity, by blocking an account, for example. In the next stage,
analysis, losses that occurred despite deterrence, detection, and prevention activities are
identified and studied to determine the factors of the loss situation, using methods such as root
cause analysis [18]. The sixth stage of Fraud Management Lifecycle, policy is characterized
by’ activities to create, access, communicate, and help in the positioning of policies to reduce
the occurrence of fraud. Balancing prudent fraud reduction policies with resources constraints
and effective management of legitimate customer activity is also part of this stage. Covert
electronic surveillance is a method used in this stage. The final stage, prosecution, is the
culmination of all the successes and failure in the Fraud Management Lifecycle [19].
3.2.1. Principal –Agent or Finance Model
Taking view from a journal on corporate governance models the model was clearly explained,
the relationship between the owners and the management is referred to as the Principal –agent
problem [5], a place whereby the Principals engage the agent to perform services on their
behalf. It involves the delegation of some decision making authority to the agent who in turn
executes the work. This shifts the controlling role of shareholders to managers who are
considered to be in an agency relationship with shareholders [21]. The traditional finance
observation is the most leading theoretical model of corporate governance which is concerned
with the universal agency problem [7]. The underlying premise of the finance model is that
shareholders’ residual voting rights should ultimately commit the corporate resources to value
maximization [20]. This model recognized the agency cost emanating from the separation of
ownership and control to ensure that managers act to maximise shareholders’ wealth [7]. Thus,
[6] argue that the finance model can be incorporated into the agency theory as a principal- agent
or finance model. To this end, [8] assert:
The relationship of agency is one of the oldest and commonest codified modes of
social interaction….essentially all contractual arrangements, as between employer
and employee or the state and the governed…. Contain important elements of agency” (134).
Under the agency model, firms can be viewed as ”nexus of a set of contracting
relationships” which goes beyond the shareholders to include other stakeholders. It serves as a
focus for a complex process in which the conflicting objectives of individuals are brought into
equilibrium within a framework of contractual relations [5]. That is, the firm as a grouping of
contracts should establish and continue renegotiating contracts constantly with their
participants.
3.3. Empirical Evidence
The research which is backed up with many findings from different scholars giving their views
and motives about the work makes it not really new. [9] based on the study findings, endorsed
that firm should engage capable expert accountants to be in control of their internal controls
functions, because it is only the presence of operational/efficient internal controls system that
can function as methods of comprehensively examining and checking misconducts, which
typically run into distress in industry [22].
4. METHODOLOGY
This study used of quantitative research design by applying experimental research design to test
researcher hypotheses. Questioners were distributed to the concerned respondents to obtain
information from Nigerian Airline industry. This is consistent with Agbonifoh and Yomere
(2002) on cross sectional survey research design as a systematic gathering of information about
a phenomenon at a particular point in time [23].
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Impacts of Internal Control on Financial Performance on Nigerian Airline Industry (A Case Study
of Airline in Ilorin, Kwara State)
4.1. The population of the study
The population of a study refers to the target population qualified for the study. For this study,
these consist of all the employees of Nigerian Airline industry in Kwara state.
4.2. Sample selection
The sample size of the study will be determined using the Taro Yamanne formula as follows:
n = 𝑁 (1+𝑁𝑒2)
Where n = Sample size
N = Population size,
e = the level of significance (the allowable chance for error).
4.3. Sampling technique
Stratified random sampling was used to select the desired respondents; staff status formed the
basis of stratification (management and senior staff)[10]. Randomization was the basis of
lottery. Proportional allocation was used to determine the number of respondents from each of
the both categories i.e. thereafter the sampling frame was collected from management in each
of the banks. Given the sampling frame, the total number of respondents from each stratum was
noted. Given that the total number of respondents from each stratum is Ni and the sample size
allocated to the ith stratum is ni, Ni identical pieces of paper will be cut and numbered from 1Ni. Subsequently, ni was selected using the lottery method.
