EFFECTIVE INTERNAL CONTROL AS THE BASIS FOR PREVENTION AND DEDUCTION OF FRAUD IN BANKS IN NIGERIA (A CASE STUDY OF ZENITH PLC ENUGU)
Fraud and forgery are gradually becoming daily occurrence in our banking industry., much as it around be admitted that they has always been part of our financial system. It is obvious that they are in lost assumes perplexity proportion millions of naira are lost through the machination of either account holder or bank official or account holder in collaboration with bank official. The offences ranges from falsification of entries forgery of signature of account holder or theft by bank cashier and customer.;
A most serious dimension has been adds to this practice by the so called taken fraud where by false message in respect of millions of naira are transmuted to form ficitions account oversea, cashed on by oversea collaborator and they by daring Nigeria of foreign exchange and creating an appalling image of our internal control system.
There fore the objectives of this work is to identify the result of internal control in a basils for prevention and detection of fraud secondary the project study various from of internal control as well as it effectiveness on ZENITH plc and Nigerian banking industry as this has been use toward checking and preventing fraud in our banking industry. The researcher also delve into deterring the legal loopholes in the Nigeria legal system that facilitate fraud.
In studying then above problem primary data and secondary data were used. The primary source includes the use of questionnaire and oral interview while the secondary source include the use of questionnaire and oral interview while secondary source include test books article and other white up in various journals.
The analysis of the secondary and primary data was based on statistical distribute ion table of Francis, percentage, bar chart and histogram. Hypothesis were established and tested in conformity with accept reject criterion. From the funding the finding of the analysis recondition and conclusion were made.
TABLE OF CONTENT
Title page i
Table of contents iv
List of table v
1. Background of the study
2. Statement of the problem
3. Purpose of the study
4. Significance of the study
5. Research questions
6. Scope. Limitation of the study
8. Review of related literal control
1. Organization of internal control
2. What is fraud of in banking industry
3. Sources form and causes of fraud in our banks
4. The effect and danger of fraud in our banks
5. The law relating to and the legal process of protecting fraud in bank
6. Common fraudulent practices
7. Technique of internal control
8. The plan of a typical bank
9. Authorization recording and custody procedures
10. Managerial supervision and review
11. Audit quality control measure
12. The main objectives of audit quality country summary of related review. Literature
21. Research methodology
1. Research design
2. Area of study
3. Population for the study
4. Sample and sampling procedure
5. Instrument for data collection
6. Reliability of reason instrument
7. Validation of research instrument
8. Method administration of research instrument
9. Method of analysis
4.0 data presentation and results
1. Summary of result (Finding)
5. Discussion conclusion and recommendation
1. Discussion of result
CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF THE STUDY
Even since the inception of the first three successful indigenous banks in Nigeria, the National Bank of Nigeria established on February 11th 1933, the Agbommagbe Bank (now wema Bank Nig Plc) in 1945, The ZENITHcan continental Bank Plc in 1947 and others subsequently established in the country during the period from 1952 when the first banking ordinance was enacted to regulate and control the activities of commercial banks in the country till present day, prand have remarried a permanent feature in our banking industry.
During the free banking era (between 1892 and 1952) there was no form of banking act or ordinance to regulate the stabilities shipment and operation of commercial bank. There are as it is presently supervised. Many bank were registered. Some of did not open their doors for business ever for a day while some simply collected customers deposits and varnished. This had resulted to the deprivation of our economy an as a whole the much needs fund for development and depriving individual the hard earned funds, this also brought about loss of faith trust on the commercial banks by Nigeria and the subsequent under developed banking habit in the country
However, with the introduction of the first banking ordinance in 1952 and the central bank of Nigeria (CBN) ordinance in 1958 to regulate and control the activities of commercial banking in the country fraud in commercial banks have rather increased in size, and method used by fraudster acquires greater sophistication day by day. Presently with the introduction or modern banking procedures ie improved communication system, automatic electronic gadgets and computers networks into our banking system coupled with various precautionary measures taken by banks. To prevent fraud in the banks fraud have rather taken unclear dimension and the six and form involved increase in a geometric progression. Other Amptiam in his articles obstacle o growth of baking industry saw that it was discovered during investigation that bank now take extra precaution before clearing a cheque because of rampant incident of fraud and forgeries the form of fraud has placed banks loss on the average of # 1m per each working day of the year in Nigeria Asimi kola in his own article “The cash economy phenomenon” also observed that fraud has become sophisticated as to make forget cheque book good the owner to confirm it as his own signature recently in the bid curb the grand fraud, CBN issued a directive to bank to increase it capital base to # 25 billion. Previously section a of the decree 1990 state that, the minimum paid up capital for bank is #50 million for commercial bank. This directive come up after several bank has been discovered to have defrauded it is customers mostly foreign investors. In this required . project topics final year project topics and research materials
Bankers in a bid to reduce the size and rapid occurrence of fraud in their bank now take adequate precautionary measure before clearing cheques drawn their customers accounts. These precautionary measures bring into focus another problem facing commercial banks,. The problem of time wastage in the banking hall. Ashimi Kola in his article also said that customer waits a minimum of about two hours in banking hall of Nigeria banks to cash their money. This is one of the most legitimate criticisms of the quality of bank services. The checking process is long and by the time a cheque is released to cashier for payment, the customer is frustrated and perhaps Rast asleep among feering crowd. This calls for an overhaul of the checking and control system. E above being the general situation of things in commercial banking fraud is there fore number one enemy to all concerned with growth and development of banks., the intention of this research work therefore aimed at identification of the fraud on Nigerian economy in general and on ZENITH Nigeria plc Enugu in particular and recommend more functional measure that will help in the prevention and to reduction of fraud in commercial bank in Nigeria.
