Internal control systems and financial performance in the petroleum industry: A case of VIVO Energy Uganda

Abstract

The study was set out to examine internal control systems and financial performance in the petroleum industry, using a case of Vivo Energy Uganda. The study was based on three objectives: to establish whether accounting regulations and procedures are complied with to enhance financial performance; internal audit function enhances financial performance and whether physical access to assets and financial records are properly authorized to enhance financial performance in Vivo Energy Uganda.

The study used a population of 165 selected from Vivo Energy Uganda staffs and a sample of 117 respondents was selected using Neumann’s formula (2000), but the study focused only on 114 respondents who returned questionnaires for analysis. Descriptive and explanatory research designs were employed and both quantitative and qualitative approaches of data collection were used. Data were analyzed using descriptive statistics, Pearson correlation, coefficient, regression analysis, and analysis of variance (ANOVA); where the statistics proved that R2=0.764; significance level was found and the hypothesis testing proved that there is a positive relationship between internal control systems and finance performance in Vivo Energy Uganda.

The multiple correlation results of .782 or 78.2% revealed that compliance of accounting regulations and procedures enhance financial performance; internal audit functions and authorization of physical access to assets and financial records enhance financial performance in Vivo Energy Uganda.

The study concluded that accounting regulations and procedures have to be complied with to enhance financial performance; the effectiveness of internal audit function partly depends on legal and regulatory framework, placement of the function and its independence and physical access to assets and financial records are properly authorized in Vivo Energy Uganda.

Basing on the study findings, the researcher recommends that the Board of Directors of Vivo Energy should monitor and supervise to ensure that all accounting staff complies with accounting regulations and requirements as provided by the Institute of Certified Public Accountants to ensure proper implementation and compliance with accounting standards and principles. Vivo Energy should develop a mechanism to incorporate relevant feedback from the various stakeholders into their internal control system