The Project File Details
- Name: ROLE OF AUDIT IN CONTROL OF FRAUD IN LOCAL GOVERNMENT IN NIGERIA.
- Type: PDF and MS Word (DOC)
- Size: [88 KB]
- Length:  Pages
1.1 BACKGROUND TO THE STUDY
Fraud is the intentional distortion of financial statements or other records by a person (internal or external) to the organization which is carried out to conceal the misappropriation of assets or otherwise for gain (Adeniji, 2004).It also define fraud as involving “the use ofdeception to obtain an unjust or illegal financial advantage; intentional misstatement in, or omissions of amountsor disclosure from an entity’s accounting records or financial statements; or theft whether or not accompanied bymisstatements in accounting record or financial statement (Mani,1993). Archibong (1992) describes Fraud as apredetermined and well planned tricky process or device usually undertaken by a person or group of persons,with the sole aim of checking another person or organization, to gain ill-gotten advantages, be it monetary orotherwise, which would not have accrued in the absence of such deceitful procedure. Fraud involves recording oftransactions without substances, suppression or omission of the effect of transaction from records or document, intentional misapplication of accounting policies and wilful misrepresentation of transaction of the entity’s state of affairs (Olatunji, 2009). According to Pollick 2006, fraud can be regarded as a “deliberate misrepresentation,which causes one to suffer damages, usually monetary losses.
However, auditors have a significant role to play in the detection and prevention of fraud because theyare not only agents of shareholders but their access to internal and external information makes them efficientmonitor (Dyck, Morse and Zingales , 2008). The existence and in fact, the high incidence of fraud in governmentbrings to mind the question of competence, skills, due care, honesty, and integrity of auditors in government orbusiness enterprise, qualities are expected to be displayed by an auditor in every time in every circumstances(Olofin,2005 and Agbaje,2007). Lorsase (2004) notes that when fraud occurs in work place, the question asked is “where were accountants andauditors? That an auditor has the responsibility for the prevention, detection, and reporting of fraud, and otherillegal acts and errors is one of the most controversial issues in auditing, and has been one of the most frequentlydebated areas amongst auditors, politicians, media, regulators and the public. Gay et al (2002) However, thereseems to be misconception that auditors duties are largely the preventing, detecting and reporting of fraud. The internal audit unit is vested with the power of independent checks, in order to assesscompliance with established rules and regulations of the university (Okoya,2002). Despite the fact that auditexist in various government establishment with internal control system in place, but the act of financial crime still continues e.g.fraud, irregularities and even breaches of other control and no any strong measures being taken to prevent suchoccurrence.
Auditors are primarily concerned about fraud as it relates to misstatement in the financial statement (Bells & Carcello,2000). So, auditing has a greater impact in the control of fraud and financial irregularities ingovernment that make effective use of their auditing system. Moreover, according to the Institute of Internal Auditors (1991), the internal audit unit is expected to review the means of safeguarding assets and where appropriate, verify the existence of such assets. Financial control hasconcentrated on the cash out flow, purchasing procedures and accountability of budget holders for currentexpenditure on resources inputs (Mainoma, 2007) and (Buhari, 2001).Therefore, internal auditing furnishesauthorities with analysis, appraisals, recommendations and information concerning all activities reviewed. Thesurvival of every organization depends on its effective and efficient utilization of resources (both financial andnon-financial). The crux of this research is therefore to establish the role of auditing in control of fraud.
1.2 STATEMENT OF RESEARCH PROBLEM
Local government has been the least organ of government in Nigeria and less concern has been given to its administration by the populace.
Financial Regulation 109 entrust the vetting of all financial activities of the local government in the hand of Auditor General for the state. Many believes that since they have not receive much benefit from the activities of the government at the grass root level then those who are charged with the administration of the local government have perpetuate fraud and an audit exercise should be able to discover the fraud.
(Gay, Schelluch & Reit 1997) opine that the role of an audit to control, prevent and detect fraud of the illegal acts and error 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. Idris (2009), assert that there is misconception that the roles of an audit are largely the controlling, preventing, detecting and reporting of fraud. Therefore the crux of this research is to establish the role of audit in control of fraud in local government in Nigeria.
1.3 RESEARCH QUESTION
- Does fraud pose a major concern in local government administration in Nigeria?
- Is it the responsibility of an auditor to control, detect and report fraud?
- Should auditors perform additional audit procedures in an attempt to control fraud?
1.4 RESEARCH OBJECTIVES
The broad objective of this research is to establish the role of Audit in control of Fraud in Local Government in Nigeria. The specific objectives are to;
- to ascertain if fraud pose a challenge in local government administration.
- to establish if it is the responsibility of an auditor to control, detect, and report fraud.
- to determine if auditors should perform additional audit procedures in an attempt to control fraud.
1.5 SCOPE AND LIMITATION
This research work covers a wide range of the Auditing practice in the control of fraud in Local government, considering the availability of relevant information of proper analysis of audit reports. The scope of this study is restricted to Auditing in government at the grass root (local Government) in Ondo State, therefore conclusion reached here may not be enough to judge local Government in other state of the nation as the system of administration is different from one state to the other.
- SIGNIFICANCE OF THE STUDY
Series of research has been conducted on the subject matter and most of these researches have not given more significant in relating it to the government at the grass root (Local Government). This research work is to elucidate the specific roles of auditing in detecting fraud and corruption. This study will therefore foresee to be of immense significance to all stakeholders in the economy such as government at various levels, private sectors, Academia etc.
1.7ORGANISATION OF THE STUDY
This research work comprises of five chapters, the first chapter explain the introduction and background of the study, significance of the study, scope and limitation of study.Chapter two entails the literature review, a comprehensive detailed essay on auditing and fraud, types and ways to detecting fraud through auditing and lots more in this research work.Chapter three deals with the research methodology of this project work, stating the study areas, sources and nature of data sampling method and sampling size and the method of analysis.
While chapter four comprises of the data presentation and analysis and finally chapter five reviews the summary, conclusion and recommendations.
1.8 DEFINITION OF TERMS
Fraud: Is the crime of obtaining financial or another benefit by deception. The benefit obtained docs not have to be money. It could be goods, services, favours or information, corruption which involves the abuse ofpower for personal gain.
Fraud control: A process designed to provide reasonable assurance that fraud risks are managed.
Fraud vendor: this can be best illustrated or described as those who make the attainable or facilitate the nation of given monetary benefit to bypass standardprocedure (contractors, employee, politicians, employers andothers)
Fraud control Framework: Measures (that are structured and co-ordinatedto address fraud prevention, detection and response.
Fraud detection: Procedures to discover fraud during or after its occurrence.
Fraud prevention: Strategies that are designed to proactively reduce or eliminate fraud committed against an organization.
Fraud Response: Plans and activities that take place after a fraud has been detected.
Internal controls system: It is a system put in place to ensure financial regulation and policies are been followed.
Financial regulation: The lay down rules and policies that governed the preparation of records and account of the public institutions.
Risk management: Policies of assessment put in place to mitigateunforeseen risk such as theft, fraud and other of misappropriations.
Independence: A state of mind in expressing ones opinion’s on financial operation of an organization’s without the fair of any influence.
Confidentiality: A requirement of an employee not to revealany information or material in substance to any third party.
Distortion: A deliberate misrepresentation of financial position of operation result without immediate loss of assets of organizations.
Defalcation: This is the fraud or irregularities that result in immediate loss of public funds asset.
Investigation: A search or collation of evidence to connect a person to conduct which is against the law .The policies or standards of an organization.
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