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AN EVALUATION OF AUDITORS ON DETECTION AND PREVENTION OF FRAUD IN AN ORGANIZATION

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: AN EVALUATION OF AUDITORS ON DETECTION AND PREVENTION OF FRAUD IN AN ORGANIZATION
: Chapter 1 – 5
: 87 Pages
: #3, 000
: Ms Word format

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Keywords:AN EVALUATION OF AUDITORS ON DETECTION AND PREVENTION OF FRAUD IN AN ORGANIZATION


RESEARCH BODY

CHAPTER ONE

INTRODUCTION

  • Background of the Study

Fraud as “the action or an instance of deceiving somebody in order to make money or obtain goods illegally.

Fraud is a deliberate distortion and misrepresentation of fact in preparations of financial information, for the purpose of personal benefit or gain.

The International Auditing Guideline (IAG) defines fraud as a particular types of irregularity, this refers to irregularities involving the use of decent to obtain illegal or unjust advantage and may involve the following: manipulation, falsification, or alternation surprising or moiling transaction without substance, international and deceitful, which ever perspective fraud is looked at, an intentional distortion of financial statement, the misappropriation of asset, whether or not accompanied by distortion of financial statement. This issue of fraud has becomes a cankerworm that issue has eastern deep into the fabric of many corporate bodies in recent times. As a result, more time is being spent on board meeting in an attempt to find solution to the persistent fraudulent practices among management and non-management staffs.

Section 334 of the companies and allied matter acts (CAMA) 1990 states that in the case of every company, the directors shall in respect of every company prepare financial statement for the year (in form of annual reports and accounts) financial statement are means of communicating economic measurement obligations and information about the resources and performance of the reporting entity or enterprise those having reasonable right to such information i.e. Inventors, lenders, supplier, trade creditors, customers, banks, government, employees insurance companies etc.

Moreover, for the users as stated to have confidence in the report and also according to section 375 of CAMA 1990 which states that “each company shall appoint an auditor at each annual general meeting (AGM) to audit the financial statement of the company” the financial statement are being audited by such appointed auditors who act from the conclusion of the (AGM). In which they were appointed to the conclusion of the next AGM.

This audit of financial statement give true and fair views (or equivalent) of the entity’s affair at the period and of it’s profit and loss (or income and expenditure for the period ended and have been properly prepared in accordance with the applicable reporting framework, (for example relevant legislation and applicable accounting standards) or where statutory or other specific requirements prescribe the term “present fails”.

However, there are some common misconceptions about this purpose even among financially enlightened people many of the recent development in auditing involve attempts to bridge this “expectations gap” the difference between what people thing auditors should be and what auditor really do in practice. Auditing standards produced by the International Auditing Practicing Committee (IAPC) attempt to ease the problem and in particular the standard, which tackless sensitive issues like fraud and laws. Many people think that auditors should act like a police, fighting for truth, order and justice, when impact auditors, responsibilities powers and duties are very restricted by statute, ethics and by auditing standards. This misconceptions goes to the extent at which users of the financial statement relies on the account in decision making, whenever an auditor issues unqualified opinion, such opinion is usually as absence of fraud, error and irregularities, evidence that, the auditor is responsible of the completeness of the financial statement, evidence that, the company will not have future financial problem or operating problems, evidence that, the asset and liabilities are stated on the balance sheet date is a continuance statement of occurrence, which is they will continue to remain so fair the reporting date

Evidence of management quality and product. The audit expectation gap has implications both for the audit profession and for users of audit reports some of the consequences includes: high rate of litigation on perceive negligence of auditors, increased mutual benefit between the auditing profession and the user public, incorrect decision on wrong premises, counter accusations leading to distraction from the more fundamental questions of what role of the profession should be going forward.

Dispersion on the future of audit will better address the expectation of user and the fear of the audit profession of accepting an “Impossible role”. Therefore this research work will hopefully bridge the gap of expectations as explained earlier in relation to the role of auditors in detection and prevention of fraud in companies and also evaluate the efficiency and effectiveness of such role in organization.

