Determining causes for non-adherence to internal inventory controls in a cooperative

Abstract

In big cooperatives, functions such as effective stock management play a vast role in ensuring risk management and asset protection. It is thus pertinent that internal control procedures be put in place to monitor and effectively manage stock controls. Although these procedures are found to be in place, the problem recognized was that employees, however, lack in compliance. This study aims to investigate what influences the employees to the point that they feel impervious to follow control procedures that relate to inventory. In order to accomplish this, a survey was completed by employees from a cooperative in the Eastern Free State. The Committee of Sponsoring Organizations of the Treadway Commission's Report on Internal Controls (2013) was used as guideline and framework to identify specific components, for the survey, that have a direct influence on the employee's behaviour. The COSO report identifies five components that form the pillars of this framework namely: the control environment, risk assessment, control activities, communication and monitoring activities. This survey was used as tool to interview the employees by means of a questionnaire. It addressed the five identified components and measured their effectiveness currently in the cooperative, as experienced by the employee. It was clear that there exists a correlation between these components and the influence thereof on the effectiveness of the employees to follow internal control procedures. Finally, the component that was found to be the least effective currently in the cooperative was the control environment.