An Appraisal Of Internal Control System As A Mean Of Efficiency And Profitability In The Nigeria Money Deposit (A Case Study Of Main Street Bank Nigeria Plc)

Project and Seminar Topics with material for Banking and Finance

An Appraisal Of Internal Control System As A Mean Of Efficiency And Profitability In The Nigeria Money Deposit (A Case Study Of Main Street Bank Nigeria Plc)

Chapter One

1.1 Introduction

In banking, Accounting and auditing internal control is defined as a process effected by an organization structure, work and authority flows, people and management information system designed to help the banking accomplish specific goals or objectives.

It is a mean by which organization resources are directed, monitored and measured. It plays an important role in preventing and detecting fraud and protecting the organization’s resources.

Internal control-integrated framework, a widely-used frame-work in not only the United State but around the world, internal control is broadly defined as a process, effected by an entity’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories.

  1. Effectiveness and efficiency of operation
  2. Reliability of Financial reporting
  3. Compliance with law and regulations

Internal control has five components

1. Control Environment:

Set the tone for the organization, influencing the control consciousness of it people.

2. Risk Assessment:

The identification and analysis of relevant risk to the achievement of objective, forming a basis for how the risk should be managed.

3. Information and Communication:

System or process that supports the identification, capture and exchange of information in a firm and time frame that enables people to carry out responsibilities.

4. Control Activities:

The policies and procedure that help ensure management directive are carried out.

5. Monitoring:

Process used to assess the quality of internal control performance over time.

The internal control relates to the aggregate control system of the organization, which is composed of many individual control procedures.

Discrete control procedures, control are defined by the SEC as a specific set of policies, procedures and activities designed to meet an objective. A control may exist with a designated function or activities in a process. A control’s impact may be entity wide or specific to an account balance class of transaction or application.

Internal control procedure reduce process variation, leading to more predictable outcomes. Internal control is a key element of the foreign corrupt practices Act (FCPA) of 1977 and the Sarbanes-Oxley Act of 2002, which requires improvement in internal control within business entities are also referred to as OPERATIONAL CONTROLS.

The internal control system (ICS) consists of a set of rules, procedures and organization structure which aims to.

  • Achieve effective and efficient corporate process
  • Safeguard the value of corporate asset ensure that corporate strategy is implemented
  • Ensure the reliability and integrity of accounting and management data.
  • Ensure that operation comply with all existing rules and regulations

1.2 Statement of the Problem

The problem of the study by the researcher is to find out the appraisal of internal control system as a means of efficiency and profitability in Nigeria banks. The major statement of the problem are:

  1. The various means employed by customer and staff or official in defrauding the money deposit bank in Nigeria. This is one of the problems confronting the money deposit bank and this affect the bank efficiency and profitability.
  2. The likely challenges to be encountered by money deposit banks in tackling fraud; it has become paramount for bank to employ control system internally to check fraud.
  3. The researcher work will aimed at finding lasting remedies or solution to solve problem of frauds in money deposit bank in Nigeria.

1.3 Research Question

The focus of this study is to identify the appraisal of internal control system as efficiency and profitability in banks, hence, in the course of the study effect has been to find solution to the following research question.

  1. What is the bank concept of internal control system?
  2. What is the historical background of internal control system in commercial bank?
  3. What are the various mean employed in defrauding banks?
  4. What are the remedies to profitability in commercial bank (money deposit)?
  5. What are the main effects of fraud in banks?

1.4 Objective of the Study

The primary objective of this study is to examine the appraisal of internal control system as a mean of efficiency and profitability in the Nigeria commercial bank (money deposit).

The objectives of the study are:

  1. To examine the basic concept of internal control system of banks.
  2. To discuss the theoretical framework of internal control system in the banking industry.
  3. To enumerate the remedies to efficiency in commercial bank (money deposit).
  4. To expatiate the form and nature of profitability in banking industry.
  5. To analyze the problem uncounted by the commercial banks (money deposit).

