EFFECT OF INTERNAL CONTROL SYSTEMS ON THE PROFITABILITY OF LISTED CONSUMER GOODS FIRMS IN NIGERIA

Abstract

This study examined the effect of internal control systems on the profitability of listed consumer goods firms in Nigeria between 2015 and 2024. Specifically, it assessed the effect of the control environment, risk assessment, control activities, and information and communication systems on profitability, while controlling for firm size. Data were collected from 13 listed consumer goods firms using secondary sources, including annual reports and audited financial statements. Panel data regression analysis using the Random Effects Model (REM) was employed. The results revealed that the control environment (β =0.118, p = 0.003), risk assessment (β = 0.094, p = 0.009), control activities (β = 0.071, p = 0.027), and information and communication systems (β = 0.089, p = 0.011) all positively and significantly influenced profitability. Firm size also had a positive effect on profitability (β = 0.056, p = 0.008). The model explained 60.7% of the variation in profitability (R² = 0.607, Adj. R² = 0.571), and the F-statistic (16.482,p < 0.001) indicated overall model significance. Based on these findings, it was recommended that management of listed consumer goods firms should prioritize the development of strong internal control systems, with particular emphasis on enhancing board oversight, risk assessment procedures, audit controls, and ICT infrastructure to improve financial performance.