This research work was
on the internal control as a basis of
fraud prevention in Nigeria financial institutions. However, for a more
detailed study a case study was carried on first bank of Nigeria plc.
This study necessitated because of
the increasing wave of bank fraud in Nigeria in recent times as reported by the
Nigerian dailies. Therefore, we need to investigate these reports in a
financial institution is to confirm that there is an effective internal control
All aspect of this work is very
relevant in one way or the other to the Nigeria banking industry, as a whole,
and for those who may be interested in carrying out further study in this
The research designed is a
descriptive research which requires the selection of respondents from a
population. The population of the study is made up of 43 staffs. 30 (thirty)
persons were used as the sample size, which is 69.7% of the entire population.
Data were collected through the
distribution of questionnaires. The
method of statistical analysis include the use of table, percentage analysis
and the significant test of two means was used in testing the hypothesis.
From my findings, it was ascertained
that banks have the best internal control system in Nigeria. The internal
control system is both effective and adequate.
The management of bank should be at
alert so as to eliminate any loophole or defect that may arise in their
internal control system.
It was also discovered that the major
cause of fraud is the employment of dishonest staff. The fore staff qualities
like integrity should be ascertained before employment.
TABLE OF CONTENTS
Table of content
of the Study
Purpose of Study
and Sampling Techniques
for Data Collection
of the Instrument
of the Instrument
of Administration of Research Instrument
of Data Analysis
Presentation ad Analysis o Result
of Research Findings
It is feared that the
inability of management to ensure effective enforcement of rules and regulation
have rendered that operations of internal control system as the banking
industry open to abuse.
The net effect could be
that every on carries out his schedules off duties in any manner he likes which
consequently gives those wishing to commit fraud their long expend golden
Prior to 1952, there was
no forms of Banking art or ordinance to regulate the establishment and
operations commercial banks or a central bank to supervise the control of
During that time many
banks were registered some of which never operated and over since that period,
fraud his remained a permanent feature in our banking industry. This resulted
as a loss of faith and trust in the financial institutions by Nigerians and
consequently, under- development of the banking habit in country.
However, with the
introduction of the first bank ordinance in 1952, and the central bank of
Nigeria (CBN) Act in 1959 and other,
subsequent Acts and Ordinance with their amendments over these years, used to
regulate and control the activities and operations of financial institutions in
the country. Frauds in financial institution have rather increased in magnitude
and the methods used to perpetrate them acquired greater sophistication day
Now with the introduction
of modern procedures and advancement in information technology such as those in
communication system, automatic electric gadgets and computer into the banking
system coupled with the various precautionary measures taken by bank agent
rather than taken nuclear dimensions and the size of sums involved increased at
a geometric rate.
Anikpitan (1976), a
banker of repute maintained that: -
Discoveries during investments
shows that banks now take extra precaution for clearing a cheque because of
rampant incident of fraud and forgery which a bank boss placed on the average
of N1m per working day of the year in Nigeria. I. Ashimi (1976 p.6) maintained
Fraud has become
sophisticated as to make a forged signature on a cheque leaf look good enough
for the rightful owner to think that it was his signature.
But a situation, as is
being experience now, where incessant cause of bank fraud are being reported,
could if not immediately checked, erode depositors confidence in the in
nation’s banking system. Such a situation could also scare foreign investors
from the country.
Ughamadu. N. in his article on
celebrating bank fraud “In Business Times 29 July 1991 observed that: -
The logic for
establishing a viable and enabling environment for any country will be
meaningless if its banking sector is very porous to fraud.
Ojo A.T. (1982) emphasized that; As an open
secret, financial institution do not have very large resources of their own in
relation to the total resources at their disposal. They depend mainly on other
people’s funds which have been entrusted to them because of the confidence the
people have on them as models of responsibility and safety. Consequently, the
confirmed existence of financial institutions rest delicately on the
maintenance of public confidence. This calls for the establishment of an
effective system of internal control, which among other things will help to
ensure that the organization’s accounting are in accordance with the lay down
procedures standard and statutory requirements.
To establish a sound
internal control system, various organization adopt various device and methods
based on their nature of business and the scope of their operation.
Internal control system
requires a continuous check and re-checking of day-to-day activities of the
business; in order to ensure the correctness and farness of the accounting
records and to defects and exposing deviation when it has occurred.
institutions loose confidence of the people not only through fraudulent use of
funds but also through some detect in fraudulent practices/or syndication of
some dishonest staff facilitated by defeats of the bank internal control. There
in therefore, a great need to eliminate or minimize the defects or loopholes
and make money effective and operational to guard against the occurrence and
re-occurrence of fraud in our financial institutions.
STATEMENT OF PROBLEM
The problem of this study
1. Robbers are employing scientific
means of gaining access to the strong room (computer room).
2. Incidence of bank fraud reduces
public confidence in banking and consequently slows down development of banking
habit in Nigeria.
3. Fraud leads to unwanted loss of public funds
and put the management of the affected bank on its toes.
4. The rising incidence of bank fraud
has created a lot of distrust between banks and their customers.
identify possible defects and loopholes (if any) in the system.
offer useful recommendation based on the findings on how best to prevent the
occurrence of fraud through an effective internal control system
ascertain the degree of compliance of the bank staff with the internal control
examine the relevance and appropriateness of the presently adopted control
measures in preventing fraud.
OF THE STUDY
The scope of the study is
limited to “Internal Control as a basis of Fraud Prevention in Financial
Institutions” with reference to first bank of Nigeria PLC Enugu main.
1. How regular does the internal control
system check the defects or loopholes in the system?
2. To what extent does fraud occurs in
First Bank of Nigeria PLC Enugu main?
3. To what extent does the internal
control measures the degree of compliance of the Bank staff?
4. How regular does the internal control
measures the relevance and appropriateness of the adopted control in preventing
H0: The present internal control system in
financial institution is not appropriate in the present world of technology and
sophistication in First Bank of Nigeria PLC.
Hi: The present internal control system in
financial institution is appropriate in the present world of technology and
sophistication in first bank of Nigeria PLC.
H0: The present internal control system in first
bank of Nigeria PLC is not effective.
The present internal control system in first bank of Nigeria PLC is effective.
The present internal control system in first bank of Nigeria PLC cannot prevent
Hi: The present internal control system in firs
bank of Nigeria PLC can prevent fraud.
The study is significance
for the following reasons:
The result of this study
would help to expose the level of fraud in first bank plc Enugu main
The result would also
help the financial institution especially first bank to see the extent of
occurrence of fraud in the bank.
The result would expose
the fraudulent staff thereby preventing fraud in the institution.
The result would also
help the bank to access their overall performance through internal control
Student carrying out
research in similar area can make use of the work.