Accounting Records and Fraud Preventive Measures
Chapter One
PURPOSE OF THE STUDY
The major purpose of the study is to identify and assess the internal control measures for preventing financial frauds in government parastatals in Akwa lbom State.
Specifically the study:
(1) ascertained the various types of financia1 frauds prevalent in government parastatals
(2) ascertained the causes of financial frauds in government parastatals
(3) ascertained the various internal control measures adopted by government to prevent financial frauds in its parastatals
(4) ascertained the opinions of junior and senior staff on the causes of financial frauds in government parastatals.
(5) determined to what extent the various internal control measures are effective in preventing financial frauds in government parastalals.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Fraud
According to the Institute of Chartered Accountants of England and Wales (ICAEW) (2001), fraud is generally defined in the law as an intentional misrepresentation of material existing fact made by one person to another with knowledge of its falsity and for the purpose of inducing the other person to act, and upon which the other person relies with resulting injury or damage. Fraud may also be made by an omission or purposeful failure to state material facts, which nondisclosure makes other statements misleading. Fraud, however, is not an easily defined term. According to District Judges Association US, the definition may change depending upon the statute in which the word appears. For example, in the crime of conspiracy to, “defraud” include a dishonest obstruction of a government agency. The definition can also be reflective of particular precedent in a jurisdiction. In some cases the definition of fraud may not be limited to fraud methodology, but may also include the harm or consequences of the fraudulent conduct [18]. To constitute fraud, the misrepresentation or omission must be made knowingly and intentionally, not as a result of mistake or accident, or in negligent disregard of its truth or falsity. Also, the plaintiff must prove that the defendant intended for the plaintiff to rely upon the misrepresentation and/or omission; that the plaintiff did in fact rely upon the misrepresentation and/or omission; and that the plaintiff suffered injury or damage as a result of the fraud [10]. Damages may include punitive damages as a punishment or public example due to the malicious nature of the fraud. There are many state and federal laws to regulate fraud in numerous areas. Some of the areas they are most heavily litigated include consumer fraud, corporate fraud, and insurance fraud. Employees in SMEs will commit fraud when they have opportunity to do so [19]. There are two separate but related theories about why employees commit fraud [19]. Based on the study conducted by Hollinger and Clark on 12,000 employees in the workforce, it was found that nearly 90 is percent engaged in “workplace deviant”, which included behaviour such as goldbricking, workplace slowdowns, sick time abuses and pilferage [19]. In addition, one-third of employees actually had stolen money or merchandise on the job. A second theory about why employees commit fraud is related to financial pressure. In the late 1940’s criminologist Donald R. Cressey interviewed nearly 200 incarcerated embezzlers, including convicted executives. He found that the majority committed fraud to meet their financial obligations. Cressey observed that two other factors had to be present for employees to commit fraud. They must perceive an opportunity to commit and conceal their crimes, and able to rationalise their offenses as something other than criminal activity. Small business normally does not have internal auditing staff. Touche Ross (1974), Kapnick (1975) and Foster (1975) reported that in most of fraud cases they studied, effective internal auditing staffs was absent [20]. Psychological theory suggests that where there is an organisation (such as an internal auditing staff) that provides some deterrent or fear of being caught, the opportunity to commit crime is decreased. Poor internal control system also increases opportunities to commit fraud.
In most instances, it was posited that poor internal control contributes to management fraud [20]. The surest avenue to fraud prevention and detection is a proper system of internal control, conscientiously implemented by management and must be regularly reviewed by auditors. Arens and Loebbecke (1976) and Kapnick (1975) suggest that a firm with poor accounting records is more susceptible to fraud compare to one that does not [20]. Basically there are several types of fraud could occur in SMEs and theft is one of the major fraudulent activities. Therefore, theft is always a serious problem for small business. In 2005, total retail losses were close to USD40 billion [21].
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
POPULATION OF THE STUDY
According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitutes of individuals or elements that are homogeneous in description.
This study was carried to examine accounting records and fraud preventive measures. Selected parastatal in Akwa Ibom state form the population of the study.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain accounting records and fraud preventive measures. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of accounting records and fraud preventive measures
Summary
This study was on accounting records and fraud preventive measures. Three objectives were raised which included: ascertained the various types of financia1 frauds prevalent in government parastatals, ascertained the causes of financial frauds in government parastatals, ascertained the various internal control measures adopted by government to prevent financial frauds in its parastatals, ascertained the opinions of junior and senior staff on the causes of financial frauds in government parastatals and determined to what extent the various internal control measures are effective in preventing financial frauds in government parastalals.. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from selected government parastatal in Akwa Ibom. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
As a conclusion, internal control and fraud prevention measures play a vital role and could have influence on government performance. In conclusion, poor accounting records keeping would lead to poor financial performance and proper accounting records keeping would lead to better financial performance
Recommendation
Precautions, detection, investigative audits and auditor professionalism have a significant simultaneous effect on efforts to minimize fraud in financial statements
Auditor professionalism has a significant partial effect on efforts to minimize fraud in financial statements
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