Assessing the role of budgeting in internal control efficacy within manufacturing firms : a case study of Pepukai Plastics Industries

Abstract

This investigation evaluates the effectiveness of budgeting as a mechanism for internal controls within manufacturing firms, with a specific focus on Pepukai Plastics Industries. The impetus for this research derived from the observed inability of Pepukai Plastics Industries to meet its organizational objectives and goals in recent years, particularly in terms of revenue generation and profit maximization. The study utilized a descriptive research design, employing a mixed-method approach to cater to the qualitative and quantitative nature of the research. The research encompassed a target population of 28, utilizing a census methodology. Data collection was executed through questionnaires and one-on-one interviews, with the results presented via tables and graphs. Key findings indicate that Pepukai Plastics Industries lacks the implementation of variance analysis, forecasting, and coordinated planning in its production processes, adversely affecting profit control. The study reveals that the firm's budgeting practices are predominantly based on estimates, proving to be time-consuming and costly. Furthermore, these practices primarily focus on financial outcomes, overlooking other critical aspects of organizational performance. Notably, the firm does not employ incremental budgeting techniques, a factor that could potentially enhance the efficacy of its budgeting process and, by extension, its internal controls. The study concludes that the absence of comprehensive budgeting strategies, including incremental budgeting, impairs the overall effectiveness of internal controls within Pepukai Plastics Industries. This conclusion underscores the vital role that a robust budgeting system plays in reinforcing internal controls, thereby contributing to the attainment of organizational objectives within the manufacturing sector.