Fraud in Financial Institution and the Auditors Liability
CHAPTER ONE
AIMS/ OBJECTIVES OF THE STUDY
The major objective of this study is to know the roles of internal auditors in fraud detection and prevention in banks in Nigeria; a case study of Skye bank plc.
Other specific objectives include:
- To determine how effective Access bank’s internal control system is.
- To determine the relationship between auditors and fraud detection in financial institutions.
- To determine if auditors alone can prevent fraud in financial institutions.
CHAPTER TWO
LITERATURE REVIEW
INTRODUCTION
Our focus in this chapter is to critically examine relevant literature that would assist in explaining the research problem and furthermore recognize the efforts of scholars who had previously contributed immensely to similar research. The chapter intends to deepen the understanding of the study and close the perceived gaps.
Precisely, the chapter will be considered in four sub-headings:
- Conceptual Framework
- Theoretical Framework, and
- Empirical Review
CONCEPTUAL FRAMEWORK
Fraud
The fraud negatively affects an economy as a whole, by causing huge financial losses, weakening social stability, threatening democratic structures, leading to a loss of trust in the economic system, or corrupting and compromising economic and social institutions (Nicolescu C., 2007, p. 92). Until not long ago, the companies did not considered fraud prevention as a main objective within their organization’s system of internal control. The action for fraud prevention was considered an implicit component within the general objectives, of compliance, of the internal controls, and therefore not seen as a structured programme, with clear and explicit aims regarding fraud prevention and detection (Petraècu D., 2013, p. 35). Furthermore, in the past, the shareholders, the board of administration, and the management tended to deal with fraud cases as mere anomalies resulted from the faulty functioning of the internal controls that only occurred rarely. As a result of the numerous famous fraud cases discovered at the beginning of the 21st century within some of the most prestigious multinational companies, this vision regarding fraud prevention has radically changed. Nowadays, fraud is considered to be one of the most important risks that an organization is exposed to, having a close connection to market, credit, judicial or reputational risks (Munteanu V., Zuca M., Zuca g., 2010, p. 33). A novelty is also the fact that investors have become more sensitive to the problem of fraud risk, since the collateral losses generated by a fraud ended up exceeding considerably the direct financial losses caused by that respective fraud. These collateral losses include negative publicity that can seriously affect the reputation of an organization. In this manner, the investors lose foremost the trust they have in the organisation’s leadership and the way it is managed, a fact that obviously entails a drop in its value. It affects as well all business relationships and employee morale. As a reaction to this situation, the investors impose the development of anti-fraud mechanisms focused on measures to prevent fraud and detect it on time. More and more interest is given to internal control and internal audit as core elements of these mechanisms (Munteanu V., Zuca M., Zuca g., 2010, p. 33). The term of ‘fraud’ appears in the broader concept of ‘irregularities’. An irregularity refers to any transgression from legality, regularity, or conformity, as well to any breach of the above mentioned. Deficiencies, transgressions, and malfunctions represent breaches of the normative framework, violations of the procedural code consisting of errors, omissions, or unintentional mistakes. The concept of fraud has several meanings, such as the ones listed below. Fraud represents the sum of irregularities and illegal actions committed with the intention of deceiving (Modalităìi practice de aplicare – MPA 1210 [Practical Means of Application – MPA 1210]. A2-1. Identificarea fraudei [Fraud Identification]). Fraud can refer also to the lack of communicating information by violating a specific obligation and/or embezzling funds from their initial goals (OG 79/2003 regarding the control and recovery of Communitarian funds, as well as co-financing funds improperly used, and its subsequent amendments)
CHAPTER THREE
RESEARCH METHODOLOGY
AREA OF STUDY
Access Bank plc, commonly known as Access Bank, is a Nigerian multinational commercial bank, owned by Access Bank Group. It is licensed by the Central Bank of Nigeria, the national banking regulator
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.
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 thirty five (35) questionnaires were administered to respondents of which thirty (30) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 30 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS:
Introduction
This chapter summarizes the findings into fraud in financial institution and the auditors liability using Access Bank as case study. The chapter consists of summary of the study, conclusions, and recommendations.
