THE ROLE OF INTERNAL AUDIT IN MANAGING FRAUD IN GHANIAN COMPANY (A CASE STUDY OF KASAPREKO COMPANY LIMITED, ACCRA GHANA)

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

Frauds are risks that no company can fully eliminate. Aware of this, companies are making significant efforts to establish an effective and robust fraud management process, in order to minimize and mitigate its multiple negative consequences. In addition to defining the roles and responsibilities of the audit board, management, and committee, as primarily responsible participants in this process, companies increasingly rely on the strength and effectiveness of internal audit in detecting and managing fraud. Increased expectations from internal audit in the management of fraud arise from the fact that it is a function which, focused on creating added value for the company, knows all its processes and activities. Indeed, through the proper implementation of its tasks and activities, internal audit can actually greatly contribute to the prevention and detection of fraud in any organisation. In addition, professional regulations covering internal audit provide for the liability of internal auditors to detect the risk of fraud which the company is exposed to, as well as the way in which the company manages these risks, but do not specify the tasks of internal audit in this process. Possibilities and expectations from internal audit as regards effective defence of the company against fraud, on the one hand, and insufficiently precise regulation of its responsibilities in this part, on the other hand, are the reason for reviewing the scope of internal audit in this area. The existence of internal audit in any organization is a means of controlling the incidence of errors, irregularities and frauds. Fraud is an intentional distortion of facts and figures; According to Howard (2002), the major role and responsibility of internal auditors is prevention and detection of fraud. Error is defined by Awe ( 2005) as unintentional mistakes in financial statements whether of a mathematical or clerical nature or whether in the application of accounting principles or whether due to oversight or misinterpretation of the relevant facts. Errors must be reduced to the barest minimum so as not to render the financial statement meaningless. The issue of fraud has become a serious food for thought for many corporate bodies nowadays. Robertson and Louwers (2002) opined that fraud consists of knowingly making material misrepresentations of facts with the intent of inducing someone to believe the falsehood and act upon it and, thus, suffer a loss or damage. This definition encompasses all the ways people can lie, cheat, steal and dupe other people. It is therefore very important for business organization to have a separate department, which is referred to as the Internal Audit department to keep watch and monitor the activities in the system. Oseni (2007) and Lav (2004) stated that internal audit plays a vital role in enhancing corporate performance in organizations.

STATEMENT OF THE GENERAL PROBLEM

Fraudulent practices and corruption have been described as the major causes of comatose state of local government administration in Ghana, and a major hindrance to good government (Onwemenyi, 2008). It has also been identified by Ali (2008) as one of the problems confronting effective local government administration in Ghana. In a nut-shell, the damage which this menace, called fraud has done to our national development is innumerable and needs urgent attention. Therefore, the attempt to put an end to these economic maladies gave rise to this present study.

AIMS AND OBJECTIVES OF THE STUDY

The major aim of the study is to examine the role of audit in managing fraud in Ghanaian companies. Other general objectives of the study include;

1. To examine the need for an effective audit system in Kasapreko limited Ghana.
2. To assess the level of fraudulent activities in Ghanaian companies.
3. To examine the prospects of the effective management of fraud in Kasapreko Limited.
4. To examine the roles played by internal audit in fraud management in Kasapreko Limited
5. To examine the relationship between effective internal audit and fraud management in Kasapreko Limited.
6. To recommend ways of improving the internal audit system in Ghanaian companies.

RESEARCH QUESTIONS

1. What is the need for an effective audit system in Kasapreko limited Ghana?
2. What is the level of fraudulent activities in Ghanaian companies?
3. What are the prospects of the effective management of fraud in Kasapreko Limited?
4. What are the roles played by internal audit in fraud management in Kasapreko Limited?
5. What is the relationship between effective internal audit and fraud management in Kasapreko Limited?
6. What are the ways of improving the internal audit system in Ghanaian companies?

RESEARCH HYPOTHESES

H0: Internal audit does not play significant role in managing fraud in Kasapreko.

H1: Internal audit plays a significant role in managing fraud in Kasapreko.

H0: There is no significant relationship between internal audit and fraud management in kasapreko

H1: There is significant relationship between internal audit and fraud management in kasapreko.

SIGNIFICANCE OF THE STUDY

This study would be of immense importance towards the reduction of fraudulent activities in Ghanaian companies by recommending ways of improving a robust and effective internal audit practices.

The study would also be of importance to students, researchers and scholars who are interested in developing a further study based on the subject matter under research by being a source of relevant literature.

The findings made from the study would also improve organizational performance in Ghanaian companies when religiously implemented

SCOPE OF THE STUDY

This study is on the role of internal audit in managing fraud in Kasapreko Limited, Accra; Ghana.

LIMITATION OF THE STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.