4.4. Method of data collection
In this study, the research made use of well-designed questionnaires. Therefore the data that
was collected was subjected to manual and electronic processing, with the aid of Statistical
packages for Social Sciences (SPSS) [14].
4.5. Research instrument
This study employed a questionnaire eliciting the necessary information from the respondents.
The questionnaire consist of two major parts, the bio data which consist of items relating to
respondents personal data and the second part addressed issues relating to the research problem.
The question response-format of the items in part II was in form of five-point Likert scale type
with items ranging from a region of strong agreements (SA), through a neutral zone, not sure
to a region of strong disagreements (SD) [12].
4.6. Sources of data
The study solely relies on primary data. The primary data will consist of information to be
elicited from the sampled respondents using questionnaire.
4.7. Method of data analysis
Research data was analyzed using descriptive and inferential statistics. Descriptive statistics
include frequency tables and percentages [13]. The T test served as the inferential statistic. The
choice of T-test was informed by the desire or need to test for the quality of two population
means since the responses of the respondents was categorized into (agree and disagree). This is
consistent with the major use of the T-test i.e. to test for equality of two population means or
for the difference between two population means.
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5. DATA REPRESENTATION, ANALYSIS AND DISCUSSION OF
RESULTS
Total of fifty (50) questionnaires were distributed to the respondents, out of which forty seven
(47) were returned. This gives us 94% of the total administered questionnaires [15].
5.1. Analysis of Responses Based on Personal Information
This segment concerns with analysis of responses from the distributed questionnaires with
specific references to section A
5.2. Frequency Distribution of the Respondents Based on Sex
Sex
Male
Female
Total
Frequency
36
11
47
Percent
76.6
23.4
100.0
Cumulative percent
76.6
100.0
From the table above, a total of 47 respondents were obtained, out of which 36 which is
equivalent to 76.6% are male, while the remaining 11 (23.4%) are female respondents. This
implies that the numbers of male workers in Airline industry are more than the number of the
female counterpart.
5.3. Frequency Distribution of the Respondents Based on Age
Age
20-27 years
28-35 years
36-45 years
46-50 years
51 years & above
Total
Frequency
6
17
22
9
3
47
Percent
12.8
36.2
25.5
19.1
6.4
100.0
Cumulative percent
12.8
48.9
74.5
93.6
100.0
It could be deducted from the table above that 6 of the respondents are aged between 20-27
years representing 12.8%, 17 of them are between the ages of 28-35 years which give us 36.2%,
12 of the respondents which correspond to 25.5% are between the ages of 36-45 years, while 9
respondents which correspond to 19.1% are between the age of 46-50 years and the remaining
3 respondents which is equivalent to 6.4% are the ages of 50 years and above.
5.4. Frequency Distribution of the Respondents Based on Airline Name
Airline Name
MM2
Ilorin
Total
Frequency
17
30
47
Percent
36.2
63.8
100.0
Cumulative percent
36.2
100.0
The table above shows the name of airline. it could be deduced from the table that 17 which
correspond to 36.2%while the remaining 30 (63.8) are from Ilorin Airline.
5.5. Frequency Distribution of the Respondents Based on Working Experience
Working Experience
0-5years
6-10years
Frequency
7
11
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Percent
14.9
23.4
1084
Cumulative percent
14.9
38.3
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Impacts of Internal Control on Financial Performance on Nigerian Airline Industry (A Case Study
of Airline in Ilorin, Kwara State)
11-15 years
16-20years
21 years & above
Total
17
8
4
47
36.2
17.0
8.5
100.0
74.5
91.5
100.0
It could be observed from the above table that 7 (14.9%) of the respondents have spent 5
years and below in the organization. Besides, 11 (23.4%) of them have spent between 6-10
years in the organization. Furthermore, 17 (36.2%) of the respondent have spent between 1115 years, 8 (17.0%) have spent between 16-20 years, while the remaining 4 which correspond
to 8.5% have spent 21 years and above in the organization.