1.5 Significance of the Study

The research work is predicted in nature of the study is enable the banking industry on the way to meet the profit on banks that meet the directives has been stronger.

The study in also be beneficial to the shareholders, the policy is bring about improved and increased in the shareholders value and with through appreciate of their share and it’s market ability through the mega bank customers is also benefit through reduction in cost of paying for services, prompt receiving of services, reductions in time spent in the banking hall.

1.6 Research Hypothesis

The basic fundamental for testing hypothesis involved the formulation is:

  • Ho: Null hypothesis
  • Hi: Alternative hypothesis
  1. Ho: internal control system has no correlation with profitability and efficiency of money deposit bank in Nigeria
  2. Hi: internal control system has a great correlation with profitability and efficiency of money deposit bank in Nigeria.

1.7 Scope and Limitation of the Study

The research intend to carry out research work on the appraisal of internal control system as a means of efficiency and profitability in Nigeria bank using Mainstreet bank of Nigeria Plc as a case study.

However, the research intend to cover the lack of recent and adequate material, unwillingness of the respondents and the case study to given the true replies, lack of co-operation of the case study.

However, effort has been made to ensure that the above limitation did not hide effective completion and quality of research work and how it can be improved upon now and the future.

1.8 Definition of Key Terms


A company carrying on the business of receiving money, collecting draft for customer subject to the obligation of honoring cheque drawn upon them from time t by customers to the extent of the amount available on the account.

Cheque Kite Flying:

This is a method whereby depositors utilize the time a cheque to clean to obtain an authorized loan without any interest charge.


This mean to check put a stop in the activity uses a limit in the activities of individual or a group of individual in the banking industry.


This is making or alteration of writing to the prejudge of another man’s right or litter to which he is ordinary entitled to.


Is an act of cause of deception deliberately practiced to gain unlawful or unfair advantages, such as deception in directly to the detriment of another.


An act of negligence in committed where employees through ignorance of lack of commitment to duties guard the interest of his employees or railed to follow a prescribed procedure.

1.9 Plan and Organization of the Study

For clarity of research context, the research work has divided into five (5) chapters and adequate research findings and conclusion was drawn to make relevant recommendations for the research.

  • Chapter one deals with introduction of the topic
  • Chapter two deals with literature review
  • Chapter three deals with research methodology
  • Chapter four deals with data presentation and analysis
  • Chapter five base on findings, summary, conclusion and recommendations.

Chapter Five

Findings, Summary, Conclusion and Recommendations

5.1 Findings

To achieve this goal, structured interview techniques were used to aid the gathering of relevant and useful which were collected before arriving at the researcher findings.

The first hypothesis has been affirmed in table I and II where it is crystal clear that fraud lead to unwarranted losses to both the bank and customers.

As regards second hypothesis, the analysis in table III and IV proved that more than 75% of bank frauds success with active connivance or collaboration of bank staff.

The third hypothesis has also been affirmed by the analysis in table VI which gave credit to the popular belief that management control measure in Nigeria are not without 100 poles on the other hand, the staff punishment are meant to serve as determent to fraudulent have ironically turned to a source of motivation with its damaging consequences uncurbed.

The fourth hypothesis has also been affirmed as analysis in table VII. About 35% of the budget annual running cost of banks is spent on preventing and detecting fraud.

This rate is high enough to contribute to the improvement of banking services to the customer but which its attempt to save our society from an incurable diseases.

The fifth and the last hypothesis has also been corrected proved as analysis in table V and Vi that banks are generally skeptical about reporting cases of the public.

The inference drawn from this analysis is that tools used to commit frauds are diversified and the experience of the fraudsters become more enriched with each repeated attempt to defraud. The further affirms the theory that there is a mature relationship between the existence, growth and sophistication of crime and the socio-economic and complexity of every society.

5.2 Summary

The research work has been able to unravel some mysteries associated with forgeries and fraud in the banking sector of the financial institution in Nigeria. The effect therefore has nevertheless been the beneficial to the economy.

