THE ROLES OF INDEPENDENT AUDITORS IN FRAUD CONTROL IN NIGERIA - UNIPROJECTS

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THE ROLES OF INDEPENDENT AUDITORS IN FRAUD CONTROL IN NIGERIA



ABSTRACT
          This research examines the roles of independent auditors in fraud control in Nigeria. It focuses on the extent to which independent auditors are responsible for fraud prevention, detection and control.
          The population of this study includes professional accountants and other people with accounting qualifications and experience.
          The main sources of data comprised of both primary and secondary sources. The primary data were obtained from the respondents through questionnaire while the internet, relevant textbooks, articles in journals and relevant unpublished materials were used to obtain secondary data.
Data  collected for this research were analysed through the use of tables, percentage and chi – square.
From the findings of this research, it was discovered that respondents are very concerned about the problem of fraud and they placed that  high expectation on independent auditors duties in fraud control. This perception is in contrary with the stated objective of an audit as stipulated in ISA 200 which merely required auditors to form an opinion on the financial statement but not on fraud prevention and detection.
The research concludes that the primary objective of an independent auditor is not only to prevent and detect fraud but nevertheless they still have their own parts to play in fraud control in Nigeria.
         

TABLE OF CONTENTS
                                                                                                     Pages
Title                                                                                         
Certification                                                                            
Dedication                                                                               
Acknowledgements                                                                
Abstract                                                                                  
Table of Contents                                                                             
CHAPTER ONE
1.0            Introduction                                                                          
1.1            Background of the Study                                                      
1.2            Statement of the Problems                                          
1.3            Objectives of the Study                                                  
1.4            Significance of the Study                                                        
1.5            Research Questions                                                     
1.6            Research Methodology                                                  
1.7            Scope of the Study                                                                   
1.8            Definition of the Terms                                                 
CHAPTER TWO
2.0     Literature Review                                                         
2.1     Independent Auditor                                                     
2.2     Independent Auditor responsibilities in Fraud Detection       
 2.3    The Menace of Fraud in Nigeria                                    
2.4     Empirical Studies on Fraud Detection                                     
2.5     Enhancement of Independent Audit to                         
Include Fraud Detection                                                          
2.6     Zweifel Theory                                                               
CHAPTER THREE
3.0     Research Methodology                                                  
3.1     Sources of Data                                                             
3.2     Population                                                                     
3.4     Sampling Techniques                                                     
3.5     Method of Data Collection                                            
3.6     Method of Data Presentation and Analysis                   


CHAPTER FOUR
4.0     Data Analysis, Interpretation and Discussion of Findings      
4.1     Interpretation of Items                                                 
4.2     Analysis of Data                                                            
4.3     Analysis of Tables                                                         
4.4.1  Test of Hypothesis I                                                      
4.4.2  Test of Hypothesis II                                                     
4.4.3    Test of Hypothesis III                                                    
CHAPTER FIVE
5.0     Summary of Findings, Conclusion and
          Recommendations                                                                   
5.1     Summary of Findings                                                    
5.2     Conclusion                                                                     
5.3     Recommendations                                                         
Bibliography                                                                  
Appendix: (Questionnaire)                                            
             


CHAPTER ONE
1.0     INTRODUCTION
1.1     BACKGROUND OF THE STUDY
          An independent auditor has a responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by fraud, other illegal acts and errors is one of the most controversial issues in Auditing and has been one of the most debated areas among auditors, politicians, media regulators and the public, this debate has been especially highlighted by the collapse of both small and big corporations across the globe
 The auditing profession has caught the media’s attention following financial scandals in some of the Nigerian Banks such as Intercontinental Bank, now Access Bank (Dr Erastus Akingbola, 56 billion Naira, Oceanic Bank, now Eco Bank (Cecilia Ibru, 191 billion Naira) and Bank PHB, now Keystone Bank (Francis Atuche and Owoeye, 79 billions Naira) among others.
In as much as the securities and exchange commission (SEC) requires companies whose shares are publicly traded to obtain an audit by an independent auditors. There seem presently to be a misconception that independent auditor’s duties are largely the control of fraud through the preventing, detecting and controlling and likewise the reporting e.g Idries (2009). This one needs to wonder much to how devastating fraud have compromised the administrative competence, performance capacity and general credibility of independent auditors in Nigeria.

1.2    STATEMENT OF THE PROBLEMS
Financial laws and regulation continue to come by the day and court and tribunals continue to administer justice to fraudsters,  all in bid to prevent fraud but to no avail
The fundamental concern of this research work is to critically analyse the role of independent auditors in fraud prevention, detection and reporting in Nigeria.
Furthermore, this study reveal the extent to which the independent auditors has continued to minimize the importance of their role in detecting fraud by stressing that such duty rested with the management.

