Effective Internal Control System As A Measure Of Fraud Prevention In The Public Service (A Case Study Of Board Of Internal Revenue Enugu State)

Project and Seminar Material for Accountancy / Accounting

Effective Internal Control System As A Measure Of Fraud Prevention In The Public Service (A Case Study Of Board Of Internal Revenue Enugu State)

Proposal

The purpose of this study is to analyze the effectiveness of the internal control system of the board of internal Revenue Enugu State.

It cannot be over emphasized here that an effective internal control system does not only ensure financial accuracy of transactions, but it reduces trade to the barest minimum. A good internal control system can only operate in a fairly large organization that employs a good number of staff.

It is also important to note that there is high rate of fraudulent practices in government ministries and parastatals today and the Board of internal revenue is not an exception. That is why the internal control system must not only be put in place, but is also having to be effective in removing such irregularities.

Similarly, the research work will be grouped into five chapters, in which chapter one contains the introduction. This will give us a skeletal framework of the study and also sub topics such as statement of the problem and so on.

Chapter two contains the literature review which will give the details of the topic and also the meaning of the topic.

Chapter three contains the research methodology and techniques which will show the methods through which the survey and the sources of data will be carried out.

Chapter four contains the presentation and the analysis of data which further gives the information suitable.

Chapter five finally contains a workable recommendation proffered from the findings derived. These findings will help the management of the board of internal revenue Enugu State to improve on the effectiveness of their internal control system.

Table of Content

Preliminary Page(s)

  • Title Page
  • Dedication
  • Acknowledgement
  • Proposal

Chapter One

Introduction

  • 1.1 Introduction
  • 1.2 Statement of Problem
  • 1.3 Purpose of Study
  • 1.4 Relevance of the Study
  • 1.5 Methodology and Hypothesis Statement
  • 1.6 Scope and Limitation of Study
  • 1.7 Definition of Terms.

Chapter Two

Literature Review

  • 2.1 Introduction
  • 2.2 Organizational Chart
  • 2.3 Personal Income Tax Duties
  • 2.4 Other Revenue Duties
  • 2.5 Planning Research and Statistics
  • 2.6 Administration and Finances
  • 2.7 Relationship Between Internal and External Auditor
  • 2.8 Internal Audit as an Effective Internal Control System.
  • 2.9 Factors That Will Be Considered by an External Auditor Before Relying on the Work of the Internal Auditors
  • 2.10 Audit Committee.
  • 2.11 Relationship Between the Audit Committee and the External Auditor.
  • 2.12 Essentials of Internal Control
  • 2.13 Internal Check
  • 2.14 Types of Internal Control System at Board of Internal Revenue Enugu State
  • 2.15 Areas of Work Where Internal and External Auditors Overlap at the Board of Internal Revenue Enugu State.
  • 2.16 Areas of Work Where Internal and External Auditors Overlap at the Board of Internal Revenue Enugu State
  • 2.17 Fraud
  • 2.18 Difference Between Fraud in the Organization
  • 2.19 Reference

Chapter Three

Methodology

  • 3.1 Research Methodology
  • 3.2 Primary Data
  • 3.3 Validity and Reliability of the Questionnaire
  • 3.4 Personal Interview
  • 3.5 Observations
  • 3.6 Statistical Tools and Mathematical Manipulation
  • 3.7 Research Design
  • 3.8 Selection of Sample
  • 3.9 References

Chapter Four

Data Analysis

  • 4.1 Introduction
  • 4.2 Field Survey
  • 4.3 Presentation and Analysis of Data
  • 4.4 Section a Part of the Questionnaire
  • 4.5 Section B Part of the Questionnaire
  • 4.6 Data Analysis
  • 4.7 The Procedure for Reporting Fraud at the Board of Internal Revenue
  • 4.8 Testing of Hypothesis
  • 4.9 Hypothesis 1
  • 4.10 Hypothesis 2
  • 4.11 References

Chapter Five

Summary, Conclusion and Recommendations

  • 5.1 Summary
  • 5.2 Recommendations
  • 5.3 Conclusion
  • Bibliography
  • Appendix

Chapter One

Introduction

1.1 Introduction

The Institute of Charter Accountants defines the concept internal control system as “The whole system of control financial and otherwise established by the management in order to carry on the business of the enterprise in an orderly and efficient manner, ensure adherence to management policies, safeguard the assets and secure as fact as possible the completeness and accuracy check and internal audit” fraud is a threat common to most organizations. It is a threat to the effective utilization of resources and as such, it will always remain an important concern to management.

