THE ROLE OF INTERNAL AUDITORS IN FRAUD DETECTION AND PREVENTION IN BANKS IN NIGERIA
1.0 Background Of The Study
A closer examination of our society's institutions reveals that many enterprises are failing as a result of fraudulent activities. Both management and staff engage in behaviours that can bring an institution down,
and a lack of understanding of the tasks of an internal auditor is also an issue. Auditors provide a fair evaluation of an institution's financial statements as prepared by both management and staff.
Internal control is critical to meeting a company's goals and objectives. Internal control assists institutions in carrying out step-by-step processes,
cost-effective procedures, and correct and competent activities in order to be efficient and effective in their managerial tasks (Connor, 1979:p6). Internal control enables an organisation to achieve risk management, disciplined processes, and activity evaluation.
Financial institutions are inundated with fraudulent activity, necessitating the presence of internal auditors to help identify weaknesses and leakages. Internal auditors are given permission by the bank's senior management to question any member of staff, search through files, reports, and even meeting minutes in order to carry out their duties.
The internal auditor is intended to advise the organisation appropriately after reviewing the material obtained by reporting directly to the institution's governor. Internal audit control that is effective not only checksmate excesses, but also engages in managerial control (Dandago, 2002).
Internal auditors assess the strengths and weaknesses in an institution's internal control of policies that can lead to undetected fraud and recommend corrective measures.
Fraud is widespread in institutions, especially banks; this is why banks implement internal controls to control losses and even prevent them from occurring.
Internal controls have harmed the businesses of bank managers who commit fraud, as well as Nigerians' international reputation.
In conclusion, bank fraud activities are expanding by the day, and institutions that do not put controls in place will fail (Adeduro, 1998:p48). As a result, the purpose of this research is to learn about the responsibilities of internal auditors in fraud detection and prevention in Nigerian banks (using Skye Bank Plc as a case study).
1.1 A general statement of the problem
Nigeria's reputation in the international community is tarnished since it is recognised to be a corrupt country, with incidences of fraud in every area of the economy, including financial institutions. People are dishonest in their duties because of their personal interests.
Bank institutions have been forced to close due to poor management. Management and even staff embezzle funds, distort data, and fail to preserve correct financial statement records, all of which contribute to fraud in the banking industry.
Furthermore, our ineffective justice system contributes to fraud. Fraudsters are not prosecuted because they know that by paying a bribe, they can avoid the full wrath of the law, and such instances are pushed under the rug.
1.2 Aims and objectives of The study
The primary goal of this research is to learn about the responsibilities of internal auditors in fraud detection and prevention in Nigerian banks, using Skye Bank Plc as a case study.
Other specific goals include:
To assess the effectiveness of Skye Bank's internal control system.
To ascertain the association between internal auditors and bank fraud.
To assess whether internal auditors can prevent fraud in Nigerian banks on their own.
To assess the transparency and effectiveness of internal auditors in detecting and preventing fraud in Nigerian banks.
1.3 Research Questions
What is the effectiveness of Skye Bank's internal control system?
In Nigeria, what is the relationship between internal auditors and fraud?
Can internal auditors at Nigerian banks prevent fraud on their own?
How transparent and effective are internal auditors at Nigerian banks in detecting and preventing fraud?
1.4 Research Hypothesis
Skye Bank lacks an effective internal control system.
Hi: Skye Bank has a strong internal control system in place.
1.5 Importance/Justification of the Study
This study is extremely important to the general public, but especially to Nigerian banks.
Many Nigerians are unaware of who auditors are and what roles they play in preventing fraud in the banking industry. It is intended to make business owners aware that auditors should be involved in the management function of their companies.
However, the purpose of this study is to encourage banks to form an internal audit committee that will help check losses, prevent losses, and provide advice on how a bank can have an accurate financial statement.
This study will be extremely useful to other researchers who want to learn more about this topic, and it can also be utilised by non-researchers to expand on their work. This study adds to knowledge and could be used as a benchmark or guide for future work or study.
1.6 scope and limitations of The study
This study focuses on the role of internal auditors in fraud detection and prevention in Nigerian banks, using Skye Bank Plc as a case study.
Limitations of the research
Financial constraint: The researcher faced a financial problem while acquiring this information.
Time constraint: Because the researcher had to combine his studies with other academic activities, the time spent to the research job was hampered.
1.7 Definitions of terms
The position or purpose that someone or anything has in a circumstance, organisation, community, or relationship is referred to as their role.
Internal auditing is an independent, objective assurance and consulting activity that adds value and improves the operations of a company.
It assists an organisation in achieving its goals by bringing a systematic, disciplined approach to evaluating and improving the efficacy of risk management, control, and governance systems.
Internal auditing serves as a catalyst for enhancing an organization's governance, risk management, and management controls by offering insight and recommendations based on data and business process studies and evaluations.
Internal auditing, with a dedication to integrity and responsibility, adds value to governing bodies and senior management as an impartial source of independent counsel. Internal auditors are professionals recruited by organisations to do internal auditing.
Fraud: A purposeful deception, fraud, or cheating with the intent of gaining an advantage.