5.6. Section B
Analysis on the Impact of Internal Control on Performance in Airline Industry
Table 1 Airline have an internal control in place.
Valid
Yes
No
Not sure
Total
Source: Field Survey (2014)
Frequency
37
7
3
47
Percent
78.7
14.9
6.4
100.0
Valid percent
78.7
14.9
6.4
100.0
Cumulative percent
78.7
93.6
100.0
Table 1 reveals that 37 respondents choose yes (representing 78.7%), 7 respondents choose
no (representing 14.9%), 3 respondents choose not sure (representing 6.4%). Thus, majority of
the respondents choose yes that airline have an internal control system in place.
Table 2 Nature of your Airline Control
Valid
Very strong
Strong
Moderate
Weak
Very weak
Total
Source: Field Survey (2014)
Frequency
26
10
8
2
1
47
Percent
55.3
21.3
17.0
4.3
2.1
100.0
Valid percent
55.3
21.3
17.0
4.3
2.1
100.0
Cumulative percent
55.3
76.6
93.6
97.9
100.0
Table 2 reveals that 26 respondents suggested very strong (representing 55.3%), 10
respondents suggested strong (representing 21.3%), 8 respondents suggested moderate
(representing 17.0%), 2 respondents suggested weak (representing 4.3%), 1 respondent
suggested very weak (representing 2.1%). Thus, majority suggested very strong for describing
internal control in airline.
Table 3 Your Airline (As an Entity) Witnessed Fraud of Any Kind
Valid
Yes
Frequency
35
Percent
74.5
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Valid percent
74.5
Cumulative percent
74.5
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Festus Femi ASAMU, Adegbola Olubukola OTEKUNRIN, Adebanjo Joseph FALAYE
No
Total
Source: Field Survey (2014)
7
47
25.5
100.0
25.5
100.0
100.0
Table 3 reveals that 35 respondents chose yes (representing 74.5%), 12 respondents chose
no (representing 25.5%). Thus, majority of the respondents chose yes that airline (as an entity)
witness fraud.
Table 4 If Yes How Often
Valid
Always
Often
Not sure
Minimally related
Not at all related
Total
Source: Field Survey (2014)
Frequency
11
22
6
6
2
47
Percent
23.4
46.8
12.8
12.8
4.3
100.0
Valid percent
23.4
46.8
12.8
12.8
4.3
100.0
Cumulative percent
23.4
70.2
83.0
95.7
100.0
Table 5 reveals that 11 respondents chose always (representing 23.4%), 22 respondents
chose often (representing 46.8%) 6 respondents chose not sure (representing 12.8%), 6
respondents chose minimally related (representing 12.8%), 2 respondents chose not at all
related (representing 4.3%). Thus, majority of the respondents chose often for the times fraud
occurs.
Table 5 The Extent of Fraud Occurrence Relating to Internal Control
Valid
Greatly related
Fairly related
Not sure
Total
Source: Field Survey (2014)
Frequency
17
21
9
47
Percent
36.2
44.7
19.1
100.0
Valid percent
36.2
44.7
19.1
100.0
Cumulative percent
36.2
80.9
100.0
Table 5 reveals that 17 respondents chose greatly related (representing 36.2%), 21
respondents chose fairly related (representing 44.7%), 9 respondents chose not sure
(representing 19.1%). Thus, majority of the respondents chose that fraud occurrence is fairly
related to internal control.
Table 6 Internal Controls Have a Role to Play in the Detection of Fraud in Nigerian Airlines
Valid
Yes
No
Total
Source: Field Survey (2014)
Frequency
33
14
47
Percent
70.2
29.8
100.0
Valid percent
70.2
29.8
100.0
Cumulative percent
70.2
100.0
Table 6 reveals that 33 respondents suggested yes (representing 70.2%), 14 respondents
suggested no (representing 29.8%). Thus, majority of the respondents suggested yes that an
internal control has a role to play on the detection of fraud in Nigerian airlines.
