AUDITING AND FRAUD CONTROLLING IN GOVERNMENT SECTOR
ABSTRACT
The importance of good corporate governance has received significant public and regulatory attention in recent years. Internal audit is a critical component of a company’s corporate governance. Simultaneously, there has been widespread public concern about the level of fraud within organizations. The goal of this research is to determine whether organizations that have an internal audit function are more likely to detect fraud than those that do not. The chi-square (X2) distribution will be used to test the hypotheses, and data analysis will be done with technical precision to avoid erroneous inferences that could affect the study’s objective. The primary goal is to ascertain the respondents’ perspectives on the questionnaire questions.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Financial audits may be performed for government sectors, registered charities, and certain governmental and public entities. Some government sectors are required to have an external audit. Government sectors typically request financial audits on a yearly basis because lenders may require an audit or owners may want to have external unbiased eyes look at the financial statements to determine if the company is complying with all required accounting principles. Charities would require a financial audit to demonstrate the organization’s financial status to potential donors. Private businesses must be audited by status to ensure that all budgeted funds are spent properly. Outside auditors do not always audit government financial reports, but government sectors are. It is the responsibility. The auditor’s responsibility is to examine the financial statements and form an opinion on their fairness in accordance with generally accepted accounting principles. As a secondary function, it is also his responsibility to uncover any act of omission that is fraudulent in nature. It is concerning to note that private liability companies have become a target for fraudsters who exploit the irregularities and professionalism of the government sectors to carry out their nefarious deeds. There is a long list of government sectors that have publicized fraud cases involving hundreds of millions of dollars, including Uni-petrol and Agip Company, now known as Oando Company, Total Company Swallowed ELF, Oceanic Bank and Intercontinental Bank, and so on. Even government ministries and departments Parastals are not immune. Auditing has gone to great lengths over the years to expose various fraudulent practices in both the private and public sectors. The inherent potential conflict between an entity’s management and users of its financial statements is one of the primary reasons for an independent audit. Management has a vested interest in the information presented in financial statements because it is used to assess management’s performance. Management has considerable latitude in preparing financial statements and deploying resources entrusted to it in the operation of the entity. An audit provides reasonable assurance that management’s statements about these activities are correct. Thus, auditing is valuable because management’s representatives on its performance and stewardship are examined and reported on by outside experts.
Management’s command. The goal of auditing is to provide assurance to shareholders, bankers, creditors, government agencies and authorities, investors, and the general public. These people require assurance that the directors’ portrayal of the company is accurate in order to obtain a second opinion from an expert (the auditor). Financial audits can alert management to weaknesses in the firm’s control as well as suggest operational improvements that could be implemented, in addition to exposing errors and fraud and testing the reliability of a firm’s controls. These are highlighted in the auditors’ management letter. Strategic systems auditors approach auditing from the top down, first examining a company’s business strategy and keys to competitive advantage.
It has become unavoidable to be critical. Examine the role of auditors in fraud prevention, particularly in the public sector. It is not misleading to state categorically that the root cause of the companies’ woes and problems is the numerous fraudulent activities perpetrated by so many shareholders and managers. These managers were held accountable for unimaginable sums of money squandered and stashed away in foreign bank accounts. Mrs. Cecilia Ibru of Oceanic Bank accrued 278.20 billion, Mr. Erastus Akingbola of Intercontinental Bank owes N210.9 billion, Mr. Sebastian Adigwe of Afri Bank owes N141.86 billion, Barth Ebong of Afri Bank owes N141.86 billion, and Mr. Sebastian Adigwe of Afri Bank owes N141.86 billion.
Union Bank owes N73.58 billion, and Mr. OkeyNwosu of Fin Bank owes N42.45 billion, as a result of their temporary appropriation of bank funds.
Since 357 of the Companies and Allied Matters Decree of 1990 (CAMD), registered limited liability companies, both private and public, are required to have their financial records audited annually by external auditors. It is the responsibility of auditors to uncover any fraudulent practice, whether by omission or commission, in the course of their work.
