1.0 Background of the study
A closer look at institutions in our society shows
that a lot of businesses are folding up due to fraudulent acts. Both the
management and the employees indulge in activities that can bring down an
institution, and ignorance of the roles of an internal auditor is also a
problem. Auditors give a fair account of the financial statement of an institution
as put together by both the management and employees.
Internal control is of much importance in
achieving a company’s goals and objectives. Internal control helps institutions
carry out step-by-step processes, economical procedures, accurate and competent
actions in order to be efficient and effective in its managerial roles (Connor,
1979:p6). An organization can achieve risk management, disciplined processes
and evaluation of its activities through internal control.
Financial institutions are flooded with fraudulent
activities and there is a need for the presence of internal auditors to help
point out these flaws and leakages. Internal auditors are granted the privilege
by the senior management of the bank to interrogate any member of staff, go
through files, reports, and even minutes of meetings in carrying out their
assignments. It is expected of the internal auditor on going through the
information gotten; advise the institution appropriately by reporting directly
to the governor of the institution. An effective internal audit control does
not only checkmate excesses, but engages in managerial control (Dandago,
The purpose of the internal auditor is to examine
the strengths and weaknesses in the internal control of the policies of an
institution that can lead to undetected fraud and point them out for corrective
Frauds are common in institutions, though very
common in banks; that is why internal controls are done in banks to control
losses and even prevent the occurrence of losses.
Internal control has spoilt the business of bank
managers who engage in fraud and even Nigerians’ reputation in the
Conclusively, the activities of bank fraud are
increasing as the day goes by, and banks who cannot put measures in place to
control this will crumble (Adeduro, 1998:p48). Therefore, this study is meant
to discover the roles of internal auditors in fraud detection and prevention in
banks in Nigeria (a case study of Skye bank plc).
1.1 Statement of the general problem
Nigeria’s reputation is stained in the
international community as it is known to be a corrupt nation; cases of fraud in
every sector of the economy including the financial institution. People are not
honest in the duties assigned to them because of their personal interests.
Poor management of bank institutions has led to
their undue fold-up. Management and even employeesembezzle funds, falsify
figures, and do not keep accurate records of financial statements all give rise
to fraud in the banking industry.
In addition, our poor judicial system contributes
to fraud. Fraudsters are not persecuted as they know with bribe they can escape
the full wrath of the law and such cases will be swept under the carpet.
1.2 Aims/ Objectives of the study
objective of this study is to know the roles of internal auditors in fraud
detection and prevention in banks in Nigeria; a case study of Skye bank plc.
specific objectives include:
determine how effective Skye bank’s internal control system is.
determine the relationship between internal auditors and fraud in banks.
determine if internal auditors alone can prevent fraud in Nigeria banks.
determine how transparent and effective internal auditors are in detecting and
preventing fraud in Nigeria banks.
1.3 Research Questions
effective is Skye bank’s internal control system?
is the relationship between internal auditors and fraud in Nigeria?
internal auditors alone prevent fraud in Nigeria banks?
transparent and effective are internal auditors in detecting and preventing fraud
in Nigeria banks?
1.4 Research Hypothesis
bank does not have an effective internal control system.
Skye bank has an effective internal control system.
1.5 Significance/ Justification of
This study is of immense
importance to the general public with special importance to Nigeria banks.
Many Nigerians are ignorant on
who auditors are and the roles they play in curbing fraud in the banking
sector. It is meant to bring to the knowledge of business owners that auditors
should be involved in the management function of their firms.
However, this study is meant to encourage banks to
have a committee of internal auditors who will help check losses, prevent
losses, and offer advises on how a bank can have an accurate financial
study will be of immense benefit to other researchers who intend to know more
on this topic and can also be used by non-researchers to build more on their
study contributes to knowledge and could serve as a bench mark or guide for
other work or study.
of the study
is restricted to the role of internal auditors in fraud detection and
prevention in banks in Nigeria, with Skye bank plc as the case study.
of the study
Financial constraint: Insufficient funds posed a challenge on the
researcher in the course of gathering this information.
Time constraint: Based on
the fact that theresearcher has to combine his study with other academic work, it
hindered the time devoted to the research work.
Definition of terms
Role : The position or purpose that someone or something has in a situation, organization, society, or relationship.
Internal Auditing: Is an independent, objective assurance
activity designed to add value and improve an organization's operations. It
helps an organization accomplish its objectives by bringing a systematic,
disciplined approach to evaluate and improve the effectiveness
of risk management,
processes. Internal auditing is a catalyst for improving an organization's
governance, risk management, and management controls by providing insight and
recommendations based on analyses and assessments of data and business processes.
With a commitment to integrity and accountability,
internal auditing provides value to governing bodies
and senior management
as an objective source of independent advice. Professionals called internal auditors
are employed by organizations to perform the internal auditing activity.
is a deliberate deception, trickery, or cheating intended to gain an advantage.