THE ROLE OF EXTERNAL AUDITORS IN FRAUD DETECTION (A CASE STUDY OF FIRST BANK OF NIGERIA PLC ENUGU BRANCH)
Considering the important role that external auditors is playing in detection of fraud in the banks and other establishments in Nigeria economy, fraudulent activities in Nigeria banking systems in this recent years has been identified to contribute a lot in Nigeria economic meltdown. In this study, effort was made on how this fraud can be detected and eliminated. Taking first bank of Nigeria plc in Enugu as a case study, this study was aimed at finding out the role of external auditors in fraud detection which is badly affecting our economy and ways of preventing it. In order to get this research project done, primary data was base on the direct questionnaires and interviews. Emphasis was laid more on the administration of questionnaires and interview as a major source of primary data. The manager of first bank of Nigeria plc was interviewed on the role of external auditors play in fraud detection. Secondary data was obtained from journals and textbooks.
TABLE OF CONTENT
Title page i
Approval page ii
Table of content viii
1.1 Background of the study 1
1.2 Statement of problem 4
1.3 Objective of the study 4
1.4 Research questions 5
1.5 Significance of the study 5
1.6 Scopes of the study 7
1.7 Limitations of the study 7
1.8 Definition of terms related to the research topic 8
REVIEW OF RELATED LITERATURE
2.1 Underlying theories on fraud detection Definition fraud 11
2.2 Types of fraud 11
2.3 Auditors rights, duties and powers 13
2.4 Roles of auditors 16
2.5 The auditor and fraud detection 20
2.6 The liability of auditors 22
RESEARCH DESIGN AND METHODOLOGY
3.1 Research design 28
3.2 Area of study 28
3.3 Population of the study 29
3.4 Sampling method 29
3.5 Research instrument 31
3.6 Validity and reliability of research instrument 31
3.7 Sources of data 32
3.8 Method of investigation 33
PRESENTATION AND ANALYSIS OF DATA
4.1 Presentation and analysis of result 34
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
1.1 Summary of findings 48
1.2 Conclusion 50
1.3 Recommendations 52
Appendix I 56
Appendix ii 57
An audit is an independent examination by a statutory appointed person called the auditor to investigate an organization, it’s records and the financial statements prepared from them, and thus form an opinion on the accuracy and correctness of the financial statements. The primary aim of an audit is to enable the auditor to say “these accounts show a true and fair view or of course, to say that they do not.
That an auditor has the responsibility for the preventing, detecting and reporting of fraud, other illegal acts and errors is one of the most controversial issues in auditing, and has been one of the most frequently debated areas amongst auditors, politicians, media regulators and the public.
This debate has been especially highlighted by the collapse of both small and big corporations across the world.
Auditing guideline lay the responsibility for preventing and detecting fraud firmly on the shoulders of management. The fraud cases that most catch the public attention invariably involve management, and the public perception is often that the auditor has failed in his duty.
The auditors professional responsibilities are clear. He should have a reasonable expectation of detecting material mis-statements in financial statement. Serious fraud usually involves materials mis-statements, so in general, auditors should have a reasonable expectation of finding it.
Auditors should also wish to detect fraud because of the client service. Irrespective of whether there is a duty on the auditor to detect fraud, the auditor provides a good service if he succeeds in identifying it.
1.9 BACKGROUND OF THE STUDY
A brief history of first banking of Nigeria Plc.
First bank of Nigeria plc for over a century has distringuished itself as a leading financial institution and a major contributors to the economic advancement and development of Nigeria. The bank was incorporated as a limited liability company on March 31, 1894, with head office in Liver-pool by Sir. Alfred Jones, a shipping magnate. It started business in the office of elder Dempster and company in Lagos under the corporate name of the Bank for British West Africa (BBWA) with a paid-up capital of 12,000 pounds sterling, after absorbing it’s predecessor, the Africa Banking Corporation, which was established earlier in 1892. In it’s early years of operations, the bank recorded an impressive growth and worked closely with the colonial government in performing the traditional functions of a Central Bank, such as issue of species in the West Africa Sub-region.
1.10 STATEMENT OF PROBLEM
This study explores the financial report users perceptions of the extent of fraud in Nigeria and of auditors responsibilities in detecting fraud. It also investigates the perceived extent of the related audit procedures. The study also aims to ascertain whether the report users perceptions of the auditors responsibilities on fraud detection are consistent with those of the auditing profession as expressed in auditing standards in Nigeria.
1.11 OBJECTIVE OF THE STUDY
Considering the general objective of this research work, the specific objectives are:
1. To ascertain the roles the external auditors play in banks in fraud detection.
2. To identify the causes of bank fraud.
3. To find out the extent to which the external auditors have been contributing in growth of banks.
1.12 RESEARCH QUESTIONS
The following research questions will guide this study:
1. What are the roles of external auditors in fraud detection in banks?
2. What are the major causes of bank fraud?
3. To what extent should the external auditors play in banks to enhance the growth of the bank?
1.13 SIGNIFICANCE OF THE STUDY
To appreciate the overall significance of this research work, one will have to put into consideration the roles of the external auditors on fraud detection.
In considering this, the importance of this study are dressed by the head to ascertain that banks keep up to their requirements.
1. It creates room for possible assessment of the banks financial reports enabling the entire public to receive an opinion that is in a true and fair view.
2. Also the auditors role is established in the view to assessing in general, the financial background of the bank which is at putting to a stop the issue of distress.
3. The government regulations on banks are being acknowledged by the external auditors, however making sure that they are continuously put of effect by banks.
4. The project will provide for any student carrying out a similar topic or further research work on this subject a solid foundation for the realization for his other research purpose or work.
5. The study is also in partial fulfillment of the requirement for the award of Ordinary National Diploma (OND) in accountancy to the researcher.
1.14 SCOPES OF THE STUDY
The research work is to enable the auditor discuss on First bank of Nigeria Plc. and their various auditors, stating the auditor’s objectives, roles and services in the bank. In view of this, the project covers the auditing of First bank of Nigeria Plc. The research work has identified the role of external auditor in fraud detection.
1.15 LIMITATIONS OF THE STUDY
In the course of this study, some limiting factors were encountered:
1. The study was carried on midst of tight academic schedule. This urgent interruption with lectures, test and private studies was not in common consequently limited time was available for the study.
2. Lack of funds which restrict the researcher’s investigation to a few already made works which she could lay her hands on.
3. The researcher’s inability to hold talk with all the auditors and bank managers whole she tended to have interviewed on issue relating to bank with regards to the roles of external auditors.
4. The refusal of some university libraries and polytechnic libraries to conduct a library research on the above topic.
1.16 DEFINITION OF TERMS RELATED TO THE RESEARCH TOPIC
The following are the definitions of the terms used in this project work.
An audit is an independent examination by a statutory appointed person called the auditor to investigate an organization, it’s records and the financial statements prepared from them, and thus form an opinion on the accuracy and correctness of the financial statement.
These are all the relevant and reliable data or information obtaining and recorded by the auditor in arriving at conclusion of the audit work bases in independent opinion on financial statement.
This means establishing the existence ownership, valuation, and presentation of assets and liabilities at the balance sheet date.
Fraud is an intentional misrepresentation of financial information by one or more individuals among management employees or third parties. It involves the use of criminal deception to obtain an unjust or illegal advantage.
These are the output of the audit exercise and representation of the audit opinion on the basis of tests, reviews and analysis carried out in the course of his audit work. It is regarded as the end product of any audit exercise.