The relationship(s) between internal control activities used, perceived stakeholder reputation and the economic sustainability of South African small, medium and micro enterprises (original) (raw)
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Journal of Small Business and Enterprise Development, 2017
PurposeThe purpose of this paper is to determine the empirical relationships that exist between two of the elements of a sound internal control system, namely internal control activities and managerial conduct, and the perceived sustainability of South African small, medium and micro enterprises (SMMEs).Design/methodology/approachData were obtained from management and employees of 100 South African SMMEs operating in the Fast Moving Consumer Goods industry. All participants were interviewed by means of face-to-face structured interviews due to the complexity of the questions posed.FindingsOnly general management competencies have a relationship with the economic sustainability of these business entities. The rejection of three of the four hypotheses supports the current poor sustainability rate with approximately 75 per cent of South African SMMEs having to close their doors after being in operation for only three years.Originality/valueAs this study is the first of its kind for SMM...
The purpose of this research study is to theoretically investigate the sustainability, the managerial conduct of management and the internal control systems evident in South African small, medium and micro enterprises (SMMEs). To achieve the aforementioned, a literature review was conducted through analyzing relevant secondary data from journal articles, theses, dissertations, books, and reports. According to popular literature, the overall sustainability of any organization is strongly influenced by its internal control systems. Taking into account the weak sustainability of South African SMMEs, it appears that the soundness of the internal control systems of these business entities is adversely influenced by the managerial conduct of its management. This is particularly the case, since the managerial conduct of management in South Africa is often described as flexible; the managerial conduct of management makes up a substantial part of the control environment which, in turn, is deemed as the foundation of any system of internal control. In quintessence, the literature reviewed shows that the sustainability of South African SMMEs is adversely influenced by a flexible managerial conduct of management which directly (and negatively) impacts on the soundness of their internal control systems; their abilities to attain relevant objectives in the foreseeable future.
2023
This study was conducted to determine the influence that internal control systems of South African (fast-moving consumer goods) SMMEs have on their economic sustainability. Both empirical research and, descriptive research were conducted that were of a quantitative nature. The study relied on survey research and primary data were collected from 99 South African fast-moving consumer goods SMME owners/managers using a mixture of non-probability sampling methods. From the research conducted, it was found that the internal control systems of South African SMMEs were developed using non-SMME-specific internal control frameworks. Even though the internal control systems of sampled South African SMMEs were perceived to be both adequate and effective by their owners/managers, they were found to adversely influence the economic sustainability of these business entities. This research study justifies the need for South African SMMEs to develop internal control systems using SMME-specific internal control frameworks. It also serves as a foundation for further empirical research to be conducted on the matter.
2019
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.
Siwangaza, L., Smit, Y., Bruwer, J-P & Ukpere, W. 2014. The Status of Internal Controls in Fast Moving Consumer Goods Enterprises within the Cape Peninsula. Mediterranean Journal of Social Sciences, 5(10), pp. 163-175. June 2014. South African Small Medium and Micro Enterprises (SMMEs) play an important role in terms of stimulating the national economy. Despite the aforementioned, prior research shows that the failure rate of these entities is amongst one of the highest in the world, which is believed to be caused by economic factors. Several economic factors which impact on SMME sustainability have subsequently been researched and identified. As a result, SMME sustainability has received attention from the national government in recent times. One of economic factors which have been perceived by the authors as a major contributor to the high SMME failure rate is the lack of internal controls. Ultimately the responsibilities to both implement internal control frameworks and maintain all internal controls, rests with the management of an organisation. In essence, it can be said that a business is uncontrollable when it is essentially unmanageable. With the absence of adequate internal controls, an environment is created where an organisation is susceptible to all kinds of detrimental risks and, if these risks are not taken care of on time, the overall sustainability of the organisation could be negatively affected, which may lead in imminent failure. The main objective of this study was to determine the degree to which the implementation of an adequate system of internal control can help improve SMME sustainability. The research that was conducted was empirical in nature and fell within the ambit of the positivistic research paradigm. Questionnaires were administered and distributed to 110 owners and/or managers of SMMEs (SMME leaders) that operate within the fast moving consumer goods industry, situated in the Cape Peninsula. Based on the findings, it is obvious that most of the SMMEs do have a variety of internal controls, as prescribed by formal internal control frameworks but their support in terms of SMMEs sustainability were quite limited. Go to http://www.mcser.org/journal/index.php/mjss/article/view/2879/2841 for a copy of the full text of this research output.
