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PREVENTION AND DETECTION OF FRAUD BY AUDITORS

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

Fraud is defined as “the act or instance of tricking someone in order to get money or things illegally.”

Fraud is the intentional distortion and falsification of facts in the compilation of financial information for personal advantage or benefit.

The International Auditing Guideline (IAG) defines fraud as a specific type of irregularity that involves the use of deception to obtain an illegal or unjust advantage and may include the following: manipulation, falsification, or alternation surprising or misleading transaction without substance, international and deceitful, depending on which perspective fraud is viewed from, an intentional distortion of financial statements, the misappropriation of assets, and so on.

As a result, more time is spent in board meetings in an attempt to find a solution to the ongoing fraudulent practices among management and non-management personnel.

Section 334 of the Companies and Allied Matters Act (CAMA) 1990 states that in the case of every company, the directors shall prepare financial statements for the year (in the form of annual reports and accounts). Financial statements are a means of communicating economic measurement obligations and information about the resources and performance of the reporting entity or enterprise to those who have a reasonable right to such information, such as inventors, leninists, and others.

This financial statement audit provides true and fair views (or equivalents) of the entity’s affairs at the end of the period, as well as its profit and loss (or income and expenditure) for the period ended, and has been properly prepared in accordance with the applicable reporting framework, (for example, relevant legislation and applic Many individuals believe that auditors should behave like cops, enforcing truth, order, and justice. However, auditors’ powers and obligations are severely limited by statute, ethics, and auditing standards. When an auditor issues an unqualified opinion, such as absence of fraud, error, or irregularities, evidence that the auditor is responsible for the completeness of the financial statement, evidence that the company will not have future financial or operating problems, and evidence that the assets and liabilities are stated on the financial statement, this misconception existsable accounting standards), or where statutory or other specific requirements prescribe the term “present fails.”

However, there are a few typical misunderstandings about this goal. Many recent developments in auditing involve attempts to overcome the “expectations gap,” the discrepancy between what people think auditors should be and what auditors really do in practice, even among financially enlightened individuals. The International Auditing Practicing Committee (IAPC) has developed auditing standards in an attempt to alleviate the situation.

STATEMENT OF THE PROBLEM

Evidence of management and product quality. The audit expectation gap has ramifications for both the audit profession and audit report recipients. Some of the consequences include: a high rate of litigation based on perceived auditor negligence, increased mutual benefit between the auditing profession and the general public, incorrect decisions based on incorrect premises, and counter accusations, all of which divert attention away from the more fundamental questions of what role the profession should play in the future.

Users’ expectations and the audit profession’s anxiety of assuming a “impossible position” will be best addressed by dispersion on the future of audit. As a result, this study project should help to close the expectations gap that was previously mentioned in connection to the function of auditors in fraud detection and prevention.

 PURPOSE OF THE STUDY

The purpose of this study is to assess the role of auditors in fraud detection and prevention at Access Bank Plc. The following are the goals of this research project:

1. Determine the scope of the parties’ responsibility under the auditing contract, namely the auditor’s responsibility to management and shareholders in respect to statutory law provisions.

 

2. Defining the liability and conditions under which an auditor can be compensated for fraud caused by carelessness.

 

3. Considered several methods and procedures for auditors to avoid being careless.

 

4. Examine a number of instances in which the auditor was negligent in relation to fraud.

 RESEARCH QUESTIONS

The study’s research questions are as follows:

1. Have auditors played a significant role in the detection and prevention of fraud in your company?

2. Is fraud primarily a problem in the financial industry?

3. Is it possible to completely eliminate fraud?

 RESEARCH HYPOTHESIS

H01: In an organization, auditors have no significant role in the discovery and prevention of fraud.

H02: Fraud isn’t just a problem in the banking industry.

H03: Fraud is impossible to completely eradicate.

SIGNIFICANCE OF THE STUDY

The problem of fraud and fraudulent behavior in any business should not be ignored. The regularity with which it rears its ugly head in any business will decide the company’s long-term survival and growth, and if not handled carefully, can lead to corporate failure.

However, it appears that the role of an auditor in the identification and prevention of fraud has been widely misunderstood, according to a number of recent studies. The goal of this study is to clarify such a function in order to improve communication between the auditor and management.

The roles of an auditor, according to (Lord Jones) 2009, are as follows: an auditor must check the organization’s accounts correctly, an auditor should be able to provide early warning if the organization has solvency problems, it should verify all the organization’s documents, and it should also make a report about the investigation to the management or shareholders of the organization in order to clarify and satisfy his duties. According to (Joseph R. Franco) 2010, the major duty of an auditor is to detect fraud in a business. The roles of management in the identification and prevention of fraud are equally important. Management’s responsibilities include managerial controls, screening, organizational atmosphere, and a new accounting specialization.

