ABSTRACT
This study assesses the effectiveness of audit committees in fraud risk management within the public sector, focusing on the Jigawa State Ministry of Local Government Audit, Dutse. Using a structured questionnaire, data were collected from 50 respondents, including audit committee members, management staff, and other stakeholders. The findings reveal that while the audit committees play a crucial role in fraud risk management, several challenges hinder their performance. The study indicates that the majority of respondents agree that functional audit committees exist and meet regularly. However, issues such as inadequate expertise among committee members, insufficient resources, and lack of management support were identified as significant barriers to their effectiveness. Despite these challenges, the audit committees were found to actively participate in fraud risk assessments, monitor internal controls, and address whistleblower complaints, albeit with varying levels of effectiveness. The study concludes that enhancing the expertise of audit committee members, providing adequate resources, and fostering a supportive organizational culture are critical to improving their effectiveness in fraud risk management. Recommendations include regular training for committee members, increased government investment in fraud prevention mechanisms, and stricter enforcement of internal audit regulations. These measures will strengthen the audit committees’ capacity to mitigate fraud risks and ensure transparency and accountability in the public sector.
TABLE OF
CONTENTS
Title page - - - - - - - - - - -i
Declaration - - - - - - - - - - -ii
Approval page- - - - - - - - - - -iii
Dedication- - - - - - - - - - - -iv
Acknowledgement- - - - - - - - - - -v
Table of contents- - - - - - - - - - -vi
Abstract- - - - - - - - - - - -viii
TABLE
OF CONTENT
CHAPTER ONE
1.1 Introduction - - - - - - - - - -1
1.2 Statement of the
Problem - - - - - - - -1
1.3 Aim and Objectives
of the Study - - - - - - -2
1.4 Significant of the
Study - - - - - - -2
1.5 Statement Hypothesis
- - - - - - - - -3
1.6 Scope and
Limitations of the Study - - - - - -3
1.7 Definition of
terms - - - - - - - -4
CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction - - - - - - - - -6
2.2 Conceptual Review - - - - - - - - -8
2.3 Theoretical Review - - - - - - - - -28
2.4 Empirical Review - - - - - - - - - -29
CHAPTER
THREE
RESEARCH
METHODOLOGY
3.0 Introduction - - - - - - - - - -32
3.2 Research Design - - - - - - - - - -32
3.3 Population of the Study- - - - - - - - - -32
3.4 Sample Size - - - - - - - - - -32
3.5 Sampling Techniques - - - - - - - - -33
3.6 Sources of Data - - - - - - - - - -33
3.7 Research Instrument - - - - - - - - -33
3.8 Method of Data Collection - - - - - - - -34
3.9 Data Analysis and Statistical Tools - - - - - - -34
CHAPTER
FOUR
DATA
PRESENTATION AND ANALYSIS
4.1 Introduction - - - - - - - - - -35
4.2 Data Presentation - - - - - - - - - -35
4.3 Analysis of Data - - - - - - - - -37
4.4 Answer to Research Question - - - - - - - -39
4.5 Summary of Findings - - - - - - - - -40
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary - - - - - - - - - -41
5.2 Conclusion - - - - - - - - - -41
5.3 Recommendations - - - - - - - - -42
References - - - - - - - - - -44
Appendix - - - - - - - - - - -46
CHAPTER ONE
1.0 Introduction
Effective governance in the public sector hinges on transparency,
accountability, and the ability to safeguard resources from mismanagement and fraud.
The prevalence of financial fraud in public institutions, particularly in
developing countries like Nigeria, has raised concerns over the adequacy of
existing oversight mechanisms. Fraud in this context not only undermines the
delivery of essential services but also erodes public trust, destabilizing
economic and social structures. Audit committees, as part of the governance
framework, are tasked with mitigating these risks through proactive oversight
of financial reporting, risk management, and internal controls. However,
questions about their effectiveness persist, particularly in the public sector,
where political interference, limited expertise, and inadequate resources often
compromise their capacity to function optimally.
The Jigawa State Ministry of Local Government Audit in Dutse
provides a microcosm of the challenges faced by audit committees in Nigeria’s
public sector. Despite efforts to establish oversight structures, instances of
fraud and financial irregularities remain prevalent, signaling gaps in the
existing framework. While audit committees are designed to serve as a buffer
against fraud, their roles in fraud prevention and detection in local
government institutions require critical assessment. This study seeks to
evaluate the effectiveness of these committees in managing fraud risks within
the ministry, identifying both their successes and the barriers to their
functionality.
The urgency of this research is underscored by the growing demand
for accountability in public financial management. As citizens increasingly
call for greater transparency, understanding the dynamics of fraud risk
management becomes imperative. By focusing on the roles and challenges of audit
committees, this study aims to provide actionable insights to enhance their
effectiveness, contributing to broader efforts to strengthen governance in
Nigeria’s public sector.
