The Role And Strategies Of An Auditor In Fraud Prevention And Detection In Banking Industries In Nigeria (A Case Study Of First Bank Of Nigeria Plc, Nigeria)

Project and Seminar Material for Accountancy / Accounting

The Role And Strategies Of An Auditor In Fraud Prevention And Detection In Banking Industries In Nigeria (A Case Study Of First Bank Of Nigeria Plc, Nigeria)

Chapter One

1.0 Introduction

1.1 Background of the Study

In the primitive days, man started his transaction with his follow man with the methods of “Trade by Barter” the need for recording, keeping or auditing did not rise, however, the advert of money and the consequent increase in the number of transaction made keeping of record and accounts and their audit avoidable.

In those days keepers need “to account to the selected men integrity who listen to oral evidence, who heard them and testifies to their correctness or otherwise, later on the complexity of the modern business transaction necessitates the voluminous account keeping and intimately the scientists examination of account now called modern auditing.

The origin of auditing is as a result of the separation of ownership from control. It is instituted to protect the interest of the owners by ensuring the financial statement is justified. Because of the separation of ownership from control, it becomes necessary for those managers entrusted with owners financial resource report (Stewardship Reports) to their employer(s). The presented might contain errors, refusal to disclose fraud and irregularities.

The audit of the book and records of a bank is similar to the audit of any other commercial organization in the sense that the audit has to report to the account present at true and fair view of the state of the affairs of the banks and of the profit and loss covered by the account. However, because of the peculiarities of a banks operation, which are governed by the bank and financial institutions Decree 25 of 1991 as amended, the audit procedure for a bank defers from that of a typical commercial organization.

1.2 Statement of the Problem

Fraud is a phenomenon, which cut across all sphere of business society. Recently; the incidence of fraud has got attention of all sundry and has been the focus of government attentions.

In this project, we attempt to say the role and strategies of an auditor in fraud prevention and detection. Also to analyze bank fraud causes, effect on the growth of the banking system in particular and the overall socio-economic development and likely solution.

1.3 Objective of the Study

  1. To acquire the readers with menace of fraud in the banking industry with a view to assist banks and customers in minimizing and trading the risks in their day to day transaction.
  2. To guide and educate the general public as to the role of auditor in fraud prevention in commercial banks of Nigeria and strategies by the auditors to reduce the effect of fraud to the minimum.
  3. To have in-depth knowledge of manifestation and causes of bank frauds.
  4. To have o-gain insight into effect and benefits of not being frauds and implication of frauds.
  5. To identify and outline various types and nature of frauds.

1.4 Scope of the Study

In the course of this study, an attempt would be made to look critically at the role of an auditor in fraud prevention in banking. First Bank Nigeria Plc as a Case Study.

The study will also attempt to look at the role customers and staff in preventing fraud in Nigeria Banks.

The adverse effects of frauds to banks customers and public will also be known.

The measure been taking at First Bank Plc will be highlighted which may be of benefit to other Banks and the general public.

1.5 Significance of the Study

The study is particularly significant taken into consideration the current development in the banking industry. The study will invariably have an impact on the company under study. Individuals or customers and whole economy at large.

The study will be beneficial to the company under study i.e. First Bank Nigeria Plc, in that if the problem of fraud could be prevented by an auditor it will afford the opportunity of having a very sound financial base there by protecting them from running into untimely liquidation

It will also encourage the general public to embark on saving and also give the customer rest assurance that their money is in good order and condition.

Also, to the economy at large, if the commercial bank could maintain liquidation at all time, they will have enough cash to lend to investor, importers and exporters developments of the economy.

1.6 Limitation of the Study

In the various stages involved in putting together this research work some problems arose which limited the area of the study. These were of course imposed by costs and time.

As a result of this topic being universal the research work will be limited to First Bank Nigeria Plc. Because the research work is sensitive, the researcher will not be able to get adequate statistics and figures, because those to be questioned may regard the question as strictly confidential to their organization.

1.7 Research Methodology

This deals with the method and procedure of data collection.

In order to obtain the needed data for this research work both primary and secondary data were conducted.

This Secondary Data:

These are data obtained from various journals, financial reports, periodical bulletins and information relevant to the research study.