Although South African Small, Medium and Micro Enterprises (SMMEs) play an imperative role in the stimulation of the national economy, previous research studies show that these business entities have severe sustainability problems as approximately 75% of these business entities fail after being in operation for only three years. The latter dispensation is pinned on the belief that South African SMMEs make use of inadequate and/or ineffective internal control systems. Taking into account that a system of internal control comprises five inter-related elements, as well as the fact that management is responsible for the internal control in their respective business entities, this research study placed focus on determining the relationship which exist between the managerial conduct of management and the internal control activities evident in South African fast-moving consumer goods (FMCGs) SMMEs. In order to achieve the latter, two literature reviews were conducted (see Chapter 2 and Chapter 3) and, in turn, quantitative data were collected through a questionnaire and analysed accordingly through both descriptive statistics and inferential statistics (see Chapter 5). Based on the analysed data, a very weak negative statistically significant relationship was identified between the managerial conduct of management and the internal control activities evident in South African FMCG SMMEs. Regardless of the very weak negative statistically significant identified relationship, the results vindicate the importance of appropriate managerial conduct, as well as adequate and effective internal control activities. Stemming from this, a new proposed framework (Control Legacy-K Framework) was developed which South African FMCG SMMEs can implement to help enhance their overall sustainability which, in turn, can help them fortify their continuation rate in the foreseeable future (see Chapter 6).
Background: Although South African small, medium and micro enterprises (SMMEs) play an imperative role in the stimulation of the national economy, previous research studies show that these business entities have severe sustainability problems as approximately 75% of them fail after being in operation for only 3 years. The latter dispensation is pinned on the belief that South African SMMEs make use of inadequate and ineffective internal control systems. Aim: Since a system of internal control comprises five inter-related elements, while also taking into consideration that management is ultimately responsible for the internal control in their respective business entities, which is greatly influenced by their managerial conduct, this research study placed focus on determining the relationship which exist between the managerial conduct and the internal control activities evident in South African SMMEs. Setting: This study was conducted in the Cape Metropole, South Africa by obtaining responses from 240 stakeholders of SMMEs: 120 members of management and 120 employees. Methods: In order to achieve the latter, quantitative data were collected through a questionnaire and analysed accordingly through both descriptive statistics and inferential statistics. Results: From the results, a very weak negative statistically significant relationship was identified between the managerial conduct and the internal control activities evident in South African SMMEs. Conclusion: Essentially, management and employees should revisit the internal control activities evident in their respective SMMEs through placing emphasis on those internal control activities which can be built on their control environment.
Since the late 1980s, many business entities around the globe have fortified their overall sustainability by making use of internal control systems. These systems are predominantly based on the COSO Integrated Internal Control Framework, and have the main responsibility to provide reasonable assurance to management that relevant business objectives will be attained in the foreseeable future. In a South African dispensation, previous studies show that Small, Medium and Micro Enterprises (SMMEs) – comprising 90% of all operational business entities in the country – make use of customised internal control systems which do not add substantial value in the mitigation of risks.Taking into account that 70% of South African SMMEs fail after being in operation for only four years, it becomes apparent why these business entities are believed to have one of the worst (financial) sustainability rates in the world. One manner in which business sustainability can be reasonably fortified is by enhancing internal control – by deploying a sound internal control system. A sound system of internal control comprises five elements, one of which is internal control activities. For this study empirical research was conducted to determine whether independent checks, as a component of internal control activities, evident in South African SMMEs had a positive influence on these business entities’ perceived financial sustainability. Stemming from the results it was found that there was an association between the two phenomena, but they were not statistically significant.
Expert Journal of Business and Management, 2020
During the mid-1990s the South African government formally recognised Small, Medium and Micro Enterprises (SMMEs) operating in the country, for the first time, through the publication of the National Small Business Act No. 102 of 1996. Through this legislation, South African SMMEs were tasked to assist with the attainment of three core socioeconomic objectives, namely the reduction of unemployment, the mitigation of poverty and the equal distribution of wealth. After more than two decades it appears that South African SMMEs are not achieving the foregoing three socioeconomic objectives; simultaneously being cited as having among the worst failure rates in the world. Prior research found that this dispensation is largely attributable to the non-management of economic factors which, in turn, led to the realisation of risks. To assist with the management of economic factors and related risks, a sound system of internal control should be used. Unfortunately, despite the existence of various internal control frameworks, South African SMMEs do not deploy sound systems of internal control; ultimately resulting in their demise. The objective of this study was therefore to propose an internal control framework that can assist South African SMMEs to implement adequate and effective internal control systems to, in turn, fortify their sustainability. This study was non-empirical in nature, exploratory and took on the form of a literature review. Stemming from the research conducted the Sustenance framework was developed as an artefact hypothesis for adoption by South African SMMEs and further empirical testing.
Internal control activities should provide reasonable assurance surrounding the attainment of business objectives in the foreseeable future, be they financial or non-financial in nature. Recent studies suggest that internal control activities used within South African Small, Medium and Micro Enterprises (SMMEs) are inadequate and/or ineffective – they do not provide reasonable assurance surrounding the attainment of relevant objectives. For this study emphasis was placed on whether internal control activities used by South African SMMEs had an adverse influence on their profitability and solvency. Data were obtained from 119 members of management of South African SMMEs, which allowed a total of 14 relationships to be tested. Only four relationships were found to be statistically significant which led to the rejection of the two developed hypotheses. Stemming from the results, it appears that there may be a need for the development of formal policies pertaining to internal control within a South African SMME dispensation.