1.1 Background of the Study
The growing emphasis on accountability and transparency in public
sector governance has made the role of audit committees increasingly critical.
Fraud in public institutions, particularly at the local government level,
continues to threaten effective service delivery, with significant consequences
for economic growth and public trust. The establishment of audit committees
serves as a safeguard against fraud, with responsibilities ranging from
oversight of financial reporting to fraud risk management.
Despite their importance, the effectiveness of these committees in
curbing fraud remains a subject of debate, particularly in developing regions
like Jigawa State, Nigeria. The Ministry of Local Government Audit in Dutse
represents an ideal case study to explore the challenges and opportunities
associated with enhancing fraud risk management.
The management of public resources is a cornerstone of effective
governance, particularly in developing countries where economic challenges and
limited resources heighten the need for transparency and accountability. Public
sector institutions, entrusted with the responsibility of providing essential
services and infrastructure, are often vulnerable to financial fraud and
mismanagement. These issues not only result in significant financial losses but
also undermine public trust and the capacity of governments to fulfill their
mandates. Fraud, in this context, involves intentional deception for personal
or financial gain, often perpetrated through manipulation of financial records,
misappropriation of funds, or collusion among individuals in positions of
authority.
In response to these challenges, the establishment of audit
committees has emerged as a critical governance mechanism to enhance oversight
and mitigate fraud risks. Audit committees serve as an independent body tasked
with monitoring financial reporting, ensuring the effectiveness of internal
control systems, and overseeing risk management processes. Their role is
particularly significant in the public sector, where the stakes are high, and
the misuse of funds can have far-reaching consequences for national development
and citizen welfare. However, the effectiveness of these committees often
varies depending on factors such as their independence, expertise, and the
extent of political interference in their operations.
In Nigeria, the public sector has faced recurring scandals
involving financial fraud and mismanagement, exposing weaknesses in governance
structures and oversight mechanisms. Despite the introduction of various
anti-corruption measures and reforms, including the establishment of audit
committees, the country continues to grapple with challenges in ensuring
accountability and transparency. At the local government level, where financial
oversight is crucial for grassroots development, the role of audit committees
becomes even more critical. Local government institutions are often the closest
to citizens, providing essential services such as healthcare, education, and
infrastructure. Yet, they are also highly susceptible to fraud, partly due to
weak internal controls, inadequate oversight, and limited capacity for
effective risk management.
The Jigawa State Ministry of Local Government Audit in Dutse
provides a pertinent case study for examining the effectiveness of audit
committees in fraud risk management. The ministry, responsible for overseeing
the financial operations of local governments within the state, plays a crucial
role in ensuring the proper use of public funds. Despite its mandate, reports
of financial irregularities and mismanagement have persisted, raising questions
about the capacity of its audit committees to fulfill their responsibilities
effectively. The challenges faced by these committees include limited
independence, inadequate resources, and the influence of political dynamics,
all of which hinder their ability to detect and prevent fraud.
This study is particularly significant in the context of Nigeria’s
ongoing efforts to strengthen governance and combat corruption. The Nigerian
government has implemented various reforms to improve public sector
accountability, including the establishment of anti-corruption agencies and the
adoption of international standards for financial reporting and auditing.
However, the success of these initiatives depends on the effectiveness of
institutional mechanisms like audit committees in detecting and mitigating
fraud. By focusing on the Jigawa State Ministry of Local Government Audit, this
research seeks to shed light on the factors that influence the performance of
audit committees in the public sector, providing insights that could inform
policy and practice.
In an era where public sector governance is under increasing
scrutiny, understanding the dynamics of fraud risk management is essential for
building trust and ensuring the efficient use of public resources. Audit
committees, as key players in this process, must navigate complex challenges to
fulfill their roles effectively. This study aims to contribute to the discourse
on public sector governance by evaluating the effectiveness of audit committees
in managing fraud risks, with a view to identifying strategies for enhancing
their performance. The findings of this research will not only be relevant for
Jigawa State but also for other regions and countries facing similar challenges
in public sector governance.
1.2 Statement of the Problem
Fraud and financial mismanagement remain persistent challenges in
Nigeria’s public sector, undermining the efficient use of resources and eroding
public trust. Despite the establishment of audit committees as a critical
oversight mechanism, financial irregularities and corruption continue to plague
local government institutions. These issues hinder effective service delivery,
disrupt development efforts, and diminish the credibility of governance
structures. The Jigawa State Ministry of Local Government Audit, charged with
ensuring accountability in the financial activities of local governments,
exemplifies these challenges. Reports of misappropriation, lack of
transparency, and weak internal controls highlight gaps in the existing fraud
risk management framework.
