The Impact Of Auditing In The Prevention Of Frauds In The Nigerian Public Sector

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The Impact Of Auditing In The Prevention Of Frauds In The Nigerian Public Sector


Internal audit system plays a key role in the assurance chain towards financial accountability and control. Therefore, the purpose of this study is to provide evidence on the perception about the effectiveness of audit accountability in the Nigerian public sector. In other to carry out a proper assessment, the research is centered on the use of auditing to improving public sector management using National Judicial Council Abuja. It also ascertained the extent to which accountability, effectiveness and efficiency of audit mechanism are being promoted in Nigeria. Data were gathered through questionnaires administered to the staff of the National Judicial Council Abuja on the problems facing the audit and accountability system of the public sector. Cross tabulations and Chi-square were used to analyze the data. We found out that the internal audit can effectively check fraud and fraudulent activities in the Public Sector have significant numbers of Internal Audit Departments to function effectively. It is recommended that Government should provide an adequately equip staff with electronic data processing and also maintains an environment within which internal auditors can have sufficient freedom to accomplish their task efficiently. The study also revealed that the internal control systems in the state are very weak; audit procedures and accountability are as well ineffective due to political interference and skills of some auditing staff. Based on the findings, an effective internal control system free from interference is needed. There is also the need for upgrading the skills of auditing personnel and also strict adherence to statutory and professional standards. Some of these changes require political will at both Federal and State government level

Chapter One


1.1 Background of the Study

The term fraud is commonly used to describe a wide variety of dishonest behaviors such as deception, bribery, corruption, forgery, false representation, collusion and concealment of material facts. It is usually to describe the act of depriving a person or something by decent, which may involve the misuse of funds or other resources, or the supply of false information. Actual gain, benefits or loss to another does not occur for an act to be fraudulent but these does have to be intent to make a gain or cause a loss.

Over the years, audited financial statements have established an impressive record of reliability. All business entities whether private or public, irrespective of size, nature or scope of operation have expert or written policies and definitely keep records.

Such records to be kept constitute valuation information and thus, subject to some form of independent verification in order to confer reasonable credibility on them. The task of the independent verification constitutes in providence of auditing and the person who perform this task is referred to as the auditor.

Auditing has been defined by Glyne (1981) as the independent examination and investigation of the book, accounts and voucher of a business with view to enabling the auditors to report whether the balance sheet and profit and loss account are properly drawn up so as to present true and fair view of the state of the affairs of the business according to the best of the auditors.

In the course of this study, it is significant to differentiate between the public and private sector. The public sector whose wealth is owned collectively by the public, it consists of ministries departments, public corporation, the parastatals and the three tiers of government (Federal, state and local government) of which the sole aim is to provide useful services to all the citizens irrespective of their status in the society.

The legal basis in the public sector constitute, Audit Act 1958, Finance Regulations, Treasury Circular, Appropriation Act of the year in question, and all form of the legal basis.

The public sector accounting is the composite activities of recording, analyzing, summarizing, reporting and interpreting financial fiscal transactions of the government and its agencies.

It reflects all levels of transactions involving the receipts, custody and disbursement of fund and the users of public sector account. While the private sector consists of ownership and shareholders and the report of their transaction is to the owners, shareholders and the outsiders.

The cash basis system of accounting is used in the public sectors while the accrual basis is used in the private sector. In addition, the equity or share interest of the public sector cannot be owned, bought or sold and profit making does not contribute to its survival unlike the private sector where profit making is the main stay and driving force.

The private sector on the other hand has its bulk of wealth owned collectively by individuals or groups of individuals. The sole motive of the sector is for profit making. The legal basis in the private sector is formed by the companies and Allied Matter Act 1990, the partnership Law, etc.

1.2 Statement of Problems

The cash basis system employed in the public sector accounting has been identified to have serious effects through its simple application. Some of the effects are as follows:

  1. Problem of compliance with application law and regulation.
  2. Problem of effectiveness in achieving the program result.
  3. Problem of efficiency economy of operation.
  4. Problem of time constraints.

1.3 Objective of the Study

The primary objective of the research work is to evaluate the effect of auditing in the prevention of fraud in the Nigeria public sector.

1.4 Research Questions

This research work will provide answer to the following questions:

  1. How best can fraud in the public sector be prevented?
  2. What role does proper accounts records play in the effective execution of public sector audit?
  3. What are the factors that hinder or promote the proper auditing of the public sector?
  4. How best are the auditors to carry out public sector audit?
  5. How best can the current problems faced by the auditors in auditing public sector or solves?

1.5 Statement of Hypothesis

H0: There is no relationship between auditing and fraud prevention.

HI: There is a relationship between auditing and fraud prevention.

1.6 Significance of the Study

The research will be beneficial to many sectors of economy due to it’s importance in the sense that it will assist in knowing whether all the legal basis of government accounting are strictly followed by the official in the preparation of financial statement in the public sector.

It will point out and proffer to the sectors of economy the solutions, such ways and such areas that could help in the prevention of fraud in any organization especially in the public sectors. The research will also draw clear lines of distinctions between public sector and private sector accounting that profit is not the main drive of the public sector, unlike private sector where profit is the main drive.

1.7 Scope of the Study

This project is restricted to the impact of auditing in prevention of fraud in the Nigerian public sector, a case study of National Judicial Council Abuja. Attention will be given specifically to the Audit Unit and Accounting Department respectively.

1.8 Definition of Terms


This is a systematic process of objectively obtaining and evaluating evidence / regarding assertion that economic action and events are ascertain and communicate the results to interested parties.


Auditor is a statutory professional body that is concerned with giving the independent opinion of the financial statement. Auditor can be internal or external.

