Abstract
This study mainly focuses on internal control system
and bank fraud prevention in Nigeria banking industry. Internal control plays a
significant role in the Nigeria banking industry. Internal control are
policies, procedures, practices on organizational structure implemented to
provide reasonable assurance that organization’s business objective will
achieve and undesired risk event will be prevented or detected and corrected
based on either compliance or management initiated concerns. The researcher
uses survey design hence, the use of questionnaires, personal interview and
observation in data collection. Hypotheses were formulated and analyzed with
the use of chi-square test at 5% level of significance. The findings revealed
that bank with internal control system can prevent the menace of fraud and a
good internal control system has a significant affection on fraud detection and
control. The study concludes that Lack of good internal control measure is a
major cause of fraud in various banks and recommends among others that banks in
Nigeria should pursue and effective internal control measures to prevent fraud.
TABLE
OF CONTENTS
Title
Page i
Certification
ii
Dedication
iii
Acknowledgements
iv
Abstract
v
Table
of contents vi
Chapter One:
Introduction
1.1
Background to the Study 1
1.2
Statement of Problems 2
1.3
Research Questions 3
1.4
Objectives of the Study 3
1.5
Statement of Hypothesis(es) 4
1.6
Significance of the Study 4
1.7
Scope of the Study 5
1.8
Limitation of the Study 5
1.9
Definition of Terms 6
Chapter
Two: Review of Related
Literature
2.1 Introduction 7
2.2 Definition of Fraud 7
2.3 Theory of
Fraud 8
2.4 Types of
Bank Fraud and Ways of Defrauding Bank 10
2.5
Causes
of Fraud in Bank 12
2.6 Effect
of Fraud in Bank 13
2.7 Prevention
of Fraud in Banks 16
2.8
Measures for Controlling Fraud in Bank 18
2.9 What is
Internal Control? 23
2.10 Components
of Internal Control 25
2.11 Management Responsible for Internal Control 26
2.12 Application
Measures of Internal Control 27
2.13 Objectives
of Internal Control 28
2.14 Limitations
on the Effectiveness of Internal Control 28
2.15 Period of
Concealment of Fraud in Banks 29
2.16 Brief
History of Unity Bank Plc 30
2.17 The Bank
Strategy Focus 31
Chapter
Three: Research Method and Design
3.1
Introduction 33
3.2
Research Design 33
3.3
Description of Population of the Study 33
3.4
Sample Size 34
3.5
Sampling Techniques 34
3.6
Sources of Data Collection 34
3.7
Method of Data Presentation 35
3.8
Method of Data Analysis 36
Chapter
Four: Data Presentation, Analysis and Interpretation
4.1 Introduction 37
4.2 Data Presentation 37
4.3 Data Analysis 38
4.4 Hypothesis Testing 57
Chapter
Five: Summary of Findings, Conclusion and Recommendations
5.1
Introduction 62
5.2 Summary of Findings 62
5.3
Conclusion 63
5.4
Recommendations 64
References
66
Appendix
I 67
Appendix
II 68
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Internal control, the strength of every
organization, has become of paramount importance today in Nigeria banks;
the reason being that the control system in any organization is a pillar for an
efficient accounting system. The need for internal control systems in the
organization, especially banks cannot be undermined, due to the fact that the
banking sector, which has a crucial role in the economic development of a
nation, is now being characterized by macro economic instability, slow growth
in real economic activities, corruption and the risk of fraud.
Fraud, which is the major reason for
setting up internal control system, has becomes a great pain in the neck of
many Nigerians. It also has become an unfortunate staple in Nigeria’s
international reputation. Fraud is really eating deep into the Nigeria banking
system and that any bank with a weak internal control system is dangerously
exposed to bank fraud.
In a nut-shell, the damage which this
menace called “fraud” has done to banks in is innumerable and needs urgent
attention. Therefore the attempt to put an end to this economic degradation,
gave rise to the topic of this research study internal control system and bank
fraud prevention in Nigeria
banking industry with Union Bank Plc as a case study. However, this study is
aimed at verifying the concept that an effective and efficient internal control
system is the best control measure for preventing and detecting fraud,
especially in the banking sector.
1.2 Statement of Problem
Considering the effects by fraud and
fraudulent act as pointed in the introduction, the problem of this study is to
effectively comb and curb the incidence of fraud. Yet they have not been able
to stop bank fraud completely. For this reason, this research was carried out
to help the banks in looking for ways of preventing bank fraud to achieve the
objective, and this research work will be guided with questions.
1.3 Research Questions
In other to achieve the objective of
this study the following questions need to be answered;
i.
Is lack of good internal control a major
cause of fraud in bank?
ii.
Do banks with internal control system
prevent menace of frauds in Nigeria?
iii.
Why do bank personnel commit fraud?
iv.
How effectively is fraud control measure
in Nigeria
banks?
1.4 Objective of the Study
The objective of this research is
basically aimed at the following:
i.
To determine if lack of good internal
control a major cause of fraud in bank.
ii.
To ascertain whether banks with internal
control system prevent menace of frauds in Nigeria.
iii.
To determine if bank personnel commit
fraud.
iv.
To ascertain how effectively fraud
control measure is in Nigerian banks.
1.5 Statement of Hypotheses
Hypothesis One
HO: The lack of a good
internal control is not a major cause of fraud in banks.
HI: The lack of a good
internal control is a major cause of frauds in Nigeria.
Hypothesis
Two
HO: Banks with internal
control system cannot prevent the menace of fraud in Nigeria.
HI:
Banks with internal control system can
prevent the menace of fraud in Nigeria.
1.6 Significance of the Study
From all experience, fraud is unique in
terms of the system of planning and execution.
Knowledge of the various ways which
fraud have been perpetuated in the past and foresight or anticipation system
considering the past can facilitate an adequate internal control design that
can be efficient and effective in guiding management in the prevention and
re-occurrence of fraud. If it is agreed that majority of fraud are born by the
bank, then banks should pursue effective internal control measures to prevent
fraud.
The research work therefore is designed
to help to get acquainted with various frauds and their method of execution
with the view of gaining sufficient knowledge to enrich individuals and
collective experience in management and prevention of fraud.
1.7 Scope of the Study
This study examines the nature and
prevention of bank fraud in Nigeria
banking system and is based on knowing how good internal control relate with
the prevention of bank frauds in the Nigeria banking. The study is based
strictly in Nigeria banking system and more emphasis is based in Auchi, the
research work uses a time frame of 5 years (2009 – 2013) using a sample size of
75 for effective result.
1.8 Limitations of the Study
As a matter of fact, fraud in bank is a
very sensitive issue, bankers hardly agree to discuss incidence of fraud in
their bank, this is due to the fact that might scare their customer, and their
competitors could capitalized on that. However, personal observation and
experience as a long time practicing bankers has also been put to play in the
research work especially in the area of scanning for information, except that
these observations and experience were not originally documented.
1.9 Definitions of Terms
The following are the definition of
certain terms used in writing the project which the research feels that there
may not be so conversant with.
1.
Fraud:
This is an act or cause of deception deliberately practiced to gain unlawful
and unfair advantage such deception is directly to the detriment of another
person or group of persons.
2.
Fraudulent:
Means
deceitful, a person who commit frauds.
3.
Internal
Audit: Means an independent appraisal unit within an
organization for the review of operation and service to management in a
managerial control by measuring and evaluating the effectiveness of others.
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