IMPACT OF AUDITING IN THE PREVENTION OF FRAUD IN THE NIGERIA PUBLIC SECTOR
ABSTRACT
This project work
present a comprehensive analysis on the “Impact of Auditing in the Prevention
of Frauds in the Nigeria Public Sector (A case study of National Judicial
Council Abuja). The objective of the research highlighted accounting related
problems of government ministries which do not enable them perform efficiently
due to fraudulent activities. Auditing has been referred to as a systematic
process of objectively obtaining and evaluating evidence regarding assertion
that economic action and events are ascertain and communicate the results to
interested parties. Data were obtained and analysed from respondents in the
National Judicial Council, Abuja. The findings revealed the respondents are
very concerned about the problems of fraud generally. In addition, the
respondents placed high expectations on auditors’ duties on fraud prevention
and detection. The research thus recommends that management should provide
reasonable remunerations and allowances to staff, avoid staff negligence.
Faulty personnel policies, there should be adequate training and retraining of
staff, avoid the use of sophisticated machines, etc. although the auditor is
not and cannot be held responsible for preventing fraud and errors, in
organizational work, he can have a positive role in preventing fraud errors by
deterring their occurrence. The auditor should plan and perform the audit with
an attitude of professional skepticism, recognizing that condition or events
may be found that indicate that fraud or error may exist.
CHAPTER
ONE
INTRODUCTION
1.1
BACKGROUND OF THE STUDY
The
term fraud is commonly used to describe a wide variety of dishonest behaviors
such as deception, bribery, corruption, forgery, false representation,
collusion and concealment of material facts. It is usually to describe the act
of depriving a person or something by decent, which may involve the misuse of
funds or other resources, or the supply of false information. Actual gain,
benefits or loss to another does not occur for an act to be fraudulent but
these does have to be intent to make a gain or cause a loss.
Over
the years, audited financial statements have established an impressive record
of reliability. All business entities whether private or public, irrespective
of size, nature or scope of operation have expert or written policies and
definitely keep records.
Such
records to be kept constitute valuation information and thus, subject to some
form of independent verification in order to confer reasonable credibility on
them. The task of the independent verification constitutes in providence of
auditing and the person who perform this task is referred to as the auditor.
Auditing
has been defined by Glyne (1981) as the independent examination and
investigation of the book, accounts and voucher of a business with view to
enabling the auditors to report whether the balance sheet and profit and loss
account are properly drawn up so as to present true and fair view of the state
of the affairs of the business according to the best of the auditors.
In
the course of this study, it is significant to differentiate between the public
and private sector. The public sector whose wealth is owned collectively by the
public, it consists of ministries departments, public corporation, the parastatals
and the three tiers of government (Federal, state and local government) of
which the sole aim is to provide useful services to all the citizens irrespective
of their status in the society.
The
legal basis in the public sector constitute, Audit Act 1958, Finance
Regulations, Treasury Circular, Appropriation Act of the year in question, and
all form of the legal basis.
The
public sector accounting is the composite activities of recording, analyzing,
summarizing, reporting and interpreting financial fiscal transactions of the
government and its agencies.
It
reflects all levels of transactions involving the receipts, custody and
disbursement of fund and the users of public sector account. While the private
sector consists of ownership and shareholders and the report of their
transaction is to the owners, shareholders and the outsiders.
The
cash basis system of accounting is used in the public sectors while the accrual
basis is used in the private sector. In addition, the equity or share interest
of the public sector cannot be owned, bought or sold and profit making does not
contribute to its survival unlike the private sector where profit making is the
main stay and driving force.
The
private sector on the other hand has its bulk of wealth owned collectively by
individuals or groups of individuals. The sole motive of the sector is for
profit making. The legal basis in the private sector is formed by the companies
and Allied Matter Act 1990, the partnership Law, etc.
1.2 STATEMENT OF PROBLEMS
The
cash basis system employed in the public sector accounting has been identified
to have serious effects through its simple application. Some of the effects are
as follows:
1. Problem
of compliance with application law and regulation.
2. Problem
of effectiveness in achieving the program result.
3. Problem
of efficiency economy of operation.
4. Problem
of time constraints.
1.3 OBJECTIVE OF THE STUDY
The
primary objective of the research work is to evaluate the effect of auditing in
the prevention of fraud in the Nigeria public sector.
1.4 RESEARCH QUESTIONS
This
research work will provide answer to the following questions:
i. How
best can fraud in the public sector be prevented?
ii. What
role does proper accounts records play in the effective execution of public
sector audit?
iii. What
are the factors that hinder or promote the proper auditing of the public
sector?
iv. How
best are the auditors to carry out public sector audit?
v. How
best can the current problems faced by the auditors in auditing public sector
or solves?
1.5 STATEMENT OF HYPOTHESIS
H0: There is no
relationship between auditing and fraud prevention.
HI There is a
relationship between auditing and fraud prevention.
1.6 SIGNIFICANCE OF THE STUDY
The
research will be beneficial to many sectors of economy due to it’s importance
in the sense that it will assist in knowing whether all the legal basis of
government accounting are strictly followed by the official in the preparation
of financial statement in the public sector.
It
will point out and proffer to the sectors of economy the solutions, such ways
and such areas that could help in the prevention of fraud in any organization
especially in the public sectors. The research will also draw clear lines of
distinctions between public sector and private sector accounting that profit is
not the main drive of the public sector, unlike private sector where profit is
the main drive.
1.7 SCOPE OF THE STUDY
This
project is restricted to the impact of auditing in prevention of fraud in the
Nigerian public sector, a case study of National Judicial Council Abuja.
Attention will be given specifically to the Audit Unit and Accounting
Department respectively.
1.8 DEFINITION OF TERMS
Auditing:
This is a systematic process of objectively obtaining and evaluating evidence /
regarding assertion that economic action and events are ascertain and
communicate the results to interested parties.
Auditor: Auditor is a statutory
professional body that is concerned with giving the independent opinion of the
financial statement. Auditor can be internal or external.
Internal Auditor: These
are auditors that are concerned with the internal review of the financial statements within the organization.
They are employees of the organization and they are involved in the day to day
checks of account in an organization.
External Auditors:
External Auditors are members of the public accounting firms or government
agencies and serve as independent reviewers of the accounting system of clients
or regulated firms.
Financial Statement: This is
the record that an auditor provide information on. It includes profit and loss,
the balance sheet and assets of the business.
Fraud: Fraud has been referred to
as irregularities in the financial statement and they are deliberate actions
that are taken by the management or employee of an organization. Fraud could
through manipulation of account by the managers or outright theft of the
company’s assets which involves defalcation.
Errors: The word errors is used to
refer to unitentional mistake in financial statements whether of mathematical
nature or electronically or whether due to over sight or misinterpretation of
the relevant facts.
Independent: It is the state of characterized
by objectively and integrity by an auditor.
True
and Fair: This auditor’s statement that the information
received and the treatment and presentation of such information are in
agreement with the accounting records and returns true.
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