Audit committees are expected to play a pivotal role in detecting
and preventing fraud by strengthening internal controls, monitoring financial
processes, and providing independent oversight. However, in practice, their
effectiveness is often constrained by several factors, including limited independence,
inadequate resources, and insufficient expertise among committee members.
Political interference further compounds these challenges, creating an
environment where fraud risks are inadequately addressed.
Despite these challenges, there is limited empirical research on
the effectiveness of audit committees in the Nigerian public sector,
particularly at the local government level. This gap in knowledge makes it
difficult to identify the root causes of their inefficiencies or to propose
evidence-based solutions. Consequently, this study seeks to assess the
performance of audit committees in the Jigawa State Ministry of Local
Government Audit, focusing on their role in fraud risk management and
identifying factors that hinder their effectiveness.
1.3 Aims and Objectives of the Study
The main aim of this study is to determine the Assessment of the
Effectiveness of Audit Committees in Fraud Risk Management in Public Sector,
with the following objectives;
- Evaluate
the roles and responsibilities of audit committees in fraud risk
management.
- Assess the
challenges faced by audit committees in Jigawa State's Ministry of Local
Government Audit.
- Determine
the impact of audit committees on fraud detection and prevention.
- Provide
recommendations for improving audit committee effectiveness in public
sector fraud risk management.
1.4 Research Questions
- What roles do audit committees play in
fraud risk management within the Jigawa State Ministry of Local Government
Audit?
- What challenges hinder the effectiveness
of audit committees in fraud detection and prevention?
- How significant is the impact of audit
committees on fraud risk management?
- What strategies can enhance audit
committee performance in the public sector?
1.5 Significance of the Study
This study is significant for multiple stakeholders in public
sector governance and accountability. It provides critical insights into the
effectiveness of audit committees in fraud risk management, with a focus on the
Jigawa State Ministry of Local Government Audit. By examining their roles,
challenges, and impact, the study contributes to the broader discourse on
enhancing governance mechanisms in Nigeria.
For policymakers, the findings will offer evidence-based
recommendations to strengthen audit committee operations, improve oversight
frameworks, and mitigate fraud risks. These insights can guide the development
of policies aimed at promoting transparency and accountability in public
financial management, particularly at the local government level. For public
sector practitioners, the study highlights best practices and identifies gaps
in current practices, enabling audit committees and their stakeholders to
enhance their performance.
Academically, the study fills a critical research gap by providing
empirical evidence on the challenges and effectiveness of audit committees in
Nigeria’s public sector. It serves as a valuable resource for future research
on governance and fraud risk management in developing countries, enriching the
body of knowledge in this field. For citizens and civil society organizations,
the study underscores the importance of robust governance structures in
safeguarding public funds, fostering greater public trust, and ensuring the
delivery of essential services.
Ultimately, this research contributes to ongoing efforts to combat
corruption and improve governance in Nigeria, aligning with national and
international objectives for sustainable development and effective public
administration.
1.6 Scope and Limitations of the Study
This study focuses on assessing the effectiveness of audit
committees in fraud risk management within the Jigawa State Ministry of Local
Government Audit, Dutse. It specifically examines the roles, challenges, and
impacts of these committees in detecting and preventing fraud. The study is
confined to the ministry’s audit operations and does not extend to other
sectors or ministries within Jigawa State or Nigeria. This localized focus
allows for an in-depth analysis of the specific governance dynamics and fraud
risk management practices within the ministry.
The study is delimited by its focus on audit committees and their
activities, excluding broader anti-corruption strategies or other financial
oversight mechanisms outside the committee’s scope. Furthermore, it emphasizes
fraud risk management rather than the entirety of the audit process, ensuring a
concentrated investigation of their performance in preventing and addressing
fraud.
Temporal limitations also exist, as the study considers data and
events within a specific timeframe, which may not capture all historical trends
or future developments. Additionally, the findings may not be generalizable to
all public sector institutions in Nigeria due to contextual variations in
governance structures and operational practices. Despite these delimitations,
the study provides valuable insights into the effectiveness of audit committees
and offers recommendations for improving fraud risk management at the local
government level.
1.7 Definition of Key Terms
Audit Committee: A
governing body within an organization tasked with overseeing financial
reporting and risk management processes (Smith, 2018).
Fraud Risk Management: The
process of identifying, assessing, and mitigating fraud risks within an
organization (ACFE, 2020).
Public Sector: The segment of
the economy comprising government departments and publicly funded institutions
(OECD, 2019).
Governance: The system by
which organizations are directed, controlled, and held accountable (IFAC,
2017).
Fraud Detection: The
process of identifying fraudulent activities through monitoring and
investigation (Wells, 2016).
Fraud Prevention:
Measures taken to reduce opportunities for fraud and mitigate potential risks
(COSO, 2013).
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