Screening: another duty of management in preventing fraud is to do sufficient employee screening. Although this remark may seem self-evident, hiring honest staff is an excellent way to reduce the danger of fraud. There are a plethora of companies that specialize in pre-employment screening. Employee detection and finger printing are among the screening tests. An employer can elicit substantially more information and establish if the original information is accurate by conducting adequate background checks on resumes and applications. Organizational Climate: Management identifies fraud by providing a company atmosphere that reduces an assumed employee’s perceived desire to defraud. This environment includes open and consistent communication for hiring, reviewing employee performance, and evaluating individuals for advancement. These characteristics, in combination with counseling programs and employee enrichment activities, may reduce an employee’s perceived need to commit fraud. This project effort is to analyze the efficiency and efficacy of such a function in an organization. It is apparent that both auditors and management can work together with understanding, and the issue of fraud can be dealt cooperatively.

 SCOPE OF THE STUDY

The case study is used to define the scope of this research project. ACCESS BANK PLC ACCESS BANK PLC ACCESS BANK PLC This research project is limited to Victoria Island Lagos state, covering the 1999 to 2009 financial year, due to the company’s numerous branches throughout the country. In addition, every research project of this nature is bound to encounter some obstacles, such as:

1. The belief that when a personal interview is requested, the management will gladly provide it.

2. Accessibility of records: It is impossible to have access to all materials and information required for this investigation, but those that are available are of sufficient size.

3. Financial constraints: Due to the current economic downturn, it may be unable to use other businesses.

HISTORICAL BACKGROUND OF ACCESS BANK Plc

Because of the nature of their operation, the banking industry has been identified as one of the economic sectors that should be regulated. Furthermore, the operations of bank operators have a direct impact on the economy’s success or failure.

Banks, as we all know, are financial institutions whose main functions are to accept deposits and make loans (financial intermediaries).

 

As a result, banks’ ultimate goals are to ensure that depositor money is safe, and that loans are given out to finance all sectors of the economy, particularly small-scale companies, which is a quick way of empowering the common man. Access Bank was founded in February 2012 as Access Bank Plc. and began operations with a paid-up ordinary share capital of N12 million.

In October, at the height of the N25 billion recapitalization funds prescribed by CBN, the bank had a public offer of 2.75 million ordinary shares, which was subscribed to 1360 percent, re-affirming investors confidence in the banks; Equity Bank, Gateway Bank, and Global Bank. It now has over 185 branches spread across the country and plans to open up to 80 more by the end of the financial year.

Access Bank, the 16th largest bank in Africa and among the top 1000 banks in the world by the Financial Times of London, has just entered into a technical relationship with BNPP partial, one of the world’s ten largest banks.

DEFINITION OF TERMS

1. Auditor: A person cannot be appointed as an auditor unless he is a member of an organization of accountants in Nigeria that is formed by an Act from time to time.

2. Fraud: According to (Apoorva Yadav) 2009, fraud is defined as “any behavior by which one person seeks to acquire a dishonest advantage over another.” In other words, it is an omission that is meant to benefit one person at the expense of another, whether by concealing facts or otherwise.

3. Financial Statements: These are the means of transmitting economic measurements, commitments, and information about the reporting entity’s resources and performance.

4. Company: A company is a group of people who have got together to create an association or a partnership for a specific purpose.

5. Auditing: Auditing is described as the use of professional expertise to examine the completeness, accuracy, truth, and fairness of financial statements.

6. Expectation Gap: This is characterized as a discrepancy between the auditors’ perception of an auditing role and the expectations of financial statement users.

 

7. Management: In an organization, management is the process of bringing people together to achieve desired goals and objectives while utilizing available resources efficiently and effectively.

 

8. Audit: Audits are conducted to determine the availability, validity, and reliability of information, as well as to offer a review of an organization’s internal control system.

 

9. Internal Auditors: A firm employee tasked with giving independent and objective assessments of the organization’s financial and operational performance.

External Auditors: An audit specialist who does an audit is known as an external auditor. In compliance with certain laws or standards governing a company’s, government entity’s, or other legal entity or organization’s financial accounts, and who is independent of the entity being audited.

11. Corporate Bodies: A corporate body is an organization or group of individuals that is identified by a specific name. Also known as a corporation.

12. Annual Reports: An annual report is a comprehensive account of a company’s operations over the previous year.

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