The Impact Of Auditing In Controlling Fraud And Other Financial Irregularities
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1.1 BACKGROUND OF STUDY
The impact of auditing in controlling fraud and other financial irregularities can not be over emphasized. This is due to the fact that auditing is one of the most important technique in financial management.
Auditing stated in the United Kingdom in the 17th century as a way of providing information to wealth owners. Over the years, auditing has developed and is universally accepted as a means of checking on the operation of organization in ensuring that their activities and policies are in consonant with the best practices and also to ensure accountability in reporting the result of their activities of the shareholders.
In Nigeria, the Audit Act of 1958 and finance and management Act of 1968 emphasized the need for government owned company to be audited. The principle objective of auditing is, transparency and accountability in reporting.
Balogun Badejo and Co. was founded on April 1st, 1969, it is one of the foremost practicing firms in Nigeria offering professional services in the following areas: Accounting, Auditing, Insolvency, Taxation and Financial Advisory Services.
Accountant measure a business entity’s income, expenses and changes resources. Fraud as rapidly spread in Nigeria as a result of lack of proper accounting control. Auditor has had a major impact in controlling fraud and other financial irregularity.
Fraud is a wrongful or criminal deception intended to result in financial or personal gain, as a result of this, the banking sector as a high risk nature and has adapted the used of auditor in the control of fraud. Conclusively, auditing firms carryout their audit using computerized system to express an independent financial statement in an organization.
1.2 STATEMENT OF THE STUDY
The main problem of this study is to examine the fraudulent act that may exist in the accounting system of some companies in Nigeria. Many scholars are always interested in the impact of auditing in controlling fraud and other financial irregularities, following the inherent fraudulent act in the system, thus requiring a study of his of critically asses, this fraudulent and highlight there implication of the statement.
Most organizations are adopting the use of auditing in checkmating or controlling fraud. The banking sector as a result of it’s high rate of fraudulent act has adopted the use of auditing to benefit the advantages of true view of the financial statement. Present day audit has advance to include Computer Assisted Audit Technology (CAAT)so as to meet the required skills of auditing computerized accounting system.
Therefore, there is an urgent need for staff and stakeholders to be aware and also to acquire knowledge in the advances of fraudulent act in an organization.
Money may be loss due to fraudulent act, there is a need for an organization to create, set up, an audit group to checkmate the rate of fraud.
1.3 HISTORICAL BACKGROUND OF FIRST BANK OF NIG. PLC
First Bank of Nigeria is a Nigerian bank and financial services firm.
First Bank traces its ancestry back to the first major financial institution founded in Nigeria; for this reason the name was given to the bank. The current chairman is Prince Ajibola Afonja.
The Bank traces its history back to 1894, the Bank of British West Africa. The bank originally served the British shipping and trading agencies in Nigeria. The founder, Alfred Lewis Jones, was a shipping magnate who originally had a monopoly on importing silver currency into West Africa through his Elder Dempster shipping company. According to its founder, without a bank, economies were reduced to using barter and a wide variety of mediums of exchange, leading to unsound practices.
In 1957, Bank of British West Africa changed its name to Bank of West Africa (BWA). After Nigeria’s independence in 1960, the bank began to extend more credit to indigenous Nigerians. At the same time, citizens began to trust British banks since there was an ‘independent’ financial control mechanism and more citizens began to patronize the new Bank of West Africa.
In 1965, Standard Bank acquired Bank of West Africa and changed its acquisition’s name to Standard Bank of West Africa. In 1969, Standard Bank of West Africa incorporated its Nigerian operations under the name Standard Bank of Nigeria. In 1971, Standard Bank of Nigeria listed its shares on the Nigerian Stock Exchange and placed 13% of its share capital with Nigerian investors. After the end of the Nigerian civil war, Nigeria’s military government sought to increase local control of the retail-banking sector. In response, now Standard Chartered Bank reduced its stake in Standard Bank Nigeria to 38%. Once it had lost majority control, Standard Chartered wished to signal that it was no longer responsible for the bank and the bank changed its name to First Bank of Nigeria in 1979.
1.4 OBJECTIVE OF THE STUDY
The objectives of this research work are as follows:
1. To examine the impact of auditing in ensuring fraud reduction and accountability in an organization.
2. To show how auditing has helped in preventing fraudulent activities in banking sectors.
3. To assess the relevance and functions of auditors in organizations.
4. To explain how auditor and auditing has helped in the banking sector, also how it has helped the investors and the government in decision making.
5. To explain how the auditor, through the process of auditing control fraud and other financial irregularities in a firm.
1.5 RESEARCH HYPOTHESIS
Based on the foregoing, the following research hypotheses formulated will be empirically tested and result gotten will serve as a basis for recommendations. The hypothesis is as follows:
Ho: auditing does not help to control fraud and other financial irregularities in banking sector
Hi: auditing helps to control fraud and other financial irregularities in banking sector.
Ho: auditors have not helped to correct irregularities in finance in the banking sector
Hi: auditors have helped to correct irregularities in finance in the banking sector
1.6 RESEARCH QUESTION
1. Does auditing really help to control fraud and other financial irregularities in banking sector?
2. Has auditor helped to correct irregularities in finance in the banking sector?
3. Are the books of account of First Bank Plc conducted in an orderly manner?
4. Is there reasonable assurance that transactions are fully and properly recorded to avoid fraud?
5. Has fraudulent activities reduced in First Bank Plc through the process of auditing?
1.7 SIGNIFICANCE OF STUDY
This research is aim at revealing the impact of auditing in controlling fraud and other financial irregularities.
The project shows that auditors also examine, on a test basis, underlying transactions and records supporting financial statement balances and disclosures. An auditor assesses the accounting principles used and significant estimates made by management and evaluate the overall financial statement presentation.
At the end of this study, some firms who do not know the impact of auditing in controlling fraud will be aware of the functions and impact of auditing in controlling fraudulent activities.
This research work will also be useful to students in Accountancy department and Business Administration department as well as management of organizations as the study generally reveals how auditors through the process of auditing control fraudulent activities.
1.8 SCOPE OF THE STUDY
Auditing is a vast and complex subject but in the course of study, we will concentrate our mind on verification and valuation of asset and liability legal position of an auditor. We also discuss the characteristics and conduct of auditor.
Furthermore, such area as the nature of auditing in controlling fraud and other financial irregularities is covered in this project.
Finally, to get an indication that some fraud or error may have occurred which could result in material misstatement.
1.9 LIMITATION OF STUDY
A number of limitations were encountered in the course of study most of these relate to finance, time and data collection.
FINANCE: Financial constraint at this point in time when we Nigerian continues to witness devaluation of the naira and the means of affording the relevant material become very expensive.
TIME LIMIT: The time limit made it impossible to cover as much ground been a project work for the partial fulfillment of the ordinary diploma in accountancy.
1.10 DEFINITION OF TERMS
1. Auditing – An official examination of business and financial records to see that they are true and correct.
2. Auditor – Professional expert in the checking of books of account or record.
3. Audit – is an evaluation of person, organization, system process, enterprises, project or product.
4. Fraud– Illegal method of collecting/getting money from organization (it is a criminal offence).
5. Error; an error is something that is done in a wrong way or a mistake that is made in the course of doing something.
6. Management – The act of running and controlling a business or seminar organization.
7. Dishonesty – Lack of trust and intending to deceive people.
8. Financial irregularity- international misstatement or omissions of amount or disclosures in financial statement done to deceive financial statement users.