This has made this project to appraisal of internal control system in bank to the prevention and also note the cause of frauds in the financial institutions.

The main causes of frauds and forgeries in the banking sector are improper and poor internal control and not only the causes manner and mode of employment of staff has also cause a great depression to the financial sector.
Fraud has over the year taken different dimensions and increased in sophistication, today banks are concerned and worried about system in the banking industry. The rampant growth of economic crime and financial fraud threatened the financial security of bank and even nation as a whole.

The project have therefore try as much as possible to make comprehensive report on the appraisal of internal control system on the commercial banks.

5.3 Conclusion

The efficiency of any organization depends on the internal control system. Before forgeries and fraud can be achieved there must have been some sense of improper coordination from the management of such organization.
The inefficiency to perpetrate fraud both within and outside the organization, there are several method of perpetrating fraud ranging from the Junior staff to the senior staff.

Most of the fraud attempts are as a result of close monitoring from the dishonest staff within the financial institutions and collaboration from the extended body, which are mostly the customer of the bank. There are times which fraud are not international but due to unnoticed errors from the initial aspect of the transaction which are capitalize on by the dishonest member of the staff.

Therefore, the management of any financial institution mostly banks should note that any person who initiates the start of a transaction must not see the end but should be taken one by other trusted and efficient staff who will monitor and see proper recording of the subordinate staff.

The management in this effort to monitor fraud and forgeries which are being perpetrated and should be concern about the welfare of its staff because an efficiency in any internal control system and adequate training.

5.4 Recommendations

The importance of any effective internal control system cannot be over emphasized in financial institution for the internal control system to be efficiently effective, the following recommendations should be taken into consideration.

Rotation of employee to an extent, practicable rotation of member of staff in the sensitive section should be duly carried out at intervals, if this is done, the members of staff holding such initial position will break up not to allow any irregularities which are uncovered with correspondingly promote the effectiveness of the internal control system.

Competence of personnel, even the best designed of internal control will work satisfactorily unless the adequate and well trained member of staff involves in the operational activity must be professionally and training and re-training should be carried out or embark upon so as to move along way the dynamic environment in which the bank exists. They will go a long way in improving the effectiveness of any internal control measure taken by the management.

The environment in which internal control operates is constantly changing because of the influx of some factors in formulating needs in the policies need to be understood so that duties should be properly segregated and linked together in horizon so that all efforts will be geared toward achieving same goals by institution in a system of graduated limit.

Establishment of deal control system by means of allowing transaction to pass through mechanism by which range, members of staff will be the achievement of an operation from the beginning to the end which will allow for proper supervision and security and reducing errors and irregularities.

  1. A good working atmosphere where there will be free flow of bankers to customer relationship, this will motivate both staff and customer to work synergistically and proper solution which might contribute to measures towards minimized work on fraud.
  2. Statutory requirement of rendering returns for effectiveness of all policy measures which the government monetary and supervisory authority might have designed the measure to curb.
  3. The preparation of application manual which will not allow intruder to gain access so easily through the security outfit which will be provided within and out of the system network.
  4. Establishment of inspectorate unit, which will commensurate powers of authority to embrace some degree of independence within the corporate organization structure.
  5. Proper verification of signature on all sensitive transaction, this will go along way in reducing forgeries and frauds, which could be disaster to the internal control system.
  6. Control of account to make sure these account are not used by dishonest staff to channel fraudulent transactions.
  7. Finally, the use of Regis-scope commercial should be installed to monitor the personality of individual involved in large financial transactions.

More so, management should let members of the staff to be aware of their valuable potential and are capable to be treated qualitatively honoured which could motivate to allow proper and effective management control towards eradication of fraud and forgeries.

An Appraisal Of Internal Control System As A Mean Of Efficiency And Profitability In The Nigeria Money Deposit (A Case Study Of Main Street Bank Nigeria Plc)

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An Appraisal Of Internal Control System As A Mean Of Efficiency And Profitability In The Nigeria Money Deposit (A Case Study Of Main Street Bank Nigeria Plc)


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