1.2 STATEMENT OF PROBLEM
The focus of this study is to provide evidence bearing on the nature and factors leading to ineffective management in bank, also it actually evaluates the uneremental effect of FRUAD and finally shows INTERNAL CONTROL as a basis to prevention and detection of fraud.
1.2.1 INADEQUATE INTERNAL CONTROL SYSTEM
Owing to perculias nature of banks in trading on financial asset and liabilities, there is high propensity towards fraudulent manipulation by both employees and those outside the bank to install internal control system that will help to eliminate stop and arrest fraudulent tendencies and ensure effectiveness in performance of its functions. It is the function of the internal control
Unlit to assist management in achieving effective. The consequences of lack of adequate internal control system in direct and financial term can not be over whelmed. Thus banking subsector has been witnessing as phenomenal increase in reported bank fraud ruing in hundreds of million of naira annually. These occur in form of computers frauds, deflation misrepresentation of document outright disappearance with physical cash by employees and outsiders and the re occurring problem of banks branch mangers granting credie over their discretionary as approval by the top management without adequate security hence resulting to losses and increased bad debt
1.2.2 INNEFFICIENT WAYS OF TRANSACTING BANKING OPERATION
Most banks operate business in such inefficient way that their target and budget becomes always unrealistic thus leading to negative result and poor performance. The end result is that while efficiently managed banks are seeking approved to open new branched the mismanaged ones are busy clamoring to be allowed to close unlivable branches one even close their door entirely. The problem of lack of economy and efficiently in operator is more serious than fraud as it is mammals of procedures. Recording of some transaction of bank by employees are not done in conformity with established standard hence resulting to back of unbalanced book and records.
123 LOAD LOSSES AND INCREASING BAND DEBT PORTFOLIO OF BANK
Increasing bad debt portfolio of banks inherent from high credit default by ,loan users has been giving bankers sleepless night as a substantial part of their income is row used as a provision against these debt in view of the requirement of prude ntital guidelines for licensed bank issued by the central bank of Nigeria in off Nigeria in 1990, in 1991, financial year, most of the existing bank will hinge portfolio after report losses or very minimal profile position ,after making the necessary provision are required by the guidelines.
It is because the continuous concerns of government and other regulatory bodies about the problem of banks and the serious need for effectiveness by their management that various registrations and directive were made in the recent time Recathly the CBN issued directive to bank for recapitalisation up to N25 billion, in January 1991 CBN issued circulated to all bank directors an information book lets (pocked Guide for bank Directors) Equally in 1991, the Bank and other financial institution decree was promulgated by government.
1.3 PURPOSE OF STUDY
The principal purpose of lilies study is to identify and explain how internal control Adit could be used to check fraud and detect fraud. Using ZENITH bank plc and a case study
However, in more specific term, lies study scale to
Identify to what extent adequate internal control is ZENITH Plc Fund out the extent of ineffective way of banking operation. Determine the overall loan losses and increasing bad debt portfolio
1.4 SIGNIFICANCE OF STUDY
The usefulness of this study entitled effective internal control as a basis for prevention detection of fraud can not be over whole the researcher was motive into embarking on this study because of the positives result accruable from an adequate internally control organization. Equally the result of this study would be immense benefit to numerous group of persons such as Auditors, External Examiners, Managers, the Accounting and Banking professions, Regulatory bodies of banks and other operators in the banking system. When the society is corrupt, wealth an groritied irrespective of its sources. The desire to join the political and the ruling class may compel most bankers to throw professional ethic to the winds for praudul practices. This therefore makes study very important.
Acknowledgement of the possible causes of disease will assist a medical doctor to give4 adequate prescription for the prevention and cure of disease similarly, it will be pertinent to analyze and recommend directive, preventive and curative measure to check fraud and distress in banks. Indeed internal control machinery when installed can do this ,Also recruitment not based on sentiments but on personal integrity will prevent recruitment of weptomanaic, greedy and ungodly people in bank
It is believes that for effective management, management by example should be the watch word of every banker, be he a director, manager officer, supervisor clerk, or messenger. Everyone should be made to comply with the lay down policed and procedure in performance of any banking function. He who says people should not steal should not steal too
1.5 RESEARCH QUESTION
This study is on appraised of internal control as a basis for fraud prevention and detection. It intend to cerate relevant theoretical concepts and relates them Adri bank plc in Enugu in a way that it would be helpful to those concerned with the management.
In a nutshell this theses is based on the following question
To what extent are banking operation effective in ZENITH bank? How adequate is the attitude and perception of banking transaction What extent are FRAID AND IRRECULARIDES occures in ZENITH bank
SCOPE AND LINITATION OF STUDY OF THE STUDY
1.6 The scope of this study is designed to cover management function of internal control will particular reference to ZENITH bank plc. This research work met a lot of difficulties First the bank visited was reluctant to gives out relevant statistical data on financial frauds occurring in their banks. None of these banks denied of ever being a victim of fraud this is non compliance.