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Do Internal Control Activities Adversely Influence the Profitability and Solvency of South African SMMEs?

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  • Juan-Pierrà Bruwer

Abstract

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 of14 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.

Suggested Citation

  • Juan-Pierrà Bruwer, 2018. "Do Internal Control Activities Adversely Influence the Profitability and Solvency of South African SMMEs?," Journal of Economics and Behavioral Studies, AMH International, vol. 10(1), pages 49-58.
  • Handle: RePEc:rnd:arjebs:v:10:y:2018:i:1:p:49-58
    DOI: 10.22610/jebs.v10i1.2088.g1581
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    References listed on IDEAS

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    1. Alessandra Amendola & Francesco Giordano & Maria Lucia Parrella & Marialuisa Restaino, 2017. "Variable selection in high‐dimensional regression: a nonparametric procedure for business failure prediction," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 33(4), pages 355-368, August.
    2. Martin, Kasey & Sanders, Elaine & Scalan, Genevieve, 2014. "The potential impact of COSO internal control integrated framework revision on internal audit structured SOX work programs," Research in Accounting Regulation, Elsevier, vol. 26(1), pages 110-117.
    3. Adebayo Agbejule & Annukka Jokipii, 2009. "Strategy, control activities, monitoring and effectiveness," Managerial Auditing Journal, Emerald Group Publishing, vol. 24(4), pages 500-522, July.
    4. Aaron Cohen & Gabriel Sayag, 2010. "The Effectiveness of Internal Auditing: An Empirical Examination of its Determinants in Israeli Organisations," Australian Accounting Review, CPA Australia, vol. 20(3), pages 296-307, September.
    5. Adebayo Agbejule & Annukka Jokipii, 2009. "Strategy, control activities, monitoring and effectiveness," Managerial Auditing Journal, Emerald Group Publishing, vol. 24(6), pages 500-522, June.
    6. Colin Wren, 2002. "Evaluating the effect of soft business support upon small firm performance," Oxford Economic Papers, Oxford University Press, vol. 54(2), pages 334-365, April.
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    Cited by:

    1. Juan-Pierré BRUWER & Judith SMITH & Suzaan LE ROUX, 2019. "Critical Innovation Skills Required of Sole Trader Small, Medium and Micro Enterprise (SMME) Management and Its Influence on Perceived Business Profitability: A South African Perspective," Expert Journal of Business and Management, Sprint Investify, vol. 7(2), pages 256-262.
    2. Jeff Y-J Chen & Boris Urban, 2018. "Behavioral and Environmental Influences on Entrepreneurial Orientation," Journal of Economics and Behavioral Studies, AMH International, vol. 10(5), pages 73-88.

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