INTERNAL CONTROL SYSTEM AS A MEANS OF PREVENTING FRAUD IN NIGERIA FINANCIAL INSTITUTIONS A CASE STUDY OF FIRST BANK OF NIGERIAN PLC ONITSHA

ABSTRACT

This research work was on the internal control system as a means of preventing fraud in  Nigerian Financial Institutions.

          However for a more detailed study a case study was carried on First Bank Plc Onitsha Head Office.  The bank understudy was selected by simple random sampling.

          This study was necessitated because of the Increasing wave of Bank fraud in Nigerian in recent times as reported by the Nigerian dailies.  Therefore the need to investigate these reports and if confirmed, a financial institution and to what extent the application of an effective internal control system can go to help matters.

          All aspects of this work is very relevant in one way or the other to the Nigeria Banking Industry, as a whole, and for those who may be interested in carrying out further study in this topic.

          The research design is the survey approach that is the cross sectional survey type of descriptive research which requires the selection of respondents from a population.  The population of the study is made up of the Senior Officer of the Bank under study who has worked in the Bank for more than five years.

          In determining the sample size Bowleys formulars on sampling was used while the allocation of questionnaires to the bank was done randomly.

          Also data were collected through primary and secondary sources, the primary sources of data are mainly through personal interviews and distribution of questionnaires while the secondary source include Books, Journals, Newspapers and Magazines.

          The method of statically analysis includes the use tables, percentage analysis and logical deductions while the significant tests of two means was used in testing the hypothesis.

          From my finding, it was ascertained that Banks have the best internal control system in Nigeria.  The internal control system is both adequate and effective, although more operative improvement and reviews is vital.  The Management of Bank should be at alert so as to close any loophole that may arise in their internal control system.  Also it was discovered that the major cause of fraud is the employment of dishonest staff.  The fore staff qualities like integrity should be ascertained before employment.  There should be an increased enlightens on the legal implications of fraud among other.

Accountancy Department

I.M.T Enugu.

July 2004.

PROPOSAL

          This Project is on the Internal Control System as a means of preventing fraud in Nigeria Financial Institutions with special reference to First Bank Plc Onitsha Head Office.

          This study is necessary because of the increasing wave of Bank fraud in Nigeria in recent time as reported by the Nigerian dialers.  Therefore the need to investigate these reports and if confirmed, a Financial Institution and to what extend the application of an effective Internal control system can go to help matters.

          The research method which is going to be use will be descriptive research which requires the selection of respondents from a population.

          In determining the sample size, I will use Bowleys formular while the allocation of questionnaire as to the will done randomly.

          By the end of this my study, the management of the Bank should be at alert so as to close any loophole that may arise in their internal control system and know that, the major causes of fraud is the employment of dishonest staff. Therefore, staff qualities like integrity should be ascertained before employment.  There should also be an increased enlightments on the legal implications of fraud among others.

  TABLE OF CONTENT

Title Page                                                                               II

Certification                                                                            III

Dedication                                                                                       IV

Acknowledgement                                                                V

Abstract                                                                                  IX

Content                                                                                  XI

CHAPTER I

1.1       Introduction                                                                  1

1.2       An Overview of First Bank Plc                                   5

1.3       Statement of Problem                                                           7

1.4       Objective of the Study                                                          9

1.5       Statement of Hypothesis                                            11

1.6       Research Question                                                    

1.7       Significance of the Study                                           12

1.8       Scope and Limitation of the Study                                      14

1.9       Reference/ Note                                                                    16

1.10    Definition of Terms                                                      16

CHAPTER II

2.0       Review of related Literature                                                 18

2.1    Definition of Fraud                                                       19

2.2       Types and Causes of Bank Fraud                                      20

2.3       Concept and definition of Internal Control                26

2.4       Types of Controls                                                        34

2.5       Internal Control system In financial

Institution (Fisrt Bank Plc)                                                    38

2.6       Internal Control measures for controlling Fraud in Financial Institution.                                                                         45

2.7       Expected Qualities of a Bank staff for Effective Internal control system.                                                            49

2.8       Computers and Internal Control System                            53

2.9       Reference / Note.                                                        56

CHAPTER III

3.0       Research Decision and Methodology.                      61

3.1    Methods of data Collection                                        61

3.2       The Research Population                                          63

3.3       The Sample Technique                                              64

3.4       The Sample Size                                                         64

3.5       The Statistical tools used.                                          66

CHAPTER IV

4.0       Data presentation and Analysis                                 73

CHAPTER V

5.0       Findings, Recommendation and Conclusion           115

5.1    Discussion of Findings                                                         115

5.2       Recommendation                                                        119

5.3       Conclusion                                                                             125

5.4       Bibliography                                                                 127

CHAPTER ONE INTRODUCTION

1.1    BACKGROUND OF THE STUDY

          It is feared that the inability of management to ensure effective enforcement of rules and regulation have rendered that operations of Internal control system as the Banking Industry Open to abuse.  The net effect could be that everyone carries out his schedule off duties in any manner he likes which consequently gives those wishing to commit fraud their long expected golden Opportunity.

          Prior to 1952, there was no form of Banking art or ordinance to regulate the establishment and operations of Commercial Banks or a Central Banks to supervise the control of Banking Nigerian.  During that time many Banks was registered some of which never operated and ever since that period, fraud has remained a permanent feature in our Banking Industry.  This resulted in a loss of faith and trust in the financial Institutions by Nigerians and consequently, under-development of the banking habit in the country.

          However with the Introduction of the first baking Ordinance in 1952, and the Central Bank of Nigeria (CBN) Act in 1959 and other, subsequent Acts and ordinances with their amendments over the years, used to regulate and control the activities and operations of financial Institutions in the country fraud in financial Institution have rather increased in magnitude and the methods used to perpetrate them acquire grater sophistication day after day.  Now with the introduction of modern procedures and advancement in information technology such as those in communication system, automatic electronic gadgets and computers into the banking system coupled with the various precautionary measures taken by bank agent, fraud have rather taken nuclear dimensions and the size of sums involved increased at a geometric rate Anikpitan (1976), a banker of repute, maintained.

                   That; discoveries during investment show that

banks now take extra precaution fore clearing a