AN APPRAISAL OF INTERNAL AUDITING AS BASIS FOR

PREVENTION OF ERRORS AND DETECTION OF FRAUDS IN

NIGERIAN BANKS: A CASE STUDY OF GUARANTY TRUST BANK.

BY

MACAULAY ONYEKA J.
MATRIC NO: 10/0419

BEING A RESEARCH PROPOSAL SUBMITTED IN PARTIAL

FULFILMENT FOR THE AWARD OF Bachelors of Science
ACCOUNTING OF THE DEPARTMENT OF Accounting
BABCOCK UNIVERSITY
ILISHAN REMO

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1.0 BACKGROUND OF THE STUDY

Auditing is an independent examination of an expression of opinion on the financial

statement of an enterprise or organization by an appointed auditor in pursuance of that

appointment and in compliance with any relevant statutory obligation. It aims at providing

solution to the inevitable problem of credibility in report and accounts. It prevents and detects

errors and frauds and also produces a report of the true and fairness of the financial statement.

They also obtain full understanding of the operations under review.

The impact of internal audit has grown tremendously in most organizations in the recent

past. This can be attributed partly to the growth of the organizations, which entails widely

extended operations and the need to ensure that the organizations policies and basic

accounting controls are observed at every facet of the organization. Again it can be observed

as a measure by management to ensure that the government regulations concerning the

operations of organizations, both public and private are duly complied with so as to guard

against conflicts and inconsistence with the law. As the organization expands and supervisory

responsibility broadens, the head can no longer have personal knowledge of every aspect of

the organization. It becomes impossible for him to control or monitor the continuing

effectiveness of all controls. This calls for the delegation of this responsibility to a separate

department called the internal audit department. Internal Audit Department is a department

set up by management, usually manned by a chartered Accountant, as established in section

358 of the companies Act 1976, to receive the activities of other employees thereby

enhancing controls in the organization.

1.1 Statement of the problem

The problem in many organizations is that funds and properties are entrusted to certain

individual employees in the organization and in most cases these individual workers are

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not brought under thorough surveillance. The result is that much of their funds and

properties are directed to personal use. To arrest this ugly phenomenon, the management

of the organization has to set up internal audit department. This department will be

charged with the objective of monitoring the activities of these employees and effecting

management control. The question however is if the internal audit improves bottom line

result that is, plays its role effectively.

1.2 Objectives of the Study

This research work is aimed at discussing the subject matter;

 To determine the roles which an internal audit department can play in

financial organizations,

 To sum up the definitions fraud, how fraud occurs.

 Distinguish between Fraud and Error

 How auditor used internal control to detecting and preventing fraudulent

activities.

 To evaluate the impact of external and internal auditing in detecting and

preventing frauds.

1.3 Research Questions

 What are the reasons why auditors fail to detect frauds in Nigeria banks?

 To what extent are auditors aware of frauds in Nigeria banks?

 How does lack of internal control show the existence of fraud in Nigeria banks?

 What is the effect of internal auditing in detecting frauds in Nigeria banks?

 Is the investigation of frauds a major concern in Nigeria banks

 How adequate is the attitude and perception of banking transaction?

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 1.4 Scope of the Study

Scope, here refers to the length of capacity to which the research work can be

studied. However, the scope of this study is designed to cover management function

of internal auditing with particular reference to guaranty trust bank plc.

1.5 Limitations of the Study

Here, this means what can make the researcher’s work slow or in other case affect the

research study negatively. These include:

 Lack of Internet Services

 Access to required Information

 Time Restraints

 Finance

1.6 METHODOLOGY

Primary data would be used in the assessment of data while conducting this research i.e.

the one which the researcher collects personally and directly on the field. Also,

secondary data would be used in the aspects of Journals, textbooks from other authors

and other periodicals.

1.7 Research Hypothesis

Hypothesis 1

HO: Internal audit have not played a significant role in the overall performance in an

organization.

H1: Internal audit have played a significant role in the overall performance in an

organization.

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 Hypothesis 2

HO: Effective internal audit does not help to detect errors and prevent frauds in an

organization

HI: Effective internal audit helps to detect errors and prevent frauds in an organization.

1.8 Definition of Terms

INTERNAL AUDITING

This is an independent appraisal function established within an organization to examine

and evaluate its activities, as a service to the organisation. It assists members of the

organisation in the effective discharge of their obligations.

INTERNAL CONTROL

This is the whole system of control, financial or otherwise established by management in

order to carry on the business of the enterprise in an orderly and efficient manner, ensure

adherence to management policy, safeguard the assets and secure as far possible the

completeness and accuracy of the accuracy.

INTERNAL CHECK

Internal check is the checking imposed on the day to day transaction whereby the work of

one person is proved by an independent person’s(auditor) to ensure that the laid down

procedures are followed, the objective prevention and detection of errors and frauds.

SUBSTANTIVE TEST

These are tests of transactions and balances and other procedures such as an analytical

review, which provide audit evidence as to completeness, accuracy and validity of the

information contained in the accounting records or in the financial statement.

FRAUD

Fraud contains a series of irregularities and illegal acts characterized by intentional

Deception or misrepresentation, which an individual knows to be false or does not

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 Believe that is true.

REFERENCES
Chuke, N. (2001) “Basic principles of financial management,” Enugu, El’ Denmark
publishers.

Adeniji, A. (2004): Auditing and Investigation. Lagos, Value Analysis Publishers

Aderibigbe, P. (1997): Auditing: Conceptual Emphasis. Ibadan, Lyons Ltd

Aderibigbe, P. and Dada, S. O. (2007): Microauditing Principles. Lagos ICAN Students

Journal, Vol 11 No 1, Jan/March.