ABSTRACT
This
project work investigates the role of auditors in the detection and prevention
of fraud in some selected business organization. In carrying out this research
work, textbooks were consulted for related literature as well as questionnaires
and oral interview for collecting data. All essential departments relevant to
the study were properly enlightened and the examinations of an auditor in areas
of ramification were thoroughly dealt with. The study revealed that in any
business organization, the employment of an auditor whether internal or
external can contribute immensely towards the effective management of the
organization. It also revealed that auditing the financial statements of
companies increases investment and it helped in knowing the importance and role
of an auditor in the detection and prevention of fraud in a business
organization to enable the organization make efforts in maintaining a positive
and at the same time pursue its growth and objectives. This project work will
be useful to researchers who try to find out the contribution of an auditor
towards business organization in detecting and preventing fraud. Finally, there
must be adequate provisions for the reliance of auditor on the control of an
organization and any advice given by the auditor must be seen as a professional
opinion and it should be taken seriously.
TABLE OF CONTENTS
Title
Page
Certification
Dedication
Acknowledgements
Abstract
Table
of Contents
Chapter One: Introduction
1.1
Background to the Study
1.2
Statement of Problem
1.3
Research Questions
1.4
Objectives of the Study
1.5
Statement of Hypothesis(es)
1.6
Significance of the Study
1.7
Scope of the Study
1.8
Limitations of the Study
1.9
Definition of Terms
Chapter Two: Review of Related
Literature
2.1
Introduction
2.2
Definition of Auditing
2.3
Development of Auditing in Nigeria
2.4
Types of Audit
2.5
Purpose/Objectives of Audit
2.6
Who is an Auditor?
2.7
Professional Conduct of Auditors
2.8
What is Fraud?
2.9
Types of Fraud
2.10 Causes
of Fraud
2.11 Effect
of Fraud to Business Organization
2.12 Auditor’s
Responsibilities in Fraud Detection and Prevention in Business Organization
Chapter Three: Research Method and
Design
3.1
Introduction
3.2
Research Design
3.3
Description of Population of the Study
3.4
Sample Size
3.5
Sampling Technique
3.6
Sources of Data Collection
3.7
Method of Data Presentation
3.8
Method of Data Analysis
Chapter Four: Data Presentation,
Analysis and Hypothesis Testing
4.1
Introduction
4.2
Presentation of Data
4.3
Data Analysis
4.4
Hypothesis Testing
Chapter Five: Summary of Findings,
Conclusion and Recommendations
5.1
Introduction
5.2
Summary of Findings
5.3
Conclusion
5.4
Recommendations
References
Appendices
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Fraud
is not a recent phenomenon associated to some highly-publicized cases. It can
be found early in the history of our world as men have made use of tricks,
manipulation, and deceit in order to acquire money, land, goods, or trust, with
the overall objective of making profit. The creation of accounting and audit
are connected in economic history with the desire, especially on the part of
the state and the church, to contain and prevent stealing and misrepresentation
in their finances.
Traces
of the precursors of audit can be dated back to Antiquity, to ancient Babylon
and Egypt, where archaeological findings have proven the existence of some
justifying documents of commercial transactions that allowed for a rudimentary
form of verification and accounting (Bogdan, 2005). And once the commercial
trades blossomed during a period or another, the need to keep a record of
transaction also emerged albeit at a primitive level. But with economic
prosperity came also the temptation to deceit and manipulate others for
self-profit. Control mechanisms were, therefore, developed by state
institutions in order to verify and supervise the use of funds and the circuit
of transactions, as was the case for example in ancient Rome, where the
questors elected by the people were responsible of this role (Bogdan, 2005).
During
the middle Ages, however, the interest to control financial documents and
accounts and to verify the use or misuse of funds increased in Western Europe.
The main objective was to discover those who eluded payment, appropriated
funds, or misused money and property, and to defer them to justice. The three
institutions that introduced as early as the 13th-14th centuries the idea of
verifying accounts and hold the wrongdoers accountable were the state
(represented by the reigning monarch), the Catholic Church, and the
universities (especially those from Northern Italy), and employed functionaries
or monks to keep the accounting of their respective structure (LeGoff, 1990).
From
the mid-19th century, the professional category of accountants and
auditors emerged as a specialized group of people involved in preventing and
detecting real or possible frauds and errors in the financial situations within
the state or an economic entity. Their role was not only to investigate, but
also to assess possible risks and to guarantee the responsibility of internal
control mechanisms. At the end of the 20th century and the beginning of the 21st
century, auditors have become a necessity for the good-functioning and
efficiency of an economic entity’s management that can prevent and deter
possible scenarios of trickery, funds embezzlement, or theft.
1.2 Statement of Problem
All organization can be a risk of fraud.
As we know, large fraud will lead to the collapse of the entire organizations,
causing major losses to investors, an important legal cost affecting directly
to key individuals, and loss of confidence in capital markets. Publicized
fraudulent behavior by key executives has negatively impacted the reputation,
brands, and images of many organizations in the worldwide.
