Factors Influncing Of Internal Control System On Profitabilty In Selected Multi-Purpose Cooperative Society In Toke Kutaye Woreda, West Shoa Zone, Oromia Regional State, Ethiopia

Abstract

As a global view, an internal control system was defined as the policies and procedures put in place to ensure the protection of multi-purpose cooperative society assets and the reliability of financial reporting. Multi-purpose cooperatives play an important role as the most effective tool for economic development. The main purpose of this study was to assess how internal control systems in multipurpose cooperative societies in the Toke Kutaye district of West Shoa zone, Oromia Region, Ethiopia, affect their internal control systems. Moreover, a lack of internal control systems is one of the main problems in promoting the co-operative sector in general, which is critical in the effort to diversify the economy for the benefit of all stakeholders. As a result, some of the major factors identified within the internal control system were a lack of control activity, monitoring, information and communication, risk management, and environmental control. A purposive sampling procedure was used to select the sample respondent members, and the total sample size of the study was 137 members. Researchers used descriptive and inferential statistics based on facts about the data collected to analyze the data. Multiple regressions, like the study for this particular study, are a statistical technique that can be used to analyze the relationship between a single dependent variable and several independent variables. Because multi-purpose cooperative societies lack an internal control mechanism, cooperative expenditures are approved in advance by appropriately authorized individuals in an inappropriate and ineffective manner. Due to the limitation of control activity, 98% manpower and an organized committee to screen and select applicants to fill vacant positions completely has been a common problem. More than 93% of the board, management, and staff receive regular training on cooperative operations as well as trends and innovations in cooperative organizations, which have been both highly and severely problematic. As in a linear regression model, an R (correlation) value of.815 (81.5%) indicates a positive relationship between the dependent and independent variables, and an R squared value of.0665 (66.5%) shows that the dependent variable in the model can be predicted by the independent variables. In addition, the contributions of all independent variables (such as control activity, information and communication, monitoring, control environment, and risk assessment in multipurpose cooperatives) accounted for 66.5% (R2 = 0.665) of the variation in the control system of multipurpose cooperatives. The ANOVA model's statements (P) were less than 0.08 error level of confidence, so the model is significantly affecting the internal control system. Consequently, the combination of the independent variables (control activity, information and communication, monitoring, control environment, and risk assessment) significantly predicts the dependent variable (internal control system) (F = 39.632; P =.000). One of the expectations that needed to be tested was the normality test, which is a major issue in regression model analysis. The value was significant even at 8%, which is normal. The research findings show that more than 93% of the board, management, and staff are given regular training on cooperative operations, which is a strong problem. Furthermore, 81.9% of all respondents disagreed that policies and procedures can result in reliable financial reports. At a 92 percent confidence level, implementation 815 (81.5%) indicates a positive relationship between the dependent and independent variables, and the R square value for the model revealed that.0665 (66.5%) of the dependent variable was statistically significant negative and the risk assessment was statistically insignificant. In general, the study clearly identified influential factors on a multipurpose cooperative's internal control system, such as control activity, control environment, monitoring, information and communication, and risk assessment. The government of Ethiopia and local government have been trying to enhance multipurpose cooperative activities to facilitate overall growth in Ethiopia's economy. Particularly, the local level, considering the problems of the internal control system in the study area, should get considerable attention to create an enabling environment.