The perceived adequacy and effectiveness of internal control activities in South African small, medium and micro enterprises

Abstract

1.South African SMMEs contribute up to 57% of the national gross domestic product and provide employment opportunities to approximately 61% of the national workforce (Mouloungui 2012; NCR 2011).Background: South African small, medium and micro enterprises (SMMEs) add significant socio-economic value to the national economy. Unfortunately, up to 80% of these business entities fail after being in existence for only 4 years. Previous research shows that a probable reason for the latter dispensation is that these business entities make use of ineffective and/or inadequate internal control systems which, inter alia, comprises inadequate internal control activities.Objectives: This study seeks to ascertain whether internal control activities implemented in South African SMMEs have an effect on the perceived adequacy and effectiveness of their overall internal control systems.Method: Though exploratory in nature, this study followed an empirical stance through the assistance of survey research. Data were collected from 119 SMME managers and 98 employees of South African SMMEs operating in the fast-moving consumer goods industry.Results: Although only 18 of the 64 tested relationships are found to be statistically significant, none of the formulated hypotheses can be rejected as relevant statistically significant predictions can be made in relation to the perceived adequacy and effectiveness of internal control systems when applicable internal control activities of these business entities are taken into account. Conclusion:This study provides a foundation for future studies to both scrutinise and enhance the internal control environment in South African SMMEs, ultimately improving the sustainability rate of South African SMMEs.

Internal Control and Risk Management Issues on The Sustainability Micro and Small Enterprises in Indonesia

“…Furthermore, to maintain company performance and avoid conflicts of interest between agencies and principals, it is necessary to implement internal controls (Siallagan & Machfoedz, 2006). Thus, according to Arena & Azzone (2009) and Bruwer et al (2019), the objectives of implementing internal control are as follows: ▪ Improve organizational performance through effectiveness and efficiency in business activities; ▪ There is compliance with internal and external regulations; ▪ Protect losses and maintain assets owned by the organization; ▪ Maintain employee integrity and transparency of financial information and non-financial information. Also, MSEs can be classified into two groups, which include: ▪ Livelihood activities, which are MSEs used to earn a living, are more commonly known as the informal sector, for example, are street vendors; ▪ Home industries are MSEs that not only aim for a living but are also accompanied by skills.…”

Factors influencing strategic decision-making in South African small businesses

“…An understanding of SDM in SMMEs is important, as their long-term survival is important for any economy. This is specifically true for developing countries, in general, and South Africa, in particular (Bruwer 2020;Fatoki 2020;Masama & Bruwer 2018;Mlotshwa & Msimango-Galawe 2020). Such additions to the body of knowledge could assist SMMEs to understand and improve their SDM and relevant environmental scanning and increase their chances of survival.…”