Table 7 The Extent You Think Fraud Prevention in Nigerian Airline is Related to the Internal Control
System in Place in Your Airline.
Frequency
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Percent
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Valid percent
Cumulative percent
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Impacts of Internal Control on Financial Performance on Nigerian Airline Industry (A Case Study
of Airline in Ilorin, Kwara State)
Valid
Greatly related
Fairly related
Not sure
Total
Source: Field Survey (2014)
27
16
4
47
57.4
34.0
8.5
100.0
57.4
34.0
8.5
100.0
57.4
91.5
100.0
Table 7 reveals that 27 respondents chose greatly related (representing 57.4%), 16
respondents chose fairly related (representing 34.0%), 4 respondents chose not sure
(representing 8.5%). Thus, majority of the respondents chose that fraud prevention in Nigerian
airline is greatly related to the internal control system in place in airline.
Table 8 The Greatest Responsibility for Fraud Prevention
Valid
Management
Employees
Internal Auditors
Not sure
External Auditors
Total
Source: Field Survey (2014)
Frequency
11
3
24
3
6
47
Percent
23.4
6.4
51.1
6.4
12.8
100.0
Valid percent
23.4
6.4
51.1
6.4
12.8
100.0
Cumulative percent
23.4
29.8
80.9
87.2
100.0
Table 8 reveals that 11 respondents suggested management (representing 23.4%), 3
respondents employees (representing 6.4%), 24 suggested internal auditors (51.1%), 3
respondents chose not sure (6.4%), 6 respondents suggested external auditors (representing
12.8%). Thus, majority respondents suggested that internal auditors have the greatest
responsibility for fraud prevention.
Table 9 Role of Internal Audit In Fraud Prevention
Valid
Great role
Fair role
Not sure
Minimal role
Not at all
Total
Source: Field Survey (2014)
Frequency
31
7
4
2
3
47
Percent
66.0
14.9
8.5
4.3
6.4
100.0
Valid percent
66.0
14.9
8.5
4.3
6.4
100.0
Cumulative percent
66.0
80.9
89.4
93.6
100.0
Table 9 reveals that 31 respondents chose great role (representing 66.0%), 7 respondents
chose fair role (representing 14.9%), 4 respondents chose not sure (representing 8.5%), 2
respondents chose minimal role (representing 4.3%), 3 respondents chose not at all
(representing 6.4%). Thus, majority of the respondents chose that internal audit plays a great
role in fraud prevention.
Table 10 Internal Control System be Absolutely Infallible
Frequency
Percent
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Valid percent
Cumulative percent
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Valid
Yes
No
Total
Source: Field Survey (2014)
39
8
47
83.0
17.0
100.0
83.0
17.0
100.0
83.0
100.0
Table 10 reveals that 39 respondents suggested yes (representing 83.0%), 8 respondents
suggested no (representing 17.0%). Thus, majority of the respondents suggested that internal
control can be absolutely infallible.
Table 11 There is a Relationship between the Internal Control and Financial Performance in Your
Airline.
Valid
Yes
No
Total
Source: Field Survey (2014)
Frequency
33
14
47
Percent
70.2
29.8
100.0
Valid percent
70.2
29.8
100.0
Cumulative percent
70.2
100.0
Table 11 reveals that 33 respondents suggested yes (representing 70.2%), 814 respondents
suggested no (representing 29.8%). Thus, majority of the respondents suggested yes to the
relationship that exist between the internal control and financial performance in their airline.