1.2 STATEMENT OF THE PROBLEM
Despite the fact that these companies are audited annually, the country has seen an increase in fraudulent practices in government sectors since the early 1980s. The bureaucratic nature of government sectors causes numerous unnecessary delays, providing ample space and time for fraud to be conceived and perpetrated. Some fraudsters use this setback to explore all avenues that will help them succeed in their heinous acts. Inefficiency of company staff results in an inefficient book-keeping system, and if they refuse to cooperate fully with the auditors, vital information may elude him, leaving him at a crossroads.
Manipulation of money also poses a significant threat to the auditor’s job. as a type of “settlement”. The Nigerian banking sector was rocked in August when the regulatory bank initially injected over N400 billion to bail out five (5) distressed banks. Unfortunately, IMO STATE UNIVERSITY OWERRI convocation and bank managements are generally unwilling to release details of possible fraud in order to protect their corporate image.
1.3 OBJECTIVES OF THE STUDY
The following are the goals of this research project:
1. Determine the root causes of fraud in government sectors.
2. To investigate the auditors’ statutory principle in relation to fraud.
3. To investigate how the scope of current audits can be expanded to include fraud prevention as well as detection.
4. To recommend a solution to combat fraud in government sectors.
1.4 SIGNIFICANCE OF THE STUDY
The auditor’s role and influence on the decisions made by users of financial statements cannot be overstated. Shareholders, bankers, creditors, government agencies, and private investors, among others, base their investment decisions on the auditor’s report. They expect that the financial statements will not mislead them, and they expect this assurance to be provided by the auditor (external), who is regarded as an expert in the impartial and, above all, independent. The big question remains: why is fraud on the rise in government sectors, despite continuous financial statement auditing? This study contributes to the enhancement of auditors’ roles in the prevention and total eradication of fraud in government sectors. Audit
will no longer be a one-time event, but rather a routine exercise that will keep every employee, not just financial staff as in the case of a standard audit, aware that any action within and outside the workplace is being monitored.
It is anticipated that at the conclusion of this study, the following benefits will accrue to companies, shareholders, other researchers, and the Nigerian economy as a whole.
I A more detailed classification of auditors’ roles in fraud prevention and detection, as many people have long believed that it is the responsibility of auditors to prevent and detect fraud.
(ii) Financial statement users will know who to hold accountable for any losses incurred as a result of relying on audited financial statements after the study.
(iii) Make suggestions for increasing auditors’ relevance in fraud prevention and detection.
(iv) Further encirclement of existing literature on the subject and other related works.
1.5 RESEARCH HYPOTHESES
As a guide for the researcher, the following hypotheses were proposed.
The first hypothesis
Ho: Auditing cannot truly prevent fraud in government agencies.
Hello, auditing can help to prevent fraud in government sectors.
The second hypothesis
Ho: Effective auditing does not keep fraud at bay.
Hello: Effective auditing prevents fraud.
1.6 THE SCOPE AND LIMITATION OF THE STUDY
Fraud occurs with reckless abandon in government sectors. This research will focus on auditors (both internal and external) and fraud prevention. The case study for this research was also limited to the Imo State University Owerri, whose image and status as one of the main sources of communication in the Nigerian economy has made it a target for numerous fraudsters.
According to the research, there will be some major limitations to the study. Some of these restrictions are as follows:
Time
The time required to complete the study is limited and insufficient to allow the researcher to conduct an extensive study on the subject.
Finance
The researcher has limited financial resources to expand the scope of his research.
1.7 DEFINITION OF TERMS
Audit
Official examination of books of records to ensure their accuracy
Auditing
A process of examining an organization’s accounts or books of records in order to express an opinion on whether the records or accounts prepared by the organization show a true and fair picture of the company’s position.
Bureaucratic
A situation in which employees follow many rules, which are carried out in accordance with official roles and habits. Negating tactical decisions that would have improved the overall performance of the organization.
Keeping books
This is the book in which an organization records all of the company’s transactions, which the auditors examine in order to evaluate her performance.
Creditors
These are individuals who lend money or funds to an organization for the purpose of
Owners of shares
This refers to a shareholder in a company. However, in a company with share capital, members are generally allotted shares to measure their financial interest in the company.
Fraud
Impropriety involving criminal deception in order to gain an unjust or illegal advantage. It may be committed with the intent of making money or obtaining something of value. It may also be committed when a person deceives others by pretending to have abilities or skills that he does not actually possess.