BACKGROUND OF THE STUDY
It is feared that the inability of management to
ensure effective enforcement to rules and regulation have rendered that
operation of internal control system s 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
out 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 registered at the companies house
for I,II years. The establishment of First Bank of Nigeria Plc predates
the birth the Nigeria nation as a sovereign 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 chaps and
development of Nigeria. It thus shared in the process of its growth, the
final experiences of the nation which in retrospect were sources of
First Bank of Nigeria Plc is egad 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 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;
- To ascertain the degree of compliance of the banks staff with the internal control measures.
- To identify possible defect, or loop holes (if any) in the system.
- To examine the relevance and appropriative of the presently adopted control measures in preventing frauds.
- To offer useful recommendation based on the finding on how best to
prevent the occurrences of fraud through an effective internal control
1.2 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
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
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.
1.3 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.
1.4 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.
1.5 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
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 cane 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 2ndMay 1990 for the
purpose of banking issues.