1.3     OBJECTIVES OF THE STUDY
The questions about the credibility of external audits, auditors’ independence, relevance and quality of audit work and the use of economic incentives for good audits, the dissertation begins by discussing why auditors are accused of seeking self interest.
Nevertheless, the purpose of this study is to :-
1)                 Identify financial report user’s perception of the independent auditors responsibilities in detecting fraud and the performance of related audit procedures.
2)                Ascertain whether the report user’s perception of auditors responsibilities on fraud are consistent with those of the auditing profession as expressed in the auditing standards in Nigeria.
3)                 Examine the extent to which independent audit are needed in combating fraud

1.4      SIGNIFICANCE OF THE STUDY
Often times, it is complicated to actually determine whose responsibility it is to prevent, detect and report fraud, errors and other illegal acts, whether it is the independent auditors, the management  or the internal auditor, but with the critical analysis of the role of independent auditors in fraud control, there will be clarification as to which and what extent is the errors, fraud and other illegal acts control is attributable to the aforementioned parties.
In general, the study is of immense importance to organizations whether profit or non – profit making for the purpose of identifying who actually is to be held responsible for the prevention, detection and reporting of fraud.


1.5     RESEARCH QUESTIONS
In view of this research work, the following questions were answered:
1)       Is fraud a major concern for business in Nigeria
2)      Is it the responsibility of the auditor to uncover fraud and to report to the appropriate authorities?
3)      Should the independent auditors assess the internal controls used by the company to prevent or detect the theft of asset?
4)      Should the independent auditor assess the role of internal auditor?          
5)      Should the auditor assess the management’s style to determine if the style might lead to fraudulent financial reporting?

1.6     RESEARCH METHODOLOGY
          Data were sourced primary through the use of questionnaire while the secondary data were gathered through the use of internent, relevant textbooks, articles in journal, newspaper and relevant unpublished materials.

1.7     SCOPE OF THE STUDY
          This research examines the auditors role in controlling fraud in Nigeria especially in the public sector.
          The paramount attention of this research is restricted to limited liability companies and service providing government parastatals e.g power Holding company  of Nigeria (PHCN), although other companies were examined, this is because fraud occurs in virtually all organisations. Therefore, other examined companies were to complement the study carried out within the scope of this research.


1.8     DEFINITION OF TERMS
AUDITING: This is the independent examination and investigation of the evidence from which a financial statement has been prepared with a view of enabling the independent examiner to report, whether in his opinion and according to the best of the information and explanation obtained by him, the financial statements are prepared in accordance with an identified financial reporting framework.
INDEPENDENT AUDITOR:- An independent auditor is a certified public accountant who reviews a companys business activities to identify and resolve discrepancies. An independent auditors is not employed by the company he or she is investigating but by the shareholders of the company. He may investigate potential theft or fraud and ensure compliance with applicable regulations and policies.
INTERNAL AUDITOR:- An internal auditor is a person employed by a company who review their own company’s business activities to identify inefficiencies, reduce costs and otherwise achieve organisational objectives. An internal auditor may investigate potential theft and he also assist in risk management.
FRAUD:- Fraud can be referred to as the intentional manipulation of financial statement to gain an illegal advantage. Therefore, every activity carried out intentionally which renders the financial statement misleading is a fraud. It may be either an employee fraud or a management fraud. A fraud  can also be described as an intentional act which results in a misrepresentation of financial statement.
AUDITING STANDARD AND GUIDELINES:-  These are those pronouncement or statement being issued normally by professional bodies e.g Institute of Chartered Accountant in Nigeria (ICAN), National Accounting Standard Board (NASB) e.t.c as well as statutory bodies as contained in various government legislation.
FINANCIAL STATEMENT:- This refers to the balance sheet, income statement or profit and loss account, statement of changes in financial  position, notes and other statements.
MANAGEMENT:-  Management comprises of officers and others who also perform senior managerial functions.
INTERNAL CONTROL SYSTEM:- It refers to all the policies and procedures adopted by the management of an entity to assist in achieving management’s objectives of ensuring as far as practicable, the orderly and efficient conduct of its business including adherence to management policies, the safe - guarding of assets, the prevention and detection of fraud and error, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information.

HISTORICAL OVERVIEW OF POWER HOLDING COMPANY OF NIGERIA (PHCN)
          The power Holding Company of Nigeria (Abbreviated PHC or PHCN), formally the National Electricity Power Authority  (Abbreviated NEPA) is an organisation governing the use of electricity in Nigeria.
          The history of electricity development in Nigeria can be traced back to the end of the 19th century when the first generating power plant was installed in the city of Lagos in 1898. from then until 1950, the pattern of electricity development was in form of individual electricity power undertaking were Federal Government bodies under the public works department; some by native authorities and others by municipal authorities.
ELECTRICITY CORPORATION OF NIGERIA (ECN)
          By 1950, in order to integrate electricity power development and make it effective, the then colonial government passed the ECN ordinance No, 15 of 1950, with this ordinance in place, the electricity department and all those undertakings which were controlled came under one body.
          The ECN and the Niger Dam Authority (NDA) were merged to become the National Electricity Power Authority (NEPA) with effect from the 1st of April 1972. the actual merger did not take place until the 6th of January 1973 when the first General manager was appointed. Despite the problems faced by NEPA, the authority has played an effective role in the nation’s socio – economic development therefore steering Nigeria into a greater industrial society, the success story is a result of careful planning and hard work.  
          The statutory function of the authority is to develop and maintain an efficient co – ordinate and economical supply throughout the Federation.