Fraud needs to be deleted and potential fraud needs to be prevented. Effective internal control system is vital for the survival of any organization it serves as a check on fraudulent activities of the management and employees an organization and it brings about solutions to likely fraudulent acts in an organization.

Management is totally responsible for establishing the internal control system in an organization.

Auditing today is based on internal control. A client during the course of financial period so because it is client during the course of so because it is undesirable for an auditor to carry out a hundred percent check on all the transactions enters this.

Internal control system is a necessity in large organizations especially where management is removed from day to day routine operations of the organization. Internal control system include controls exercised by management which comprise of rules and regulations as well as procedures set up by organizations bearing also the problems set up by organizations bearing in also the problem of limited resources.

If the internals control system is effective in an organization, it ensures maximum use of resources and also reduces to the barest minimum fraud.

The feed for affective internal control system therefore cannot be over-emphasized. It is important because of the existence of risks and also all form irregularities in an organizations.ter of flatly, the major frauds in public and private enterprises can be traced to lapse in the internal control system and the existence of poor control environment in organization.

An effective internal control system and its fraud preventive measures in an organization will help to prevent fraud and errors in an organization thereby reducing fraud to its minimum than when internal control is not in existence or when there is weakness in the system.

1.2 Statement of Problem

An internal control system on its own guarantee and effective and efficient administrative completeness and accuracy of records or a fraud and error free environment due to the following reasons:

  1. Two or more dishonest persons working in collusion can override the efficiency of the internal control system.
  2. Management is in a position to step over the control it has set up
  3. Those in whom the authority is vested can abuse authorization control.
  4. A single dishonest employee can override the efficiency of the internal control system.

1.3 Purpose of the Study

They are:-

  1. To ensure that management policies are implemented appropriately
  2. To ensure the existence of a structures framework for efficient and effective channeling resources.
  3. To ensure that there is important and accurate documentation that can provide information on which significant based.
  4. To ensure timely records of relevant strategic ad tactic decision are based.
  5. To ensure that vital and expensive assets on which operation of the organization critically depends on are prevented from misuse and misappropriation.

1.4 Relevance of the Study

The relevance of this study is in its attempt to find out and evaluate those factors responsible for effective internal control system in the board of internal revenue (BI) Enugu State, Nigeria.

The significance will include the following:

  1. To ensure, the researcher finds out problems encountered in relation to the internal control system and make appropriate recommendation for improvement.
  2. To serve as a guide for organization having weak internal control systems to improve on the quality of theirs and their intern make it more effective.
  3. To serve as guide to others who are likely to carry on research on this study in future.

1.5 Methodology and Hypothesis Statement

In order to carry out this study, both primary and secondary data will be made use of Null and alternative hypothesis will be used for general statement of hypothesis.

  1. HO: Will represent Null hypothesis
  2. H1: Will represent Alternative hypothesis
  • HO – Internal control system is not effective in board of internal revenue Enugu State Nigeria to provide a fraud preventive measure.
  • H1 – Internal control system is effective in Board Of Internal Revenue Enugu State Nigeria to provide a fraud preventive measure.
  • HO – Two or more dishonest persons working in collusion can override the efficiency of the best possible controls.

1.6 Scope and Limitations of Study

This study is concentrated on effective internal prevention in an organization and it centres on the internal control system of the Board of Internal Revenue Enugu State Nigeria

The time available to complete this project has placed limitations too. However the researcher will overcome these constraints by streamling the research methodology.

The assumption that respondents would not honestly and accurately answer the survey questions is a limitation in the sense that the fear of loosing their jobs will not make them reveal the secrets of their organization.

1.7 Definition of Terms

In this study the researcher will try as much as possible to explain technical terms used during the course of study. They are as follows:

1. Internal control

In the AICPA’S codified standards covering auditing practice (320:09). Internal control is defined as “Internal control comprise the plan if organization and all of the co-ordinate methods to safeguard its assets check the accuracy and reliability of its accounting data, promote operational efficiency and encourage adherence to managerial policies.
It is the whole system of controls financial and otherwise established by the management in order to carry on the business of the company in an orderly67 and efficient manner.

2. Auditors

It is a firm of professional accountants all parties one or more of whom is responsible for the control of the audit and signing of the audit report on behalf of the firm.