  • Statement of Problem

The development of auditing in Nigeria has led to a number of problems many of which have not yet been solved completely, and they serve as long in the will of success of the auditors. The following problems among others can be identified.

  1. Lack of cooperation from the management of the company.
  2. Problem of getting audit recommendations implemented in time at all.
  3. Low relationship between the auditor and staff of the organization

Pertinent of these problems or that even aggregates the problem is the misconception of the role of the auditors in the organization and these problems serves as a threat to the fraud success of the audit work to audit profession itself and also to the correct usage of audit report.

  • Purpose of the Study

The aim of this research work is to evaluate the role of auditors in detection and prevention of fraud in Access Bank Plc. The objective of this research study is as listed below to:

  1. Determine the extent of the responsibility of the parties to the contract of auditing that is responsibility of the auditor to management and shareholders in relation to provision of the statutory law.
  2. Established liability and condition under which an auditor can be awarded damages for fraud through negligence.
  3. Considered various means and method by which auditors can avoid being negligent
  4. Review various cases where the auditor was neglect in relation to fraud.

1.4     Research Questions

           The research questions for its study are stated thus,

  1. Did auditors perform a significant role in detection and prevention of fraud in an organization?
  2. Is fraud mostly peculiar to the banking organization?
  3. Can fraud be totally eradicated?

1.5     Research Hypotheses

H01:   The auditors do not perform a significant role in detection and prevention of fraud in an organization.

H02:   Fraud is not mostly peculiar to the banking organization.

H03:   Fraud cannot be totally eradicated.

  • Significance of the Study

 The issue of fraud and fraudulent practice in any organization should not be let lying low. The frequency with which it rears, it ugly head in any establishment will determine the long term survival and growth of the company and if not handled with care, can lead to corporate failure.

However, it appears from a number of studies in recent times that, the role of an auditor in relation to detection and prevention of fraud has been widely misunderstood. The purpose of this study is to clarify such role so as to enhance clarity of role between the auditor and the management.

According to the (Lord Jones) 2009 the roles of an auditor are thus an auditor must check the organizations accounts correctly, an auditor should be able to provide early warning if there are solvency problems with the organization, it should verify all the documents of the organization, and also make report about the investigation undergone to the management or shareholder of an organization in order to clarify and satisfy his duties. The primary role of an auditor is to detect fraud in an organization also the roles of the management in detection and prevention of fraud is necessary according to (Joseph R. Franco) 2010. The roles of management are thus managerial controls, screening,  organization climate and a new specialization in Accounting.

Managerial controls: Organization with one hundred or few employees has the greatest median bosses per capital. The primary reason for this, internal controls are less sophisticated and stringed in smaller organization in term of prevention and detection of fraud, annual reports of management clearly stated that management is responsible for the preparation and integrity of the financial information presented. Management and the company maintain a system of internal to provide for administrative and accounting controls all professional literature make it clear that, the responsibility of Internal controls, proper reporting and adoption of sound  accounting policies rests solely with management not the auditors.

Screening:  this is another role of management to combat fraud by making adequate employee screening although this statement seen obvious, a good role to follow by minimize the risk of fraud is to hire honest employees. There are many organizations specializing in pre-employment screening. These screening tests include detection and finger printing of employees. Through adequate background checks information on resumes and applications, an employer can elicit significantly more information and determine if the original information is accurate.

Organizational Climate:- Management determining fraud by creating a business environment that reduces the perceived need of a presumed employee to commit fraud. This environment includes creating open and consistent communication for hiring, evaluating employee performance and assessing employees for promotion these factors, along with counselling programs and employee enrichment efforts, might curtail the perceived needed of an employee to commit fraud. It is clearly that both auditor and management can be together with understanding, the issue of fraud can be tackled together also this project work is to evaluate the efficiency and effectiveness of such role in an organisation.