Table 12 If Yes Specify the Relationship
Frequency
23
12
8
3
1
47
Valid
Very strong
Strong
Moderate
Weak
Very weak
Total
Source: Field Survey (2014)
Percent
48.9
25.5
17.0
6.4
2.1
100.0
Valid percent
48.9
25.5
17.0
6.4
2.1
100.0
Cumulative percent
48.9
74.5
91.5
97.9
100.0
Table 12 reveals that 23 respondents suggested very strong (representing 48.9%), 12
respondents suggested strong (representing 25.5%), 8 respondents suggested moderate
(representing 17.0%), 3 respondents suggested weak (representing 6.4%), 1 respondent
suggested very weak (representing 2.1%). Thus, majority suggested very strong for describing
the relationship between internal control and financial performance of airline industry.
Table 13 Areas with Room for Improvement in the Internal Control System in Your Airline
Valid
Yes
No
Total
Source: Field Survey (2014)
Frequency
39
8
47
Percent
83.0
17.0
100.0
Valid percent
83.0
17.0
100.0
Cumulative percent
83.3
100.0
Table 13 reveals that 39 respondents suggested yes (representing 83.0%), 8 respondents
suggested no(representing 17%). Thus, majority of the respondents suggested yes that there are
areas with room for improvement in the internal control system in their airline.
5.7. Descriptive Statistics
N
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Minimum Maximum Mean Std. Deviation
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Impacts of Internal Control on Financial Performance on Nigerian Airline Industry (A Case Study
of Airline in Ilorin, Kwara State)
Airline have an internal control system in place
Nature of airline internal control system
Describing the internal control system in airline
Airline (as an entity) has witnessed fraud of any kind
How often
The extent of fraud occurrence relating to internal control
Internal control have a role to play in the detection of fraud in
Nigerian airlines
The extent of fraud prevention in Nigerian airline is related to
internal control system in place
The greatest responsibility for fraud prevention
Role of internal audit in fraud prevention
Internal control system is absolutely infallible
There is a relationship between the internal control and
financial performance in airline
If yes specify the relationship
Areas with room for improvement in the internal control
system in airline
47
47
47
47
47
47
47
1
1
1
1
1
1
1
3
5
5
2
5
3
2
1.27
1.76
1.76
1.25
2.27
1.82
1.29
.578
1.026
1.026
.440
1.097
.731
.462
47
1
3
1.51
.655
47
47
47
47
1
1
1
1
5
5
2
2
2.78
1.70
1.70
1.29
1.249
1.196
.379
.462
47
47
1
1
5
2
1.87
1.17
1.055
.379
Table 14 Airline have an Internal Control System in Place
Airline have an internal control system in place
Valid N(listwise)
Source: Field Survey (2014)
N
47
47
Minimum
1
Maximum
3
Mean
1.27
Std. Deviation
.578
The question required respondents to rate their perception of the above question under yes,
no and not sure. All of the 47 respondents answered the question. The question has a mean of
1.27 and a standard of 0.578. the mean is within 1 which means that the average respondents
chose yes that airline have an internal control system in place.
Table 15 Nature of Airline Internal Control
Nature of your airline internal control
Valid N(listwise)
Source: Field Survey (2014)
N
47
47
Minimum
1
Maximum
5
Mean
1.76
Std. Deviation
1.02
The question required respondents to rate their perception of the above question under very
strong, strong, moderate, weak and very weak. All of the 47 respondents answered the question.
The question has a mean of 1.76 and a standard deviation of 1.02. the mean is close to 2 which
meant that the average respondents agreed to the nature of airline internal control to be very
strong.
Table 16 Describing the Internal Control System in Airline Descriptive Statistics
Describing the internal control system in airline
Valid N(listwise)
Source: Field Survey (2014)
N
47
47
Minimum
1
Maximum
5
Mean
1.76
Std. Deviation
1.02
The question required respondents to rate their perception of the above question under very
strong, strong, moderate, weak and very weak. All of the 47 respondents answered the question.
The question has a mean of 1.76 and a standard deviation of 1.02. The mean is close to 2 which
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Festus Femi ASAMU, Adegbola Olubukola OTEKUNRIN, Adebanjo Joseph FALAYE
meant that the average respondents agreed to the nature of airline internal control to be very
strong.
