Effective Internal Control as the Basis for Prevention and Deduction of Fraud in Bank in Nigeria (a Case Study of Afribank Plc Enugu)
Chapter One
PURPOSE OF STUDY
The principal purpose of Lilie’s study is to identify and explain how internal control Audit could be used to check fraud and detect fraud. Using Afri Bank plc and a case study
However, in more specific terms, lies study scale to
- Identify to what extent adequate internal control is Afribank Plc
- Fund out the extent of the ineffective way of banking operation.
- Determine the overall loan losses and increasing bad debt portfolio
Chapter Two
REVIEW OF RELATED LITERATURE
This chapter review literature related to theme and sub theme of the study major idea of this section are group and presented under the following sub heading
- Organization of internal control
- What is fraud in banking industry
- Sources form and caused of fraud in our bank
- The effects and danger of fraud in our banks.
- The law relating to and the legal process of protecting fraud in banks.
- Common fraudulent practices
- Technique off internal control
- The plan of the bank
- Authorization Recording and custody procedures
- Managerial supervision and reviews
- Audit Quality control. Nature and content
- Need for Audit Quality control Measure
- The Main objective of audit Quality control
- Summary of relates reviewed literature
ORGANIZATION OF INTERVAL CONTROL
Management in the new millenium will be saddled with greater challenges than it has been in the case of past. The are of easy money or armchair banking witnessed in bank as at 1980 is gone. What are likely to be experience in this new millennium will be uncertainty and lack of stability in the banking environment. Before the advent of large business concern, businesses were mainly carried on individually. In other word., the owner was his own internal Adulator. However with present complexity. It is advisable that he has a continuing appraised of work a s the hasty of his employee.
In this view Archibony EE (1992) increase in regular activities, the trend towards decentralization and greater geographical dissension coupled with continuos change capitalization and operating guideline diversification of product, computer and other technology call for outstanding performance by all level of management. These problem he, continued, contributed to increase the burden of manger’s. Consequently, management can not eleegate its dusties, management has t urn to the control specialist, the Auditor for assistance in maintaining surveillance over the management control network
According to ovuate porie (1994) Internal control as a serious processes and technique through which an organization own employees ascertain for the management by means of first hard on the job deservation weather established management control are adequate and effectively maintained, records and report financial accounting and other wise reflect the octual operation and result accurately and promptly and each division or unit is carrying out plans, policies and procedure for which it is responsible.
In the word of Omotosho (1992) the internal Auditor function as top management chief intelligent officer and chief executive, principal Adiver. It is the internal Auditor dusty to provide top management will the making and measuring cooperate performance, he break his confinement to budgeting , cashflow, panning and expenses budgeting and planning and expenses, budgeting and play the larger role of controlling entire bank operation and activities geared toward achieving cooperate goal and objectives as determined in the mission vision and message set out by the representative of the owner the bank, that is board of directors. It is pertinent at this juncture to say that Auditing is defined by the institute of chartered Accountant of Nigeria (ICAN) is an examination of by an auditor of the exidence from, which the final revenue account and balance sheet of an organization has been prepared in order to ascertain that they present a true and fair view of the summarized transaction for the year ended, enabling the auditor report them there on. In the word of word of Adeigbe (1984) plans for operation of internal control should be designed tentatively before establishing the department of internal control Audit. He asset that at early stage the advantage of such a division to bank as well as its initial one the cost of maintaining the department does not out weigh considerably the benefit accusable. It is note worthy that internal control play an essential function in fraud detection and control. The form internal play an essential role in fraud prevention it intend to make a clear that this is an activity carried on within the organization using it own employee Adeigbe (1999) how ever opined that internal control is not a substitute for proper evaluation of the overall control present in a company. The English illustrate detionary defined fraud as a deceitfulness, criminal deception and using false representation to obtained an unjust advantage. Again Fagbemi (1986) defined fraud as an act of depriving a person dishonesty of some thing to which he or she would be entitles.
Aderigbe (1999) indentified the following as the factor that could contribute to fraud.
- The ease with which the particular asset can be consented after they are appraise such as cash, securities, good purchase for resale
- Independent control of individual over asset (That is where there is inadequate segregation of duties
- Possibility of refusing to comply with laid down policy, procedure without any penalty or sanction and.
- Collusion between interacting agents changed with the duties responsibilities to safe guard, protecting the asset and other interest of the organization.
For example an official driver in bank may take petrol reciepl from petrol station not actually sold to him and make clain on it from bank.
CHAPTER THREE
METHODOLOGY
This chapter deals will research procedure described under the following heading
- Research design
- Area of study
- Population of study
- Sample and sampling
- Instrument for data collection
- Validation of research instrument
- Reliability of research instrument
- Reliability of the research
- Method of administration of research instrument
- Method data analysis
RESEARCH DESIGN
This study was survey descriptive research performed as a case study on Effective internal control as a basis for prevention and defection of draud as applicable to Afri bank plc. Consequently this condition survey appraised the various method of internal control Audit in order to enhance effectivence in fraud control and detection
ARAE OF STUDY
This research is a case study of Afri bank plc Enugu was camed out at the man branch (head quates) of this bank located in Ogui road
POPULATION
The population of this study consisted of all the staff under various department existing at Afri bank plc Enugu main office. The department inducting the numerical staff strength is shown below.
CHAPTER FOUR
DATA PRESENTATION AND RESULTS
The chapter dwells on the presentation and analysis of data collected from the study. The method of analysis was explain in chapters three
CHAPTER FIVE
DISCUSSION OF RESULT
This chapter presents the discussion of the result of the study, conclusion, implication funding, recommendation, suggestion for further research and limitation of study
RESEARCH QUESTION ONE
To what extent are the banking operation effective at Afri Bank plc?