1.7     Scope and Limitation of the Study

 The scope of this research work is being referred to its case study. ACCESS BANK Plc. As this company has different branch all over the country, this research project is limited to Victoria Island Lagos state, covering the period of 1999 to 2009 financial year. Also in any research work of this nature one is band to face some hindrances such as:

  1. The assumption that personal interview will be willingly granted by the management when required.
  2. Accessibility of records: The impossibility of having access to all materials and information needed, however, those available are considerable size necessary for this study.
  3. Financial Limitation: Due to current low financial situation of the economy, it might not be possible to make use of other companies for comparison as this will increases the research cost.

1.8     Historical Background of Access Bank Plc.

           It is observed that the banking sector is one of the economic activities to be regulated owing to the nature of their business. Also, activities of banks operator have a direct effect on the success or failure of the economy.

Banks as we know are the financial Institution whose primary functions is the acceptance of deposit and advance of loans (financial intermediaries).

Therefore, the ultimate objectives of banks to ensure save keeping, depositor money, given out loans to finance various sector of the economy particularly small scale industries, which is a quick  way at empowering the common man. Access Bank was established in 2012, as Access Bank Plc. in February 2012 and also commenced business with paid up ordinary share capital of N12 million. In 2012 became Access Bank Plc. In 2012 became a public liability company with full subscribed of 283, 995, 000 ordinary shares.

The height of the N25 billion recapitalization funds prescribed by C.B.N the bank had a public offer of 2.75 million ordinary shares which was subscribed to 1360% and re-affirming investors confidence in the banks; Equity bank, Gateway Bank and Global bank in October and it has over 185 branches spread nationwide and opening up to 80 branches by financial year ending, 2008.

Access Bank rated by the financial times of London as the 16th largest bank in Africa and among the top 1000 banks in the world having recently entered into technical partnership with BNPP partial, one of the ten largest banks in the world. In conclusion, Access banks remain a very stable financial institution as all members of the board that started the band remain on the board today which has reflected in steady and dynamic growth of the bank all over the years.

  • Definition of Terms
  1. Auditor: A person cannot be qualified for appointment as an auditor unless he his a member of a body of accountant in Nigeria established from time to time by an Act.
  2. Fraud: The term fraud defined by (Apoorva Yadav) 2009 as “any behaviour by which one person intends to gain a dishonest advantage over another” In other words, is omission which is intended to cause wrongful gain to one person and wrongful loss to the other, either be way of concealment of fact or otherwise.
  3. Financial Statements: These are the mean of communicating economic measurement, obligations and information about the resource and performance of the reporting entity.
  4. Company:- It is come together of people to form as association or partnership for the purpose of making business with the aim of profit
  5. Auditing: Auditing can be defined as application of professional skill to investigate correctness, accuracy, truth, fairness of financial statement.
  6. Expectation Gap:- This can be defined as a gap of difference between role of an auditing which perceived by the auditors and expectation of the users of the financial statement.
  7. Management: This is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively in an organization
  8. Audit: Audits are performed to ascertain the availability validity and reliability of information, also to provide an assessment of a system’s internal control of an organization.
  9. Internal Auditors: An employee of a company charged with providing in dependent and objective evaluations of the company’s financial and operational business activities including its corporate governance.
  10. External Auditors: An external auditors is an audit professional who performs an audit. In accordance with specific laws or rules on the financial statements of a company, government entity and other legal entity or organization and who is in independent of the entity being audited.
  11. Corporate Bodies:- A corporate bodies is an organization or group of persons that is identifies by a particular name. Also called corporation.
  12. Annual Reports:– An annual report is a comprehensive report on a company’s activities throughout  the preceding year.
Keywords: AN EVALUATION OF AUDITORS ON DETECTION AND PREVENTION OF FRAUD IN AN ORGANIZATION




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