Table 17 Airline (As an Entity) Witnessed Fraud of Any Kind Descriptive Statistics
Airline (as an entity)witnessed fraud of any kind
Valid N(listwise)
Source: Field Survey (2014)
N
47
47
Minimum
1
Maximum
2
Mean
1.25
Std. Deviation
.440
The question required respondents to rate their perception of the above question under yes
or no. all of the 47 respondents answered the question. The question has a mean of 1.25 and a
standard deviation of .44. the mean is within 1 which meant that the average respondents chose
yes that airline (as an entity) witnessed fraud of any kind.
Table 18 How Often Descriptive Statistics
How often
Valid N(listwise)
Source: Field Survey (2014)
N
47
47
Minimum
1
Maximum
5
Mean
2.27
Std. Deviation
1.09
The question required respondents to rate their perception of the above question under
always, often, not sure, minimally related, and not at all related. All of the 47respondents
answered the question. The question has a mean of 2.27 and a standard deviation of 1.09. the
mean is within 2 which 2 which meant that average respondents chose not often to how often.
Table 19 The Extent of Fraud Occurrence Relating to Internal Control Descriptive Statistics
The extent of fraud occurrence relating to internal
control
Valid N(listwise)
Source: Field Survey (2014)
N
47
Minimum
1
Maximum
3
Mean
1.82
Std. Deviation
.731
47
The question required respondents to rate their perception of the above question under
greatly related, fairly related and not sure. All of the 47 respondents answered the question. The
question has a mean of 1.82 and a standard deviation of .731. The mean is close to 2 which
meant that average respondents agreed that the extent of fraud occurrence relating to internal
control is fairly related.
Table 20 Internal Control have a Role to Play in the Detection of Fraud in Nigerian Airlines
Descriptive Statistics
N
Internal control have a role to play in the detection 47
of fraud in Nigerian airlines
Valid N(listwise)
47
Source: Field Survey (2014)
Minimum
1
Maximum
2
Mean
1.29
Std. Deviation
.462
The question required respondents to rate their perception of the above question under yes,
no and not sure. All of the 47 respondents answered the question. The question has a mean of
1.29 and a standard deviation of 0.462. The mean is within 1 which means that the average
respondents chose yes that internal control have a role to play in the detection of fraud in Nigeria
airline.
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Impacts of Internal Control on Financial Performance on Nigerian Airline Industry (A Case Study
of Airline in Ilorin, Kwara State)
Table 21 The Extent of Fraud Prevention in Nigeria Airline is Related To Internal Control System in
Place.
Descriptive Statistics
N Minimum Maximum
The extent of fraud prevention in Nigeria airline is 47
1
3
related to internal control system in place
Valid N(listwise)
47
Source: Field Survey (2014)
Mean
1.51
Std. Deviation
.655
The question required respondents to rate their perception of the above question under
greatly related, fairly related and not sure. All of the 47 respondents answered the question. The
question has a mean of 1.51 and a standard deviation of .655. the mean is close to 2 which
meant that average respondent agreed that the extent of fraud prevention in Nigeria airline is
greatly related to internal control system in place.
Table 22 The Greatest Responsibility for Fraud Prevention Descriptive Statistics
N
47
47
The greatest responsibility for fraud prevention
Valid N(listwise)
Source: Field Survey (2014)
Minimum
1
Maximum
5
Mean
2.78
Std. Deviation
1.24
The question required respondents to rate their perception of the above question under
management, employees, internal auditors, not sure and external auditors. All of the 47
respondents answered the question. The question has a mean of 2.78 and standard deviation of
1.24. the mean is close to 3 which meant that the respondents agreed that internal auditors has
the greatest responsibility for fraud prevention.
