EFFECTIVE INTERNAL CONTROL SYSTEM AS A MEASURE AGAINST BUSINESS FAILURES IN ASABA, DELTA STATE, NIGERIA

Abstract

This empirical research paper investigated the effectiveness of internal control measures against business closure in 
Asaba, Delta State with a specific focus on Zsal General Enterprises. Considering the escalating rates of business 
closures and their critical impact on the Nigerian economy, particularly among SMEs, this study examines the 
causes, effects, prevention and control measures related to business closure (failure). The primary objectives were to 
evaluate existing internal control measures, asses their effectiveness and provide recommendations for enhancement. 
Utilizing a case study approach, primary data was collected through questionnaires and interviews employees and 
management of case study, complemented by secondary data from business documents, academic journals and 
industry report. Data analysis involved percentage methods for elementary analysis and Spearman’s rank order 
correlation for statistical hypothesis testing. The findings reveal significant connection or relationship between 
inadequate internal control measures and an increased likelihood of business failures or closure (χ² = 16.14(p < 
0.05). A strong positive correlation (p=0.790, p=0.000) was found between effective internal control measures and 
reduction of business failures or closure.  Furthermore, the study confirms that business closures has a significant 
negative impact on economic growth in Nigeria (χ² = 19.2(p < 0.05). Conversely, effective internal control measures 
were found to have a meaningful impact in preventing business failure orclosure (χ² = 10.8(p < 0.05). This result 
underscores the pivotal role of robust internal control systems in safeguarding businesses against failure and 
fostering economic stability. The study concludes that implementing and maintaining effective internal controls is 
crucial for business continuity and sustainability and for mitigating the adverse effect of business failures or closures 
on the broader economy. It recommends that business prioritize strengthening their internal control frameworks and 
policymakers develop supportive interventions and financial assistance programs for SMEs.