Summary of the Study
In this study, our focus was to examine fraud in financial institution and the auditors liability using Sky Bank as case study. The study specifically was aimed at determining how effective Access bank’s internal control system is; determine the relationship between auditors and fraud detection in financial institutions; determine if auditors alone can prevent fraud in Nigeria financial institution; determine how transparent and effective auditors are in detecting and preventing fraud in Nigeria banks.
The study adopted the survey research design and randomly enrolled participants in the study. A total of 30 responses were validated from the enrolled participants where all respondent are active staffs of Access Bank, Ikeja, Lagos State
Conclusions
Based on the findings of this study, the researcher made the following conclusion.
- The internal control system of Access bank is effective.
- There is a relationship between auditors and fraud detection in Nigeria financial institutions.
- Auditors can not solely prevent fraud in Nigeria financial institutions.
- Auditors in Access bank plc are very transparent and effectivein detecting and preventing fraud in
RECOMMENDATIONS
Based on the findings of this study, the researcher recommended that:
- The management of the commercial banks should ensure that the available corporate fraud control and prevention systems are utilized, maintained and updated for effective fraud control and prevention.
- A viable audit committee to evaluate and oversee everyday transactions of the bank and assist the management with oversight of reporting any lapses in the internal controls process of the bank.
- Anti-fraud seminars should be conducted on regular basis to employees.
- Job rotations within the bank should be planned by auditors and other senior officers to ensure effectiveness and the rotations should not be communicated ahead of time to the involved employee.
- Expanding the scope of an internal audit may help to mitigate the “expectation gap” problem as auditors would then be performing additional duties not previously required. It is hoped that by implementing both approaches, the public’s expectation and auditor’s duties will be brought into closer accord.
REFERENCE
- Adeyemo, K. A. (2012), Frauds in Nigerian Banks: Nature, Deep-Seated causes, Aftermaths and Probable Remedies”, Mediterranean Journal of Social Sciences, 3(2), pp. 279-289.
- Akindele, R.I. (2011). Fraud as a Negative Catalyst in the Nigerian Banking Industry. Journal of Emerging Trends in Economics and Management Sciences (JETEMS)2 (5): 357-363
- Agbaje, F. (1996): Nigerian Auditors and the Distressed Financial Sector. The National Accountant, 6(4) 36-37
- Alleyne, P. & Howard, M. (2005): “An exploratory study of auditors’ responsibility for fraud detection in Barbados. Managerial Auditing Journal. 20(3):284-303.
- Asukwo, P.E. (1999). Bank Frauds: A look at the Nigerian Banking Clearing System, ICAN News, January/March, pp. 19-24.
- Basle Committee on Banking Supervision (1997). Core Principles for Effective Banking Supervision.
- Biegelman, M. T., & Bartow, J. T. (2005). Executive roadmap to fraud prevention and internal control: creating a culture of compliance.
- Biegelman, M. T., & Bartow, J. T. (2012). Executive roadmap to fraud prevention and internal control: creating a culture of compliance. Retrieved from https://ebookcentral.proquest.com
- Chartered Institute of Management Accountants (CIMA 2008). Fraud Risk Management: A Guide to Good Practice.
- Coenen, T. L. (2008). Essentials of Corporate Fraud. Hoboken: John Wiley & Sons, Incorporated. Retrieved from https://ebookcentral-proquestcom.ezproxy.puv.fi/lib/vamklibrary-ebooks/detail.action?docID=331643
- Comer, M.J. (1985). “Corporate Fraud”. London: McGraw-Hill Book Company (UK.) limited.
- Fraud.Business Dictionary.com. Retrieved November 5, 2017, from Business Dictionary.com
- Graham, L. (2015). Internal control audit and compliance: documentation and testing under the new coso framework. Retrieved from https://ebookcentral.proquest.com
- Georgio, V.L. (2015). The Critical Role of Internal Audit in Addressing Bank Fraud: A Conceptual Framework and Critical Review of the Literature with Future Extensions.
