ABSTRACT
The alarming rate at which fraud is being perpetrated in the business world has been a thing of great concern to the accountancy profession and well – meaning individuals in the society. This has given rise to discourses in the academic papers, etc. on circumstances that lead to fraud perpetration and ways of curbing this menance.
A study was conducted to determine the extent of fraud in companies in Port Harcourt and Aba and the control techniques that could be adopted to prevent fraud. It was discovered that fraud is perpetrated by mostly staff in conjunction with people outside the organisation.
In addition, investigation was also conducted on how management could help in eliminating fraud. Based on this, questionnaires were administered to some firms within and outside Port Harcourt. Oral interviews were also conducted as a back up support to the questionnaires.
The result of the questionnaires and the oral interview showed that fraud perpetration results from negligence on the part of management either in placing adequate control on their personnel or the employment of incompetent staff or inadequate staffing. Based on the findings, it is recommended that for fraud to be curbed to its barest minimum, the management should recruit competent, efficient and trustworthy workers.
TABLE OF CONTENTS
Title page – – – – – – – – – i
Dedication – – – – – – – – – ii
Acknowledgements – – – – – – – iii
Abstract – – – – – – – – – iv
Table of contents – – – – – – – – v
CHAPTER ONE
INTRODUCTION
- Background of the study — – – – 1
- Statement of problem – – – – – 7
- Objectives of the study – – – – 8
- Research questions – – – – – 8
- Significance of the study — – – – 9
- Scope and limitations of the study – – – 9
- Summary – – – – – – – 10
CHAPTER TWO
REVIEW OF RELEVANT /RELATED LITERATURE
2.1 Definition of marketing – – – 11
2.2 The Marketing Mix – – – 13
2.3 Types of Fraud – – – – – – 17
2.4 Circumstances which encourage fraud – – 23
- Methods management can adopt in prevention
of fraud – – – – – – – 25
2.6 Techniques of prevention of the pay roll fraud – 35
2.7 Computer processing controls – – – 39
2.8 Other miscellaneous frauds – – – – 42
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction – – – – – – 43
3.2 Sources of data – – – – – – 43
3.3 Determination of sample size – – – 45
3.4 Method of Investigation – – – – 46
3.5 Method of Data analysis – – – – 50
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.1 Analysis and Discussion of findings – – 52
4.2 Discussion of Findings (Manual) – – – 74
4.3 Discussion of Finding on Computer section – 80
CHAPTER FIVE
SUMMARY OF FINDINGS, RECOMMENDATION
AND CONCLUSIONS
5.1 Summary – – – – – – – 81
5.2 Conclusion – – – – – – 82
5.3 Recommendation – – – – – 83
References – – – – – – 88
Appendix – – – – – – – 92
Questionnaire – – – – – – 93
CHAPTER ONE
INTRODUCTION
- BACKGROUND OF THE STUDY
It seems likely that ever since financail recording began frauds have taken place, however, perpetration of frauds in recent times has taken a more dynamic and sophisticated dimension in the business world, thus causing a great concern to the accountancy profession, the business community and the public in general. Also the magnitude and the alarming rate at which fraud is being perpetrated calls for serious re-examination of most organization because fraud has imposed a servere pressure on the profitability of many organizations and furtherd, forced them into perpetual liquidation.
“The term ‘fraud’ is well known to the public, business community and the accountancy profession. However, what constitutes fraud in any given situation may differ depending on the individuals perception. The term fraud can be defined as the misrepresentation by a person of material fact known by the person to be untrue or made with reckless indifference as to whether the fact is ture with intention of deceiving the other party is injured”.
History of the court of chanery (1828 p.508).
“Bigelow, an American professor of law defines fraud in the following words – “fraud consist on the one hand in one mans endeavouring by deception to alter another mans right”.
The term fruad has always remained a subject of an exhaustive difinition by both the court and the state. It is a term which is well known to the public, the business, community and the proffession however it is recognised that an individuals perception of what constitutes fraud in any given situation may differ for it is not easy to give a difinition of what constitutes fraud in the extension signifiicance in which that term is understood by civil courts of justice. The courts have always avoided hampering themselves by definition or laying down as a general prosposition what shall be held to constitute fraud.
“Fraud in the cmtemplation of a civil court of justice may be said to include properly all acts, commission, and concealments which involves a breach of legal or equitable duty, trust or confidence, justly reposed and are injurious to another or by which an undue or unconscientious advantage is taken of another. All surprise, trick, cunning dissembling and other unfair way that is used to cheat anyone is considered as fraud. Fraud in all cases implies a wilful act on the part of anyone, whereby another is sought to be deprived by illegal or unequitable means of what he is entitled to”. Keer (1929,p.508).
The term fraud could also be defined by categorisation or according to words and phrases (Butterworth, p .53). actual fraud will generally arises from acts or circumstances of deception and will usually take form of a false statement by words or conduct or a suppression of the truth.
Fraud may further be divided into ‘actual’ and ‘constructive’. Under the term ‘Actual’ will include fraudulant misrepresentation which itself has been the subject of precise definition by the court as consisting of a false statement made knowingly or without belife in its truth or recklessly without caring whether it is true or false with intent that it should be acted upon and which is acted upon.
Whilst the term ‘constructive’ fraud includes acts relating to undue influence, abuse of confidence, unconscientable bargains and fraud on power. In this context it has been stated that:
“Fraud is infinite and where a court of equity once lay down rules how far would they go on further, in extending the relife against it, the juriadiction would be cramped and perpetually eluded by new scheme which the fertility of mans invention would contrieve”. Lord Hardwicke (30th June, 1959, p. 204).
