The empirical relationship between the managerial conduct and internal control activities in South African small, medium and micro enterprises

Abstract

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.