The Primary Data:

These are data collected through oral interview, direct observation and responses from the interview conducted.
A well structure oral interviews was conducted for the purpose of the study, which was an instrument used to know the opinion of the participant of the interview was conducted and selected element of the population using the sample random sampling techniques which endures that equal opportunity was given to all element within the population selected.

1.8 Plan of the Study

For the case of the study and proper understanding. The write up is planned and organized in five chapters.

  • Chapter One: These contain the background of the study, statements of the problem, objective of the study, scope of the study, and significance of the study, limitation of the study.
  • Chapter two: It contains the literature review, nature and types of fraud, causes of fraud, frauds control and prevention.
  • Chapter three: It contain research methodology, introduction, population under study, sample and sampling, sources of data, methods of data collection, methods of data analysis, Research limitation.
  • Chapter four: It contain Introduction, presentation and analysis of data, Data analysis based on past journal of fraud case in bank, presentation of responses on the oral interview conduct.
  • Chapter five: This contains the Summary, Conclusions, Recommendations and Bibliography

Chapter Five

5.1. Summary, Conclusion and Recommendation

5.1. Summary

It was observed that the present high rate of fraud is the direct product of our societal setting respectively where wealth is glorified irrespective of its source.

Finding revealed that the lack of effective and efficiency internal and external control system and a poor recruitment exercise from part of the factor inducing and fueling the incidence of fraud.

This is evident as most successful bank fraud, has the active participation of bank employees. Lack of following routines or total deviation from the other laid down regulations contributes to the upspring of banking fraud. The study also revealed that the lukewarm attitude of our law enforcement agents, the snail pace and itself fraud inducing.

5.2 Conclusion

An attempt have been made in the previous chapter to take and overview of the problem, causes and consequence of fraud in commercial bank in Nigeria, misplaced value judgment and the prevailing bad economic environment bill time fraud are on the increase and the bank are losing amount running into million of Nigeria to fraudster almost everyday. In most cases when the frauds are detected early, amount already drawn are usually difficult to recover.
The research work has shown that even when bank inspector, auditor and even customer discover frauds and there is the possibility of recovering some of the frauds, the cooperation of police has not be particularly encouraging. This is therefore of essence in affecting control of frauds. A sound and effective control will only prevent but will at a very early stage detect it.

Management staff have important role to play by ensuring that there are sound internal control system in their banks and that laid down procedure are reviewed regularly and effectively followed. It is part of management duties to ensure that the control system is placed in various institutions reflect realities of the environment at all time.
It is equally important to stress the needs for all financial institution to comply with statutory requirement of rending return effectiveness monetary and supervisory authorities might design to curb the menace.

The prevention and control and detection of fraud should be collaborative effect of banks, their staff, customer, the public and the government including relevant agencies. Fraud in the financial system should as much as possible be minimized as its kills the institutions and destroy the economy of a nation.

5.3 Recommendations

Obviously, if the little confidence that the bank have built of them is denied, the impact will be disastrous for the overall development of banking in Nigeria. In view of these, this research project deems it necessary based on its finding to recommend in our financial institutions.

  1. All banks should introduce strict disciplinary action, which would serve as deterrent to other staff whenever malpractice is proved against such staff.
  2. Chief inspector of commercial banks must endeavor to work hard with the police during investigation of frauds, which must be handed promptly.
  3. Staff should be related periodically and should not be left on one function for too long a period in order to forestall the possibilities of exploring existing operational loopholes and shortcoming personal given.
  4. Appointment of officers as against supervisor to man rural branches in order to reduce the increasing, receiving and payment and cash should be divorced from each other.
  5. Cash officers should be sure of the need of cash by the cashier before making the money available, receiving and payment of cash should be divorce from each other.
  6. Dormant account should be separated from each account and other operations on them should raise suspicious and must be with the authority of the branch managers to branch accountant.
  7. Bank should be properly screened before being employed satisfactory references must always be obtained the present practice whereby name of dismissed bank staff are circulated among bank fraud.
  8. The list of customer whose account is used for fraud should be circulated on their benefits.
  9. Every bank must establish internal auditor functions, which are all known as the inspection department regularly audits valts to ensure that records keeping controls are being practice and evaluate of efficiency of internal control system.

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