Internal Auditor:

These are auditors that are concerned with the internal review of the financial statements within the organization. They are employees of the organization and they are involved in the day to day checks of account in an organization.

External Auditors:

External Auditors are members of the public accounting firms or government agencies and serve as independent reviewers of the accounting system of clients or regulated firms.

Financial Statement:

This is the record that an auditor provide information on. It includes profit and loss, the balance sheet and assets of the business.


Fraud has been referred to as irregularities in the financial statement and they are deliberate actions that are taken by the management or employee of an organization. Fraud could through manipulation of account by the managers or outright theft of the company’s assets which involves defalcation.


The word errors is used to refer to unitentional mistake in financial statements whether of mathematical nature or electronically or whether due to over sight or misinterpretation of the relevant facts.


It is the state of characterized by objectively and integrity by an auditor.

True and Fair:

This auditor’s statement that the information received and the treatment and presentation of such information are in agreement with the accounting records and returns true. By true, it means that financial statement are:

It is free from material misstatements.

Base on verification evidence fair. “By fair” it means that the financial statements are:

  • Objectively presented
  • Free from management bias
  • Relevant to the needs of the users.

Chapter Five

Conclusion and Recommendations

The guarantee of complete independence and non-interference in the work of audit department is essential for a quality audit work to be performed as well as effective line of accountability. According to our results the internal control system in the State is not considered to be effective by a sample of the Auditor General’s Department.
We also recommend that the internal auditors should ensure that reviews of various departmental functions of

There is an inevitable need for today’s auditors to acquire the requisite technique and skills in computer operations and electronic data processing because of the impact, which the advent of computer has made in our lives. It is envisaged that some task such as salary preparation, pension accounts, automation of vote book recording and many other could be tapped.

In a system where manpower or manual operation are in use as it is a known fact, auditors are expected to operate at a tolerable level of performance for total system to run properly. Therefore training personnel as well as other training infrastructure becomes an important ingredient in the successful operation of control in such government parastatals, public sector organizations are carried out periodically in order to identify weaknesses in executing responsibilities and make recommendations for improvements such reviews should either be weekly, fortnightly or monthly. Heads of internal audit unit should be in attendance at top management meetings to be aware of policies affecting organizational objectives.

However, the following suggestions, based on the results of this study are hereby recommended:

  1. There must be strong and functioning accounting internal control and audit systems, manned by competent and morally upright staff;
  2. Government should try to alleviate the sufferings of its general population to improve their standard of living and empower them economically
  3. All payments and receipts to and from thee organization be computerized. In other words there must be administrative, systems development and procedural controls fully entrenched in the established computerization. Under these access to the computer should be restricted to specially assigned staff. Input data adjustments and master file alteration must not be initiated by Computer Department.
  4. The offices of the Auditors-General at Federal, State and Local Governments be made more functional and must be taken out of civil service structure and be restricted to professionally or academically competent hands with demonstrated capabilities for holding such offices.
  5. There is need to re-embark upon moral, religious, ethical and social re-orientation in the Nigeria’s society on the path of economic progress and development and not for political advantages. Rigorous campaigns to conscientize and re-orientate the general society on the need to refrain from fraud or abetting it are desirable. But this can not succeed without discipline, leadership by example and punishing culprits summarily and denying them any opportunity to do the same. Societal perception can only be changed if relevant FR, FI, FMM and other laws of the land are allowed to take their normal courses.
  6. There is need for a realistic, efficient and precisely formulated personnel policy in terms of staff recruitment, postings, promotion, motivation and discipline to be put in place to discourage attempts to defraud public sector organizations. Odiongenyi (1999:10), quoting an organizational psychologist Schein (1965) had discovered that “employees would be unlikely to share any valuable information including information on fraud with management where they perceive the organization as basically exploitative and indifference to human needs”. He added that where information flow on fraud is distorted, fraud prevention, control or detection is difficult.
  7. Academic and professional training and education be given appropriate attention with respect to accountants and auditors recruitment and selection in addition, cognitive attitudes, attributes, moral.
  8. Ministries and parastatals as well as local governments should endeavour to identify the type of fraud they are susceptible to and mount special efforts to deal with these specially and decisively. They can do this by being alert to the types of fraud prevent and gearing efforts to prevent it. Staff can also be enlightened through special workshops and training on the various areas involved in the fraud with a view to blocking all the existing loopholes in the internal control. For instance, various organizations in the public sector can organize special training on strategies for prevention and control of ‘defalcations’, ‘conversion’, ‘ghost workers’, ‘cash fraud’, ‘revenue fraud’ etc. etc. depending on the needs and appropriateness of the organization. In other words the nature of fraud prevalent and the type of organization must be given adequate attention and consideration in fraud prevention.
  9. Like Buhari (1998:31) observed, the society has the duty to nurture the virtues and qualities of integrity, honesty, discipline and readiness to undergo and suffer deprivation on behalf of the public or what it believes in and values, it must cultivate these values, it must demonstrate these by disowning completely antitheses of these and withdrawing respect and dignity for individuals who appear to embrace negative attitudes.
  10. Finally, it must be born in mind that the task of fraud prevention and control in public sector is not easy one; it must be faced collectively or jointly. Changing the system or its operators without changing their attitudes will not solve the problem. Like Obadan (1998:21) rightly observes, “African countries Nigeria inclusive, have come along way. They will get just as effective administration as they want, whether from their politicians or civil servants, or military personnel, depending on their vision for long-term development. If as in Latin American countries, during the nineteenth century, the general consensus is for plundering of the public purse, then the public purse will be plundered whatever the system of government that is devised. But if the consensus is to enforce commitment to development and accountability, the country will have a clean and effective government”.

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