ABSTRACT
This research work was the infernal
control system as a means of preventing fraud in Nigeria financial institution.
However for a more defiled study was carried on First Bank Nigeria Plc Onitsha
Head Office.
This
study was necessary because of the increasing
wave of Bank fraud in Nigeria in resent times as reported by the Niger
dailies. Therefore the need to investigate these reports and if confirmed, a
financial institution and to what extend the application of an effective
internal control system can go to help matter.
All
aspect of this work is very relevant in one way or the other to the Nigerian
Banking Industries, as a whole, and for those who may be interested in carrying
out further study in this topic.
Also
data were collected through primary and secondary sources, the primary sources
of data are mainly through personal interviews and of questionnaires, while the
secondary source include Books, Newspapers, Magazines.
From
my finding it was ascertained that Banks have the best internal control system
in Nigeria. The internal system is both adequate and effective, although more
operating improvement and review is vital. The management of the bank should be
at alert so as to chose any loophole that may arise in their interview control
system.
Also,
it was discovered that the major cause of fraud is the employment of dishonest
staff. Therefore staff quality like integrity should be ascertained before
employment. There should be an increased enlightens on the legal implications
of fraud among other.
TABLE
OF CONTENTS
TITLE PAGE
CERTIFICATION
DEDICATION
ACKNOWLEDGEMENT
ABSTRCT
TABLE OF CONTENT
CHAPTER ONE
1.0
Introduction
1.1 Purpose of the study
1.2
Significance of the study
1.3
Scope of the study
1.4
Limitations of the study
1.5
Definition of terms
CHAPTER TWO
2.0 Review of related literature
2.1
Definition of fraud
2.2
Types and causes of bank fraud
2.3
Concept and definition of internal
control
2.4
Type of control
2.5
Internal control system in financial
institution (FIRST BANK PLC)
Reference/Note
CHAPTER THREE
3.1 RESEARCH
METHODOLOGY
3.2 SOURCE OF DATA
3.3 INTERVIEW QUESTIONS
3.4 SAMPLE USED
3.5 METHOD OF INVESTIGATION
CHAPTER FOUR
4.1 DATA ANALYSIS AND
INTERPRETATION
4.2 DATA PRESENTATION AND ANALYSIS
CHAPTER FIVE
SUMMARY, FINDINGS, CONCLUSION AND
RECOMMENDATION
5.1 SUMMARY OF THE FINDINGS
5.2 CONCLUSION
5.3 RECOMMENDATION
CHAPTER ONE
1.0 INRODUCTION
BACKGROUND OF THE STUDY
It
is feared that the inability of management to ensure effective enforcement to rules
and regulation have rendered the operation of internal control system in the
Banking industry open to abuse. The net effect could be that every one carries
out his schedule off duties in any manner he likes which consequently gives
those wishing to commit fraud their long
expected golden opportunity.
Prior to 1952, there was no form of
Banking art or ordinance to regulate the establishment and operations of
Commercial Banks or a Central Banks to supervise the control of Banking
Nigerian. During that time many Banks was registered some of which never
operated and even since that period, fraud has remained a permanent feature in
the banking industry. This resulted in the loss of faith and trust in the
financial institutions by Nigeria and consequently, under-development of the
banking habit in the country.
However with the introduction of the
first banking ordinance in 1952, and the
central Bank of Nigeria (CBN) Act in 1959 and other subsequent Acts and
ordinances with their amendments over the years, used to regulate and control
the activities and operations of financial institutions in the country, fraud
in financial institution have rather increased in magnitude and the methods
used to perpetrate them acquire greater sophistication day after 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, fraud have rather taken nuclear
dimensions and the size of sums involved increased at a geometric rate
and also with the held of Anipkitan (1976) a banker of repute, I Ashimi (1976,
p6) a banker of prudent, Ughamadu N. (1991) observed to be liable in its
banking sector and be very porous to fraud and many others who have contributed
to maintain a prudently measured to the ascertainment of financial banking
assets and liabilities.
Consequently, the confirmed
existence of financial institutions rests delicately on the maintains 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 laid down procedures standard and statuary requirement.