The result of this research question (tablet) indicate that both the senior and junior staff of Afri bank plc Enugu mean expressed their opinion as show below
Both of them SS and Js agreed this the four strategies comprising strong capital base prompt and courteous alternation to customers safety of customer deposit and trust and technological advancement are all applicable at Afri bank geared toward effective delivery service.
RESEARCH QUESTION TWO
How adequate s the altitude and perception of banking operation transations? The result of this research question (table 2) cleany depict that both cadre of staff senior and junior as shown below expresses their opinion
Both SS and JS agreed that by providing 5 minutes transaction time customer oriented services, saving deposits account and other financial service provision of various from of loan and advances and mortgage services and the availability constancy services help to ensure that their attitude and perception of banking operation transaction at Afri bank remained adequate
RESEARCH QUESTION THREE
To what extent are loan losses and bad debts occuring in Afri bank plc?
The result of this research question (table3) indicated that both the senior and junior members of staff of Afri bank expressed their opinion as analyzed below
Both cadre of staff (junior and senior) agreed that proper assessment of the attributes of credit application using “ SCS of credit investigation of the credit application via reference,
Physical possession of them of security and signed irrevocable authority to sell as issued by the debtor to the creditor (Afri bank) and the effective data collectors policy are strategies adopted to ensure bad eurrent general low level loan loss and bad debts in Afri bank
CONCLUSION
The following conclusion have been drawn from the relevant major finding of the study
- That some of the strategies installed in Afribank to ensure effective banking operation include strong capital base prompt and courteous attention to customer, safety of customer deposit, and trust form major base of internal control and technology advancement
- The bank adopt a style of providing only 5 minute transaction time customer oriented financial service various form of loan and advanced and availability of constancy services to the public. These are geared toward ensuring that adequate banking operation transaction are provide to customer
- Again it was observed that adequate steps are always taken by the bank to discourage loan losses and bad debt such as through proper assessment of the attribute of loan appliance investigation of credit applicant physical possession of collateral and effective debt esilection
- As at present the extent to which these strategiesa are being applied in the bank is satisfactory
- In a nutshell the above strategies reveal the high standard of internal control put in a place to ensure effective management of resources at Afri bank plc.
RECOMMENDATION
The following recommendation have been made in the light of finding and discussion will relevant major conclusion which have been highlighted in 1,2,3,4,5, in this section there is emergent need to suggherst the following action polices and steps geared toward ensuring the general improvement of internal control Audit function and effectiveness in banking management
ADEQUATER INTERNAL CONTROL
SYSTEM- Internal control involve all type of check and balance both operational and fincinal employed by management to ensure a safeguard the organization asset. There fore, specific responsibilities should be defined for identifiable type of duty. There should be check and balances
USE OF OPERATION PROCEDURE MANUAL
Each procedure should be reduce to writing. Bank should have manual of procedure in order to promote efficiency among staffs, it is absolutely essential for staff to take their annual holiday during which a new hand must be allowed to stand in on relief duty. Except cases of collusion any misdemeanor are usually exposed or any form of intended fraudulent practiced are brought to light. Also employee should be rotated on a job.
INTERNAL CONTROL AUDIT DEPARTMENT BANK
Should try as much possible to have an internal control Audit department. It has been butlers by finding of this study that complete absence of internal control Audit service is one major cause of frauds to enhance its effectiveness of control the internal control Audit section should be responsible by a qualified account . Additionally he should be responsible only to the managing director or higher authority of the bank
An internal Auditor should be independent and must not be affair to exercise his authority
MANAGEMENT SHOULD DAYT PARTICULAR
Attention to cash
Experience has shown that cashier and mean culprits in perpetrating fraud in banking sectors this their recruitment should not be bias it should be through. This is the key post in any organization possibly proper security or quartette should be requested from the applicant before being assigned to the post of cashier. In addition banks should arrange for a fidelity insurance to cover the activity of cashier during accounting period usually equally cash in transit is another insure cover which a bank should posed in order to cover the risk of loss of any cash in transit space movement
ADEQUATE RECORD MNUST BE KEPT
In addition the adequate record demand by companies and Allied matter degree 1990 the following are generally required record to be kept
(a) Record must be sufficient to show and explain the bank transaction
(b) Record should disclose with reasonable accuracy at any time the financial position of the bank at any time and record must be such that enable the director to ensure that the balance she or profit and loss account proponed by them gives, in the case o balance sheet a turn and fair view of the company stale of affair and in case of profit and loss account and true and fair visas of companys profit and loss account
REFERENCE
- Ader,bige, P (1984) The important of internal /Audit function AnExperimental investigation . Ibaden university press limited.
- ADEWUMI NNE (1986) Fraud in Bank an over view of Nigerian institute of bank Lagos branch; land work publisher
- Adewanye Femi (1986) Fraud in banking transition The Nigerian bank vol. 5 No1 p7-15
- Archibony EE (1992) The bank inspector Ibandan New barn publisher
- Asukwo PE (1999) Bank fraud A look at the Nigeria cleaning system Ibandan new born publisher
- Fagbemi Bunmi Fraud and law (1986) the Nigerian banker vol. 6 no1
- Fagbemi O.A (1986) Fraud in banks: The law and legal process. Journal of Nigeria institute of bankers Lagos.
- Brierley : P. (1984) Quality control for Auditing New York Ronal per company