The Role Of Internal Control Measures In The Prevention Of Fraud And Operations Error In Ghanaian Firms

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The Role Of Internal Control Measures In The Prevention Of Fraud And Operations Error In Ghanaian Firms


Abstract


This study examined the role of internal control measures in the prevention of fraud and operations error in Ghanaian firms. Secondary data was used in the study. The study employed descriptive summary case study research design. The Method of Data presentation analysis for this work will include descriptive such as simple tables with percentages, charts, and correlation; while inferential statistics such as regression analysis will be used to test for hypothesis. The model specification for the test of hypothesis will encompass two specific models. The student T test and Pearson product moment of correlation coefficient. The findings reveal that the correlation between financial governance control and level of fraud prevention and detection is negative and significant (R= – 0.401, p value=0.008). This implies that an increase in financial governance control is associated with a decrease in level of fraud prevention and detection. The study recommended that The study recommends that firms should fully reconcile their accounts more frequently in order to reduce the cases of more incidences of frauds. Also, firms should reduce the variances in budgets through better reporting and budgetary control measures as it will reduce cases of frauds.


Chapter One


Introduction

1.1 Background of the Study

The aim of every organization whether private or public is to have a successful operation which leads to the achievement of corporate aims of objectives. This requires that the organizations assets and resources are effectively managed. Therefore the need to protect the firm’s assets and the adoption of established procedures and policies for successful operations is imperative. Internal controls consist of all procedures and methods which the firm applies to protect its assets and conduct a successful operation Emma Zhang (2016). The essence is to prevent fraud and losses arising out of fraudulent activities. Internal control detects deviations in financial records through the adoption of internal control measures. Such as establishing a system of checks and balances, adopting an authorization procedure. The essence of authorization is to verify the validity of transactions. Segregation of duties to provide for check and balances and the detection of errors in the operation of the firm and taking corrective measures. The essence is for operational efficiency and effective communication. Internal control measure also involves the maintenance of an effective human resources through the establishment of clear line of responsibility and authority. Other internal control measures include the physical protection of the firm’s assets, processes and data, Documentation and record management for the preservation of accurate records and the monitoring of the firms operations. The study seeks to appraise the role of internal control measure in the prevention of fraud and operation errors in Ghanaian firms.


1.2 Statement of the Problem

The increasing level of fraud and inefficient operation is associated with lack of good internal control measures. The process of achieving success in business cannot be disassociated with sound internal control policies as many firms conduct their business without the adherence to sound principles of management as internal control measures. Consequently, operations are not properly segmented to establish a clear line of responsibility and authority which leads to inefficient workforce, no proper documentation and record keeping leading to errors in record keeping and fraudulent activities. Also, many firms do not take adequate measure to protect their assets, processes and information and lack good monitoring and evaluation method. The study seek investigate the role of internal control measure in the prevention of fraud and operation errors in Ghanaian firms.


1.3 Objectives of the Study

The main study objective is to investigate the role of internal control measure in the prevention of fraud and operation errors in Ghanaian firms; while the specific objectives include:

  1. To appraise the concept of internal control and internal control measures.
  2. To determine the role of internal control measure in the prevention of fraud and operation erros.
  3. To determine the role of internal control measure in the prevention of fraud and operation errors in Ghanaians firms.

1.4 Research Questions

  1. What is the internal control and internal control measures?
  2. What is the role of internal control measure in the prevention of fraud and operation erros?
  3. What is the role of internal control measure in the prevention of fraud and operation errors in Ghanaians firms?

1.5 Statement of Hypothesis

The statement of the hypothesis of the study is stated in null

Ho The level of fraud and operation error in ghanian firms is low

Ho The internal control measures in ghanian firms are ineffective


1.6 Significance of the Study

The study seeks to provide an evaluative appraisal of internal control and internal control measures with the view of determining its applicability in Ghanaians firms.


1.7 Scope of the Study

The study focuses on the investigation of the role of internal control measure in the prevention of fraud and operation errors in Ghanaians firms.


1.8 Limitation of the Study

The study was confronted with logistic and geographical constraint


1.9 Definition of Terms

Internal Control Defined

Internal controls consist of all procedures and methods which the firm applies to protect its assets and conduct a successful operation. The essence is to prevent fraud and losses arising out of fraudulent activities.

Fraud Defined

The falsification and misrepresentation of financial record of the firm

Operations Management Defined

Operations management is the management of business activities to create high efficiency. It is concerned with converting materials and labor into goods and services as efficiently as possible to maximize the profit of an organization.


Chapter Five


Summary, Conclusions and Recommendations

5.1 Summary of Findings

The study sought to investigate the role of internal control measures in the prevention of fraud and operations error in Ghana firms. The main problem was that there is increased level of fraud and misappropriation of funds in firms in Nigeria caused by poor internal control measures.

The correlation analysis revealed a negative and significant association between reconciliation controls and level of fraud prevention and detection (R= – 0.594, p value=0.000) which implies that an increase in reconciliation controls is associated with a decrease in level of fraud prevention and detection. The correlation between financial governance control and level of fraud prevention and detection was also negative and significant (R= – 0.401, p value=0.008). This implies that an increase in financial governance control is associated with a decrease in level of fraud prevention and detection. On the other hand, reporting and budget control was found to be positively correlated to level of fraud prevention and detection (R= 0.363, p value=0.017) whichimplies that an increase in budget variances which represents financial control is associated with an increase in level of fraud prevention and detection.

The regression results indicated a negative and significant relationship between reconciliation control and level of fraud prevention and detection (Beta= -0.57, p value = 0.000). The results also indicate that there is a negative and significant relationship between financial governance control and level of fraud prevention and detection (Beta= -0.842, p value = 0.004). Reporting and budget control was positively and significantly related to level of fraud prevention and detection (Beta= -0.039, p value = 0.007).


5.2 Conclusions

The study concluded that the reconciliation control measures among firms in Ghana has been poor over the study period as the mean number of accounts that were fully reconciled showed decreasing trends from 2010 to 2014.

The study also concluded that there is a negative and significant relationship between reconciliation control and level of fraud prevention and detection.

The findings of the study also led to the conclusion that there is a negative and significant relationship between financial governance control and level of fraud prevention and detection..

Another conclusion made by the study is that higher variances in the budget positively and significantly relate to level of fraud.


5.3 Recommendations

The study recommends that firms should fully reconcile their accounts more frequently in order to reduce the cases of more incidences of frauds.

The study also recommends that firms should put in place stronger financial governance control measures through more frequent meetings among the members of the risk management committee and also finance and investment committee.

Another recommendation made by the study is that firms should reduce the variances in budgets through better reporting and budgetary control measures as it will reduce cases of frauds.


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