The definition of ‘fraud prevention and
fraud detection’ are related to each other, however it is not the same concepts
preventing fraud include policy, procedure, training and communication to
prevent fraud happening. While the detection focusing on the activity and
technique in order to quickly recognize fraudulent whether fraud has happened
or is happening.
Specifically problem of this study are
if the role of auditors is well understood in business. The rate of auditors in
fraud detection, if there is a legislature to this effects. Who are the
offenders of business fraud in an organization. Finally, the misinterpretation
of the primary role of audit true and fairness to be the detection of fraud.
1.3 Research Questions
The following are the research questions
of the study;
i. What is the significant relationship
between the role of the auditor and fraud detection in selected firms in
Nigeria?
ii. What is the significant relationship
between fraud detection and audit of the financial statement in selected firms
in Nigeria?
iii. What
is the relationship between the qualification and experience of the auditors
and fraud detection in selected firms in Nigeria?
1.4 Objectives of the Study
The objectives of the study are stated
below;
i. To ascertain if there is significant relationship
between the role of the auditor and fraud detection in selected firms in
Nigeria.
ii. To ascertain if there is significant
relationship between fraud detection and audit of the financial statement in
selected firms in Nigeria.
iii. To
ascertain the relationship between the qualification and experience of the
auditors and fraud detection in selected firms in Nigeria.
1.5 Statement of Hypotheses
Hypothesis One
HO:
There is no significant relationship
between the role of the auditor and fraud detection in selected firms in
Nigeria.
HI: There is significant relationship between
the role of the auditor and fraud detection in selected firms in Nigeria.
Hypothesis Two
HO: There is no significant relationship between
fraud detection and audit of the financial statement in selected firms in
Nigeria.
HI: There is significant relationship between
fraud detection and audit of the financial statement in selected firms in
Nigeria.
Hypothesis Three
HO: There is no relationship between the qualification and experience
of the auditors and fraud detection in selected firms in Nigeria
HI: There is relationship between the qualification and experience of
the auditors and fraud detection in selected firms in Nigeria.
1.6 Significance of the Study
The result of this research would help
prospective investors, students, researchers, bankers, managers, governments,
directors, employees and other financial institutions.
1.7 Scope of the Study
This study is on the role of auditors in
the detection and prevention of fraud in some selected business organizations
in Edo State. The researcher delineated the scope of the study to public and
private organizations in Benin and Auchi in Edo State due to time and financial
constraint. The following are some other variables to be considered in
examining the role of auditors in business organizations such as audit:
auditor, qualification and disqualification of an auditor, auditors
responsibilities in fraud detection and prevention, professional conduct of
auditor fraud, the offenders.
1.8 Limitations of the Study
At first financial constraint, some of
the business organizations were not easily accessible. Another limitation was
time constraint; therefore time became a limiting factor since all the business
organizations cannot be visited by the researcher within a very short time.
Secondly, small sample size is one of
the limitations and the researcher distributed 100 questionnaires and after
filtering out the questions and answers are not valid questions, only 75
questionnaires of which were used for this study. Therefore, it leads to the
population of the study which was limited to two areas, Benin and Auchi in Edo
State.
1.9 Definition of Terms
Auditing: Auditing is seen as a systematic process of
objectively obtaining and evaluating evidence regarding assertions about
economic actions and events to ascertain the degree of correspondence between
these assertions and established criteria and communicating the results to
interested users.
Audit:
Audit is simply a systematic examination and verification of a firm’s books of
account, transaction records, other relevant documents and physical inspection
of inventory by qualified accountants (called auditors).
Auditor:
An auditor may be defined as an accountant who has undergone a recognized
bodies resident in Nigeria and who is carrying out a professional accountancy
practice.
Fraud:
This is the intentional deception to cause a person to give up property or some
lawful right. It is also an intentional act by one or more individual among
management, employees or third parties, which results in a misrepresentation of
financial statements.
Financial Statement: The term “financial
statement” covers the Balance Sheet, Income Statement or Profit and Loss
Accounts, Statements and explanatory materials, which are identified as being
part of financial statement.
Incorporated
Registered Companies: These are companies incorporated under the Companies
Decree and as amended by the Companies and Allied Matters Act (CAMA) 1990.
Audit
Report: This is the means by which the auditors express their opinion on the
truth and fairness of the company’s financial statement.
Independence:
To the accountancy profession, independence is a fundamental concept that
implied the attitude of mind, characterized by objectivity and integrity in
approach to audit assignment.
Auditing
Standards: These are the basic principle and practices to be followed in all
audits. They specify the requirement that an audit must meet if it is to be
considered a satisfactory and professional effort.
Accounting:
This is concerned with the keeping of records of daily transactions entered
into in the day-to-day management of a business organization.
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