Abstract:
Effect of internal control systems on profitability of companies has attracted the interest of many researchers recently. Many organisations having as their objective of maximizing scarce resources sometimes run a high risk of fraud, errors, misappropriations, inefficiency and ineffectiveness of operations. This study examined the effect of internal control systems on profitability of free zone companies with focus on HPW Fresh and Dry Ltd and Bomarts Ltd. The study used cross-section data set within a causal research design. The study employed quantitative approach in the study and data collection was done using questionnaire. A total of 182 respondents including finance officers, managers and supervisors were selected using simple random sampling technique. Analyses of the data were done by using descriptive and simple regression analyses. The study revealed that control environment has a positive effect on the profitability of free zone companies. In addition, risk assessment has a positive effect on the profitability of free zone companies. The study further revealed that control activities have positive effect on the profitability of companies. The results also indicated a positive relationship between information and communication and profitability of companies. Finally, the results showed that size of the company and leverage have positive and negative effects respectively on profitability. The study therefore recommends that management of free zone companies must put in place effective internal control systems in order to propel growth and profitability of their companies.