3. Internal Audit

The standards for the professional practice of internal auditing released in may 21978 defined internal auditing as an “independent appraisal function established within its activities as a service to the organization”

4. Internal Auditors

Auditors that have been employed by the management of organizations, individuals, companies, partnership, and government as well as other agencies.

5. External Auditors

These are independent professional Accountants (qualified) often refereed to as independent to as independent auditors or certified public Accountants.

6. Internal Check

It is defined as the checks on the day today transactions, which operate continuously as part of the routine system where the work of one person is proved independently by another person.

7. Audit Committee

It is a committee setup by the shareholders to examine the directors’ report and make recommendation on the annual general meeting

Chapter Five

Summary, Recommendations and Conclusions

5.1 Summary

In the realization of the dangerous effects of the increasing wave of frauds in organizations, the management of organization have devised deferent control systems and polices that will ensure that the incidence of fraud is brought to the barest minimum polices. However, management polices differ from one organization to the other.

This study was embarked upon with the sole aim of discovering the effectiveness of the internal control system at the board of internal revenue, Enugu State. To facilitate the achievement of the objectives of this study, hypothesis was formulated around the topic of the study. After the administration and collection of questionnaires the board of internal revenue, the formulated hypothesis were tested and resulted derived there of.

However, the different methods proffered in the previous chapters of this study, would make and given any management the foresight to be able to prevent and put in place, the necessary madunery to convert internal fraudulent acts existing in an organization.

In a nutshell, we can see that, fraud cannot be perpetrated in any organization. Without the collusion of staff working in the account department.

5.2 Recommendations

The following recommendations are made following the observations and finding from the analysis of the data collected.

  1. The internal audit department should make do with more staff and this department must be independent of management
  2. The scope of the audit function at the board should be expanded to meet with present standard.
  3. The management and staff at the board must make effort to improve the internal control system generally.
  4. Regular review of the internal control system should be carried out to evaluate weakness and highlight areas of improvement.
  5. The staff at the board should be well motivated and commended each time the perform credibly well.
  6. Emphasis should be made on how to keep the internal control supervisory level and tighter control maintained in all department.
  7. There should be regular comparison between budgeted and corrective measures undertaken
  8. The management at the board must be building in safeguards in all aspects of its operations to minimize losses against fraud.
  9. The safeguard must be subjected to regular review with effectiveness assessed and compliance ensured
  10. External and internal control measure should be the water word put in place to curtail practices.
  11. The existing control system at the board of internal revenue should be supplemented by the introduction of more computers with in built internal control devices
  12. There should be improved training of staff at the board generally.
  13. All vouchers receipts cheque and so on must6 be dully authenticated by the audit department.
  14. The salaries of staff at the board should be increased to alleviate the poverty level and there in turn minimize cases of incidences of fraud.
  15. Personal records of staff should also be kept in the accounts department.
  16. The subject of this project work is so important to the current and incessant cases of fraud being conclusions over it should not only be confined to one parastatal like the board of internal revenue Enugu state alone but should be addressed to the general public.
  17. It is believed that internal control system in general has virtually broken down the unparalles wave of pen robberies in organization

5.3 Conclusion

Conclusively, it must be emphasized that to minimize losses against fraud, management must build in safeguards must be subject to regular review with effectiveness assessed and comeuppance ensured. This is because with all the good intentions in the word, efficient and well mentioned internal control system is the only answer to fraud. External and internal vigilance should be the watchword of fraudulent practices are to be faced.

In the view of the high test for wealth in Nigeria, but time frauds are on the increase and most organizations lose large sums to fraudsters. In most cases even where the frauds detected easily, amounts already drawn are difficult to recover.

Experience has shown that even where fraud has been discovered and there is the possibility of recovering same of frauds, the co-operation of the police has not been forthcoming. They have either complained of lack of vehicle or personnel. Hence, arrest is not quick time to recover from the fraudster parts of the fund if not at all.

Finally, the de-emphasis the craze for wealth in Nigeria, the government should place more emphasis on moral and religious instructions in all schools. This with the effort of the auditors will minimize the trends in fraud perpetration. It must be pointed out that this research work has not been too easy as to result of the difficult in obtaining the actual procedures of internal control on process. The internal control on process. The internal control systems as maintained by the board of internal revenue can be said to have been on quite effect in operation based on the research. However, deficiencies that were observed in some areas have been highlighted in the report and the research has made recommendations accordingly.

It is hoped that due consideration will be given to these recommendations and the researcher is quite positive that if implemented, these recommendations will go a long way in improving the internal control system at the board of internal revenue Enugu State.

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