Table 23 Role of Internal Audit in Fraud Prevention
Descriptive Statistics
Role of internal audit in fraud prevention
Valid N(listwise)
Source: Field Survey (2014)
N
47
47
Minimum
1
Maximum
5
Mean
1.70
Std. Deviation
1.19
The question required respondents to rate their perception of the above question under great
role, fair role, not sure, minimal role and none at all. All of the 47 respondents answered the
question. The question has a mean of 1.70 and standard deviation of 1.19. The mean is close 2
which meant that average respondents chose that internal audit has a great role in fraud
prevention.
Table 24 Role of Internal Audit in Fraud Prevention Descriptive Statistics
Role of internal audit in fraud prevention
Valid N(listwise)
Source: Field Survey (2014)
N
47
47
Minimum
1
Maximum
2
Mean
1.17
Std. Deviation
.379
The question required respondents to rate their perception of the above question under yes,
no and not sure. All of the 47 respondents answered the question. The question has a mean of
1.17 and a standard deviation of 0.379. The mean is within 1 which means that the average
respondents chose yes that internal control system is absolutely infallible.
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Festus Femi ASAMU, Adegbola Olubukola OTEKUNRIN, Adebanjo Joseph FALAYE
Table 25 A Relationship Exists Between the Internal Control and Financial Performance in Airline.
Descriptive Statistics
N Minimum Maximum
A relationship exists between the internal control
47
1
2
and financial performance
Valid N(listwise)
47
Source: Field Survey (2014)
Mean
1.29
Std. Deviation
.462
The question required respondents to rate their perception of the above question under yes,
no and not sure. All of the 47 respondents answered the question. The question has a mean of
1.29 and a standard deviation of .462. The mean is within 1 which means that the average
respondents chose yes that a relationship exists between the internal control and financial
performance in airline.
Table 26 Specify the Relationship
Descriptive Statistics
N Minimum Maximum
A relationship exists between the internal control
47
1
5
and financial performance
Valid N(listwise)
47
Source: Field Survey (2014)
Mean
1.87
Std. Deviation
1.05
The question required respondents to rate their perception of the above question under yes,
no and not sure. All of the 47 respondents answered the question. The question has a mean of
1.17 and a standard deviation of .379. the mean is within 1 which means that the average
respondents chose yes that there are areas with room for improvement in the internal control
system in airline.
5.8. Hypothesis testing
Hypothesis one
Table 27 Does Internal Control has the Support of the Executive Committee and the Audit Committee
in Your Airline?
Frequency
Percent
Cumulative percent
Yes
37
78.7
78.7
No
7
14.9
93.6
Not sure
3
6.4
100.0
Total
47
100.0
Source: Field survey, 2014 based on question 5
Statement of the Hypothesis One
H0:
H1:
Internal control has no support of the executive committee and the audit committee
Internal control has the support of the executive committee and the audit committee.
Computations of Chi – Square Test
Yes
No
Not sure
Observed N
37
7
3
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Expected N
15.7
15.7
15.7
1092
Residual
21.3
-8.7
-12.7
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Impacts of Internal Control on Financial Performance on Nigerian Airline Industry (A Case Study
of Airline in Ilorin, Kwara State)
Total
47
100.0
Test Statistics
V1
44.085a
2
.000
Chi- square
Df
Asymp. Sig.
V9
32.894D
4
.000
a.
0 cells (.0%) have expected frequencies less than 5. The minimum expected cell
frequency is 15.7.
b.
0 cells (.o%) have expected frequencies less than 5. The minimum expected cell
frequency is 9.4
Chi square test
N
47
Mean
1.2766
Std. Deviation
.57868
Chi square value
44.085
Df
2
Critical value
5.991
6. DECISION RULE
It could be observed from above that chi-square (X2) calculated value is 44.085, while it critical
value (table value) at 0.05 level of significant and at 2 degree of freedom (df) is 5.991. Since
the calculated value is greater than the critical value, thus null hypothesis that says “Internal
control has no support of the executive committee and the audit committee” is rejected while
alternative hypothesis is accepted. Hence, the test is statistically significant.