To establish a sound internal
control system various organization adopt scope of their operations. Internal
control system requires a continues check and rechecking of day-to-day activities of the business in order to ensure
the correctness and firmness of the accounting records, and to detect and
expose any deviation when it has accord. Most financial institutions loose
confidence of the people not only through fraudulent use of funds but also
through some detect infraudulent practices and or syndication of some dishonest
staff facilitated by defects in the Bank internal control system. There is therefore
a great need to climate or minimize the defects loopholes and make money
effective and operational to quard against the occurrence and re-occurrence of
fraud in our financial institutions.
AN OVERVIEW OF FIRST BANK PLC
First Bank of Nigeria Plc was incorporated
on 31st March 1894 as a limited liability company with an authorized
share capital of 2 stilling, but today it has been registere at the companys house for I,II
years. The establishment of First Bank of Nigeria Plc predates the birth the
Nigeria nation as a soverign entity. The Bank which was registered as Bank of
British WEST African in 1894, has
therefore evolved along the path of political, social and economic chapes and development of Nigeria. It thuse shered
in the process of its growth, the final experiences of the nation which in
retrospect were sources of strength.
First Bank of Nigeria Plc is engad
in Commercial Banking Business. It’s head office is located in Lagos. It is the
policy of the board of Directors that the bank should play an important role in
the Commercial Banking industries in
Nigeria Accordingly the Bank is committed to the expansion of it’s branches net
word with a view of eventually making it’s services available through the
country.
New the bank has branches all over
the country and overseas, large they embarked on the increase in publicity, it
therefore well equips and computerized in order to enhance the delivery of its
services and as well took internal control system to check the level of fraud
attitude against customers an members of the coy. The bank is committed to
successful restricting and development of the nations economy as it’s rural
objective. Towards this end, the bank is interested in assisting small scale
industries, farmers, cooperatives societies and community development efforts.
The service include savings account
current account, standing orders and direct debit current services, fixed
deposits, loans and advances, corporate finance international operations, these
services are being carried out by efficient human resource of the bank which
made up to both senior and junior cadres.
1.1
STATEMENT OF PROBLEM
The focus of this study is to
provide evidence bearing on the nature and factors leading to ineffective
management in bank, also it actually evaluates the incremental effect of FRUAD
and finally shows INTERNAL CONTROL as a basis to prevention and detection of
fraud.
INADEQUATE INTERNAL CONTROL SYSTEM
Owing to perculias nature of
banks in trading on financial asset and liabilities, there is high propensity towards fraudulent manipulation by
both employees and those outside the bank to install internal control system
that will help to eliminate stop and arrest fraudulent tendencies and ensure
effectiveness in performance of its functions. It is the function of the internal control
Unlit to assist management in achieving
effective. The consequences of lack of
adequate internal control system in direct and financial term can not be over
whelmed. Thus banking subsector has
been witnessing as phenomenal
increase in reported bank fraud ruing in hundreds of million of naira annually.
These occur in form of computers frauds, deflation misrepresentation of document
outright disappearance with physical cash by
employees and outsiders and the re occurring problem of banks branch
mangers granting credie over their discretionary as approval by the top management without adequate security
hence resulting to losses and increased bad debt
INNEFFICIENT WAYS OF TRANSACTING BANKING OPERATION
Most banks operate business in
such inefficient way that their target and budget becomes always unrealistic
thus leading to negative result and poor performance. The end result is
that while efficiently managed banks are
seeking approved to open new branched the mismanaged ones are busy clamoring to
be allowed to close unlivable branches
one even close their door entirely. The problem of lack of economy and
efficiently in operator is more serious than fraud as it is mammals
of procedures. Recording of some transaction of bank by employees are not done
in conformity with established standard hence resulting to back of unbalanced
book and records.
LOAN LOSSES AND
INCREASING BAD DEBT PORTFOLIO OF BANK
Increasing bad debt portfolio of
banks inherent from high credit default by loan users has been giving bankers
sleepless night as a substantial part of their income is low used as a
provision against these debt in view of the requirement of initial guidelines
for licensed bank issued by the central bank
of Nigeria in off Nigeria in 1990, in 1991, financial year, most of the existing bank will hinge portfolio after report losses or very minimal
profile position ,after making the necessary
provision are required by the guidelines.
