Internal Control Functions and Small and Medium Enterprises Sustainability: Empirical Evidence from Selected SMEs in the South-West States of Nigeria.

Abstract

Good business operations contribute to enterprises achieving their long-term growth goals. Hence, governance, controls and compliance are foundational elements in the effective management and oversight of a company by management and boards. The value of the internal control system is enormous for all kinds of organizations small or big. This study evaluated the effect of internal control activities of control environment and control activities on small and medium enterprises sustainability in terms of alignment of operations with goals and operational efficiency. The study adopted cross sectional survey research design. The population of the study comprised all registered SMEs operating in South-West states, Nigeria, while the study adopted purposive sampling technique to select 350 SMEs operating across Lagos, Ogun, and Oyo states, South-West, Nigeria. This study used primary data gathered from selected SMEs through structured questionnaire designed on 5- point Likert scale. Data gathered were analysed using descriptive and inferential statistics, while the hypotheses were analysed using ordinary least square regression. Findings from statistical test of hypotheses reveal that control environment and control procedures jointly contribute positively and significantly to ability of SMEs to align operations with sustainability objectives, and promote operational efficiency. The study concluded that internal control system ensure that the behaviours and decisions of employees and managers are consistent with organization’s sustainability objectives and strategies and effectively contribute to higher business performance and long-term growth. Therefore, this study recommended that SMEs managers should strengthen and monitor their internal control mechanism, and implement more effective accounting information systems, ensure compliance with regulatory requirement, be socially, economically and environmentally responsible.