Apparantly it is clear from the above statements, that it would be a fruitless task to identify the multiferious methods by which fraud and irregularities may be encountered from time to time by auditor. However, fraud may be catogorised as follows:
- Employes fraud; this can be in terms of overstating values of assets, cash fraud and stock fraud.
- Director/mamangement fraud which can be committed by high personnel in the organization. It could also take the form of cash, over valuation of assets or stock fraud.
- Fraud directed against the business enterprise.
- Business used as instrument of fraud.
- Fraud directd against client or depositors moneies or assets.
The forgoing categories do not purport to be exhaustive or mutually exclusive, but form a useful assessment framework.
However, in the light of the above statement and categorisation of fraud, it is also necessary at this point to highlight the fact that the use of computer in the business world is fast gaining ground and there are various irregularities and fraudlent practises associated with the use of computer system.
These can be discussed as follows.
- fraud perfetrated by computer users.
- Fraud requiring technical computing knowledge mainly programme modification and to a lesser extent, file modification.
- Other miscellaneous fraud in the computer. All these form a sub branch of the main categorisation of fraud above.
In addition, it is recognised that fraud (and irregularities) may be a sole venture or conspirancy involving a number of parties and they may be ‘one offs’, short term or long term frauds.
At this juncture there is the need to highlight this fact that the auditors duty is not to detect fraud, rather their duty froms part of an internal control check on an organization except on rate occassions, where auditors are invited to specifically detect irregularities as specified by the letter of engagement. Thus the accountancy profession is well aware of the case of re – kingston cotton mill company limited,where lord justice Lopes made certain statements in the course of his judgement in the court of Appeal, upon which the auditor has placed profer relaince to the present day. Thus it was stated:
“An auditor is not bound to be detactive or as was said to approach his work with suspicion that something must be wrong. He is a watch dog but not a blood bound. He is justified in believeing trieds servants of the company in whom confidence is placed by the company. He is entitled to assume that they are honest, to rely upon their representation, provided he takes reasonable care. If there is anything calculated to arouse suspicion he should probe it to the bottom but in the absence of anything of that kind, he is only bound to be reasonable cautious and careful” Justtice Lopes (1896, p. 299).
Thus in these words of justice Lopes the duty of an auditor is partially explained to mean that he examines the financail statements and expresses an opinion on the books so examined, rather than being a fraud detective. However, where special examination is required to detect fraud by the client then this should be specified in the management letter. Also it is worth saying that the auditor should not hesitate to report to the approporiate authority assuming he detects fraud in the process of his normal work.
- STATEMENT OF PROBLEMS
Fraud has been an endemic problem in the nigerian economy. Fraudulent practices in governmental organizations have been given proninence in both the print and electronic media. However, fraud in private establishments are usually shrouded in secrecy. Fraud whether in public or private establishments constitutes a menance to the proper and efficient management of resources. It amounts to a waste or misapplication concerned and consequently the economy as a whole. This researcher therefore set out to study fraud in companies existing in port – Harcourt and Aba and suggest ways of minimising the problem.
- OBJECTIVES OF THE STUDY
The study has the followings as its objectives
- to highlight different types of fraud.
- The circumstances which encourages fraud.
- To also show various techniques and methods which management can adopt in reducing fraud.
- To reveal the role an auditor/management could play in reducing of fraud and
- to highlight the different types of fraud associated with commputers
- to encourage further research work on this topic.
- RESEARCH QUESTION TO BE ANSWERED.
The study seeks to find answers to the following questions:
- what are the categories of fraud?
- what circumstances encorages fraud?
- what steps should be taken be management to eradicate fraud?
- SIGNIFICANCE OF STUDY
The researcher in carrying out this research work wishes to draw out attention to both the phsychological effect on the people and the devastating effect on the economy in general.
Our society needs a re – orientation of mind towards means of amassing wealth through genuine way. If fraudaters are easily detected and adequate punishment metted out to them, and the virture of honesty and hard work propagated, then this will give a new dimension to hard work by honest employee and this will definatelly help our economy in as much as firms and industries are functioning.
- LIMITATION OF STUDY
Management sees publicity of fraud in their organisation as an illwill. Most management shy away from discussing or publishing such occurances. Thus, the author was limited to materials from text books, journals, newspapers (to a limited extent) and seminars on fraud detection and preventions. However, the materials were on small scale in comparison to the rate of fraud perpetration. Also most top management officers are unwilling to discuss and give instances of fraud they have encountered in their organisation, thus making the author’s wore more herculean in nature.
However, the small information gathered, coupled with texts, journals, newspapers and seminars were systematically and carefully gather to form part of this write up.
- SUMMARY
In this chapter, an attempt was made at defining fraud. Opinion and views held by different author’s were also considered. We also tried to categories fraud and computer fraud was broght into focus.
The significance of study was mentioned here in this chapter. Cunstriants in the cause of the study were also examined. In short the researcher has been able to bring into focus the inherent danger posed by fraud to management and the company.
REFERENCES
Bigelow (1828) An American professor of, Definition of fraud.
Gyasi Kwame (1982), An international Guide to Auditing, 1st Edition,
London Graham Buin.
Lord Hardwicke (30th June, 1959, p. 204). Definition of fraud and
their categories.
Okike E.N.M (1989); “Extension of information in Accounting Reports;
An investigation, “Nigerian financail Review, Vol 2.
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