It is because the continuous
concerns of government and other regulatory bodies about the problem of banks
and the serious need for effectiveness by their management that various
registrations and directive were made in the recent time. the CBN issued directive to bank for
recapitalisation up to N25 billion, in January 1991 CBN issued circulated to
all bank directors an information book lets (pocked Guide for bank Directors)
Equally in 1991, the Bank and other financial institution decree was
promulgated by government.
1.2 PURPOSE
OF THE STUDY
This
research work concentrates essentially on the financial institutions with
special a view to providing suitable recommendations and suggestions that will
help in their prevention and minimization of fraud. It is therefore the main
objective of this study to examine the internal control system in the operation
of this bank in Nigeria and evaluate the appropriateness and the effectiveness
of the system as a toll for fraud prevention.
The study also has its objectives as
follows;
i.
To ascertain the degree of compliance of
the banks staff with the internal control measures.
ii.
To identify possible defect, or loop
holes (if any) in the system.
iii.
To examine the relevance and
appropriative of the presently adopted control measures in preventing frauds.
iv.
To offer useful recommendation based on
the finding on how best to prevent the occurrences of fraud through an
effective internal control system.
1.3 SIGNIFICANCE OF THE STUDY
Even
through this study is not a very comprehensive and exhaustive one as a result
of some limitations of all aspects of the work is very relevant in one way or
the other to the Nigerian Banking Industries as a whole, primarily, this study
is designed for all those may be interested in carrying out further study on
internal control system as it related to fraud prevention in financial
institutions in Nigeria.
Moreover, banks in Nigeria will
deprive great assistance from this research work in detecting fraud in bank
system and subsequently preventing and
minimizing fraud.
This can be achieved by adopting and
implementing the various suggestions and recommendation made this study in
their control systems.
Finally, there is no need over
emphasizing the fact that if banks are able to reduce the incidence of fraud in
their operation to the least level. That will be able to operate on a more
profitable ground. Again, the bank customers detecting confidence on the
banking industries will once more be restored and thereby help in building up
good banking habit in Nigeria.
1.4 SCOPE
OF THE STUDY
This research work is carried out to
examined fraud prevention and control, a management effort to avoid dishonesty
and fast play in financial institutions.
The work is focused on Nigerian
banking sector with particular reference to first bank of Nigeria Plc Onitsha,
due to certain obvious factors like easy accessorily of research material,
financial and time constraints and non-disclosure of certain information from
the management due to bank’s secrecy.
1.5 LIMITATION
OF THE STUDY
Here
the limitation composed on this study is that of shortage of time and financial
constraints. The time limit set for the submission of these project work was
short and this made to be carried out. This problem of time and finance account
for the limitation of the sample size to
only the first bank of Nigeria Plc in Onitsha.
1.6 DEFINITION
OF TERMS
The
following terms or concepts need to be clarified other terms will be defined of
course of the study.
a.
FRAUD:
There is no commonly accepted definition
of the term fraud. Experts and academicals alike have defined if in various
ways; The oxford advanced learners
dictionary defined fraud as “act of deceiving somebody illegally in order to
make money or obtain goods”. In other way, I can say “It is an act of criminal
deception, out of deceptive trick cheating , swingding person on things that
deceives.
b.
INTERNAL CONTROL SYSTEM:
The whole system of control both
financial and other wide established by management in order to carry on the
business of the enterprise in an orderly and efficient manner to ensuring
adherence to management policies, safeguard then assets and secure as for as
possible, the completeness and accuracy of the records.
c.
PREVENTION:
The
system of stopping the bad attitude of fraud from happening.
d.
FINANCIAL INSTITUTION:
This
refer to organizations, societies, buildings established for the purpose of
taking care of monetary affairs, bonds,
securities etc, in a given economic, it embraces banks, insurance
companies, stock exchange etc.
e.
PLC PUBLIC LIMITTED COMPANY
This is in line with the provisions
stipulated order Sec 29 (2) of the company and allied matters decree (CAMD)
1990 which look effect from 2nd May 1990 for the purpose of banking
issues.
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