6.1. Hypothesis Two
Table 28 How Could You Describe Internal Control System in Airline Industry Compare to Other
Industry?
Frequency
Percent
Very strong
26
55.3
Strong
10
21.3
Moderate
8
17.0
Weak
2
4.3
Very weak
1
2.1
Total
47
100.0
Source: Field Survey, 2014 based on question 7
Cumulative percent
55.3
76.6
93.6
97.9
100.0
Statement of the Hypothesis One
H0:
H1:
Internal control is not effective in Airline industry compare to other industry.
Internal control is effective in Airline industry compare to other industry.
Computation of Chi Square Test
Very strong
Strong
Observed N
26
10
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1093
Expected N
9.4
9.4
Residual
16.6
.6
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Festus Femi ASAMU, Adegbola Olubukola OTEKUNRIN, Adebanjo Joseph FALAYE
Moderate
Weak
Very weak
Total
8
2
1
47
9.4
9.4
9.4
9.4
-1.4
-7.4
-8.4
Test Statistics
V3
42.894a
4
.000
Chi- square
Df
Asymp. Sig.
a.
0 cells (.0%) have expected frequencies less than 5. The minimum expected cell
frequency is 9.4
Chi square test
N
47
Mean
1.7660
Std. Deviation
1.02603
Chi square value
42.894
Df
4
Critical value
9.488
Decision Rule
It could be deduced from above that chi square (X2) calculated value is 42.894, while it critical
value (table value) at 0.05 level of significant and at 4 degree of freedom (df) is 9.488. Since
the calculated value is greater than the critical value, thus null hypothesis that says “internal
control is not effective in Airline industry compare to other industry” is rejected while
alternative hypothesis is accepted. Hence, the test is statically significant.
6.2. Hypothesis Three
Table 29 Does Internal Control Has The Support Of The Executive Committee And The Audit
Committee In Your Airline?
Frequency
Percent
Cumulative percent
Yes
33
70.2
70.2
No
14
29.8
100.0
Total
47
100.0
Source: Field survey, 2014 based on question 12
Statement of the Hypothesis One
H0:
H1:
The impact of internal control and audit committee is not numerous on the financial
performance of Airline industry.
The impact of internal control and audit committee is numerous on the financial
performance of Airline industry.
Computations of Chi – Square Test
Yes
No
Total
Observed N
33
14
47
Expected N
23.5
23.5
Residual
9.5
-9.5
Test Statistics
Chi- square
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V7
7.681a
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Impacts of Internal Control on Financial Performance on Nigerian Airline Industry (A Case Study
of Airline in Ilorin, Kwara State)
Df
Asymp. Sig.
a.
1
.006
0 cells (.0%) have expected frequencies less than 5. The minimum expected cell
frequency is 23.5
Chi square test
N
47
Mean
1.2979
Std. Deviation
.46227
Chi square value
7.681
Df
1
Critical value
3.841
Decision Rule
It could be deduced from above that chi square (X2) calculated value is 7.681, while it critical
value (table value) at 0.05 level of significant and at 1 degree of freedom (df) is 3.841. Since
the calculated value is greater than the critical value, thus null hypothesis that says “The impact
of internal control and audit committee is not numerous on the financial performance of Airline
industry” is rejected while alternative hypothesis is accepted. Hence, the test is statically
significant.
7. CONCLUSIONS
It is concluded that airlines cannot function effectively without a strong internal control in place.
Internal control is adequate enough in Nigerian airline industry to limit opportunity to commit
fraud and it make it difficult to conceal fraud. It is essential for corrective measure to be taken
on fraud occurrences to check and deter further fraud occurrence. It has also shown that
substantial relationship exist between internal control system comprising of control activities,
internal audit and control environment with financial performance comprising of monitoring,
balance scorecard and reporting.
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